GSI analysis: Big gap in benefit cost in public, private sectors in N.J.

Garden State Initiative on Thursday analyzed the latest employee compensation data from the U.S. Bureau of Labor Statistics and found major differences in compensation costs between the public and private sectors.

In particular, GSI said government costs for pensions and medical benefits far exceeded the private sector, especially when looking at how New Jersey spends. The analysis said there’s a 50% differential in cost between the state and the rest of the U.S.

“As policymakers in Trenton debate modernizing public employee benefits, having a firm grasp of the facts over political rhetoric is essential” Regina M. Egea, president, GSI, said. “This data laden analysis clearly shows that the cost of public employee benefits in New Jersey far-exceeds those of other state government entities, let alone private sector employers. Any unwillingness to adapt New Jersey to the market realities of what it takes to compete with other states for jobs and residents just inhibits the growth of our economy.  New Jersey must significantly lower the cost of benefits of its public workforce if we are serious about attracting and retaining jobs.”

In the U.S., the average public sector benefits are $19.14 an hour, $8.81 more than the private sector. In New Jersey, government employees pay 50% more for benefits ($17.50 an hour) than the national average for public sector employees ($11.47 an hour).

National trends

There’s a noticeable difference between wages in the public and private sectors with public employees earning more, the analysis found. The report said this reflects the public sector’s requirement for more education when compared to the private sector.

Nearly all (95%) of the difference between public and private benefit costs was due to retirement and health care, GSI said.

New Jersey trends

The national average cost for public employee medical insurance comes out to roughly $12,000 a year, the analysis said. The cost to the employer of a typical New Jersey public worker plan is around $20,000 a year per worker, which adds up to an additional $10 per hour in costs, GSI said.

The national figure of $5.57 an hour for employee contributions to retirement benefits translates to $11,000 a year per worker.

In Fiscal Year 2019, New Jersey contributed about $5 billion to the pension funds, equal to about $11,000 per covered worker, according to the report. So, New Jersey was paying equal to the national average, but that was when the state government was only making a 60% payment of what was actuarially required, GSI found.

The amount will be higher in Fiscal 2020 likely more than $15,000 a year per worker or 36% higher than today —as the state continues to boost spending to get to 100% of required contributions, GSI said.