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Fair pay: How public, private jobs differ

A major issue for local voters and town officials is what constitutes fair compensation for public employees. A public employee differs from a private employee even though work may be similar, e.g., a town accountant compared to a company accountant.

Differences between public and private employment provide an initial basis for reflecting on compensation. The purpose of a company is to make money by increasing revenue and ending up with a net profit. However, public employment is for public service. Revenues from sales provide private salary compensation while tax revenues provide public sector compensation.

During the last half of the 20th century, public employees received lower wages than comparable salaries in the private sector for similar jobs and levels of education. In return, public employees received more job security and higher pensions, which was seen as a form of deferred compensation. During this century, the advantages of public employment, based on total compensation of wages and benefits, have usually been superior to private employment. This creates a problem for taxpayers when their income rises at a lower rate than public employment compensation.

A standard method for determining fair compensation for public employees in New Hampshire is to look at a specific job, e.g., town manager, and to then examine salaries for that position statewide as a way of comparison. In which quintile of compensation does the manager place? Is the manager earning less or more than the mean or median? This appears to be an obvious way of determining compensation, but it has problems.

Comparisons with other states, including neighboring ones, are not useful because states differ in population, cost of living, income, wealth, nature of and rates of taxation, and sources of employment. Most of these variables also exist amongst towns within a state. No two towns are identical. Even two communities with similar household incomes, based on census data, may differ enormously in household wealth. Determining average household income is easy but household wealth is more difficult. Although household incomes in Peterborough ($70,114) and Rindge ($68,250) are almost similar, I suspect but cannot prove that household wealth is greater in the former community.

Another problem in determining fair compensation is that duties and responsibilities may vary by town despite having similar job titles. This can be determined by examining job descriptions.

Another important variable is a town’s population. It is common practice to regard a town manager of a community with 5,000 people as having less responsibility than a manager of a town with 25,000 people. But is that so? Managerial responsibility is, basically, the same, supervision of department heads. Budgets are higher in larger towns, but are workload and effort actually greater? I do not think it is because the larger the community, the greater delegation of work responsibilities takes place as the number of town employees increases. One may believe but no person actually works 24/7.

Towns of similar population size should be compared for determining compensation. Using town managers as an example, a matrix to determine compensation can be developed. Per capita income would be more equitable than household income. A town with an average household income of 60,000 and a family size average of two people would have a per capita income of 30,000, but if its average family size were three, per capita income would be 20,000. Thus, Peterborough’s household income is just a little larger than Rindge’s, but its per capita income is much larger. Peterborough’s per capita income is the 29th highest in the state at 39,520. Jaffrey’s at 30,439 is 122nd place and Rindge’s at 23,642 is the 211 lowest out of 248. This indicates the ability to fund raises for these three communities since they are close in population.

Comparing four communities: A, B, C, D, of similar population size, we could compare a town manager’s salary in each town in relationship to per capita income. If town A has the highest per capita income but the lowest salary, then the town manager should get a raise, If town C has the lowest per capita income and the highest salary, then the manager should not get a raise. If town B’s manager has the second highest compensation, and per capita income is in second place, then the salary is about right. Statewide comparisons are meaningless because of variations in population and per capita income.

Cost of living increases are relevant if they are based on the low inflation America is experiencing. Social Security recipients received a 1.5 percent increase, and consequently, any increase above that is higher than the most liberal estimate of price increases. Since labor force participation for adult workers is at the lowest level ever, 63 percent, raises above the rate of inflation are inherently unfair.

Working hard is not an argument for a wage increase, as all workers should be working hard. Added responsibilities are another matter. Working hard does not always correlate with working well. Private sector productivity would be easier to measure than public sector work because amounts manufactured or sold is more quantifiable than human services work.

Not having had a wage increase for several years is irrelevant if the majority of people in a community, state society, and nation have not seen increases in their income, adjusted for inflation, over that several year period It is relevant to increase compensation if there is an actual and proven inability to procure workers for a position. This situation may exist in the booming shale oil and natural gas fields of North Dakota, but not in the Monadnock region.

Effects of public employment compensation upon the taxpayer are the heart of the matter. Is a compensation (wages and benefits) increase justifiable and affordable? If so, then it is fair.

Rick Sirvint lives in Rindge.

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