Paul Gessing’s Presentation on Government Employee Pay to NM State Personnel Board: 4/28/14

I was asked to present to the State Personnel Board because we had some concerns about the way they calculate whether government employees in New Mexico are overpaid or underpaid. My remarks follow:

The Personnel Office’s Compensation Report discusses employment issues involving government employees in New Mexico. The general conclusion of the 2013 report was that New Mexico government employees are underpaid when their salaries and benefits are compared to government employees in neighboring states.

The Rio Grande Foundation, New Mexico’s free market think tank, has reported on this issue as well. Our findings are generally contrary to those of the Personnel Office insofar as we found, based on an analysis done by economists David Macpherson of Trinity University and William Even of Miami University. that when workers with similar experience and skills are compared to each other, New Mexico’s government workers are paid about 8 percent more than equivalent workers in the private sector.

What gives and which is the more relevant comparison?

Without analyzing or critiquing the entirety of the Personnel Office report, we believe that comparing state workers across state lines is not a relevant statistic for several reasons:

1) Economic conditions vary dramatically from state to state. As seen in this chart which was taken straight from the Albuquerque Journal, New Mexico’s job market was far weaker over the past year than the job market in neighboring states. We all know that New Mexico’s economy has been far weaker than that of most of its neighbors in recent years. It only makes sense that those working for the state in New Mexico (a relatively weak economy) would not make as much as those in relatively strong surrounding economies.

2) I don’t have data on how much movement there is by government employees from one state bureaucracy to another, but it seems unlikely that there is a great deal of direct competition for talent between Texas and New Mexico. This would certainly be worth studying and having data on;

3) Another thing worth studying is how state government turnover rates actually work and what turnover rates actually mean. Are workers leaving to join the private sector in New Mexico? Are they leaving for private sector jobs in other states? Or are they leaving to work in government in another state? How do pension changes impact turnover and how might New Mexico change its compensation system in ways that might be attractive to workers and taxpayers at the same time?

It might also be worth studying how external economic factors, both federal and state, impact turnover rates and workers’ desire to look for new opportunities.

4) Lastly, we believe that comparing categories of government employees across state lines is very difficult and may not be a relevant tool in comparing overall worker benefits.

In conclusion, it is our belief that the most relevant comparison when it comes to government pay is with similar private sector workers here in New Mexico. When that comparison is made, the packages available to government workers are more generous than those available in the private sector. Such analysis should at least supplement existing analyses.