Editorial: Excessive Salaries Even Worse in Private Sector By BECKY O'MALLEY

Tuesday February 28, 2006

A staple of daily newspaper journalism is an “expose” of the salaries paid to public servants of all kinds. The Contra Costa Times has been dining out for more than a year on salary information it obtained about Oakland employees who make more than $100,000 per year, gleaned from a successful California Public Records Act lawsuit against the city. Oakland’s unions, particularly the police union, fought tooth and nail to keep said information from coming out into the open. Lately, the San Francisco Chronicle has been engaged in a similar struggle to reveal information about compensation packages for top University of California officials, and the results have caught the attention of the state Legislature—both parties—in a big way. Putting such details in the public arena is laudable, and readers are certainly shocked to see it, but in some ways these stories miss their mark.  

It’s true that taxpayers have a right to know how their dollars are being transferred to whom and for what. That should be a matter of public record, and the papers that put it there deserve a good deal of praise. But it’s also important to take a look at where salaries paid to government officials fit into the overall economic picture, and if that’s done the data is not quite as impressive. 

The Chronicle of Higher Education calculated the total compensation paid to UC President Robert Dynes at $423,666, presumably among the highest salaries if not the very highest in the UC system. It’s above average for public university administrators, but still not in the top 20. And five private university presidents earned more than $1 million. Any of these figures add up to a hell of a lot of money by any calculation, especially as compared with the pay of service workers in the same institutions. Dynes himself lands just over the edge in the 99th percentile of pay scales in the United States, even if everyone else who works under him makes less. But an even more shocking story, one that doesn’t get as much ink, is who else is getting that last 1 percent, and how it affects those on the bottom.  

A recent paper by economists Emanuel Saez (of UC Berkeley) and Thomas Piketty shows that the top 1 percent of Americans now corral about 15 percent of all U. S. income, up from about 8 percent just since the 1960s and 1970s. The income share taken by the top 1 percent is again what it was in the Gilded Age at the turn of the 20th century. The overall income rise coming from increasing worker productivity is being sucked up by the top one percent. 

Super-hero economist Paul Krugman’s most recent column puts this into perspective with his discussion of another recent paper, this one by Ian Dew-Becker and Robert Gordon of Northwestern University: “Between 1972 and 2001 the wage and salary income of Americans at the 90th percentile of the income distribution rose only 34 percent, or about 1 percent per year... But income at the 99th percentile rose 87 percent; income at the 99.9th percentile rose 181 percent; and income at the 99.99th percentile rose 497 percent. No, that’s not a misprint.” 

In other words, though public servants like UC administrators and Oakland police officers are doing reasonably well at taking care of themselves, “doing well by doing good” like Tom Lehrer’s Old Dope Peddler, the really big guys are doing much better, and having a more profound and long-lasting effect on the structure of American society. Even in what the bloggers call the MSM, the mainstream media, you can be pretty darn sure that the top executives are taking care of themselves in ways undreamed of by those who merely toil in the public sector. Just for comparison it might be instructive to take a look at the available financial information on executive compensation in the companies which own the Contra Costa Times (Knight-Ridder) and the San Francisco Chronicle (the Hearst Corporation) or even the East Bay Express (New Times, now transmogrified into Village Voice Media). It’s a relatively minor research project, though outside the scope of this space today. It might, in fact, be a good story idea for reporters in any of these organizations, but they might have some trouble getting management approval to do it. Even more, it might be an instructive and fun project for the former employees of such media conglomerates now at loose ends because of the endemic layoffs and buyouts in their industry, engineered to make sure that profits and thus executive pay at the top levels continue to stay high.  

It’s easy (and stylish) to take potshots at public employees, but the real problem with the American economy today is not that public employees on the whole are grossly overpaid. The biggest problem is that taxes are too low to pay for needed public services at any pay level, politicians are too cowardly to raise taxes, and the media let them get away with it. If marginal tax rates, the taxes on the excessive income at the very top of the scale in a progressive tax system, went back to what they were in the Eisenhower administration (90 percent) or even in the Kennedy administration (70 percent) we could go back to a decent level of public services without the looming specter of a deficit for which our children and grandchildren will pay.