Sunday, February 27, 2011

How Much do Wisconsin Teachers "Really" Contribute to Their Benefits Package?



One of our graduate students brought these two articles to the attention of her Facebook friends (which includes me) yesterday: this one in the Wall Street Journal and this one in the web site tax.com. The WSJ tells a rather hair-raising story about what a large contribution the state government and school districts are paying into the pension plans and medical insurance of public school teachers. In some cases the teacher's own contribution is zero. The Tax.com article claims that in every case the teachers own contribution is actually 100%! How, my young FF wondered, can there be such wild disagreement about a plain matter of fact?

Good question! I think the answer is that there is really no substantive disagreement here at all. They are simply describing exactly the same facts in different ways. The Tax.com author, David Cay Johnston, maintains that medical insurance and pension contributions from the government are really from the worker. The reasoning seems to be this: "Wages" properly refers to everything you are given in compensation for your work. Since the state and the districts give the teachers these benefits as compensation for work, they are really part of the worker's wages. Therefore the worker's contribution to their benefits packages from their wages is not 4% or 8% but 100%. They already contribute it all!

This is of course nothing but word-magic.

In one way, though, it is simply not true. If it were actually true that compensation with benefits is actually equivalent to compensation with pay, then it would also be true that, if the teachers were given no benefits at all, they would be getting its full value in pay. That would mean that the Milwaukee teachers being discussed in the above video would be getting an average of $100,000 a year in cold, hard cash for 9 months of work. That of course is absurd. Taxpayers in the private sector are slow to anger and their anger has usually has little effect, but they would never sit down for that.

It makes a difference, probably a big one, that about half of Wisconsin teacher compensation is concealed in the form of perqs rather than pay. I means that it does not show up on transparency web sites like this one. It means that workers in the private sector -- about half of whom have no pensions at all -- cannot accurately assess how much they have to work in order to support these people.

(HT to Molly Gardner.)
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