Thursday, March 22, 2012

Government protects its Own

Yesterday, I was listening to NPR (National Public Radio). There was a profile of Marine Pilots. The men and women that guide huge merchant ships into port. There is no doubt that this is a difficult job, but the pay should be comparable to other similar jobs. That only seems fair. These positions are almost always government jobs in the United States since the ports of America are the usually public facilities. Even so I was shocked when the narrator disclosed that pilots in Los Angeles earned in the mid $300,000 and a study of northeastern U. S. pilots had an average salary slightly above $400,000.

I have had positions of great responsibility and critical to the welfare of a portion of the country, but never earned that much money. Of course, I worked in the business sector where salaries levels are negotiated between two parties with "skin in the game." Clearly, most government sector jobs only have one party with skin in the game. There is no real negotiation in the government sector. The emphasis seems to be on making the employee happy.

This incident sparked me to recall an incident in San Francisco when on a trip with my family in the 1960s. The whole family was on a tour bus that made various stops around the city. At one of those stops the bus driver was outside the bus talking to a passenger about a possible upcoming strike by City bus drivers. I was standing with my Father nearby and we could hear the conversation. He was telling the visitor that the average salary for bus drivers was $60,000. I knew the average salary of the business people in our community south of Seattle was about $30,000. The visitor said that seemed like a lot of money. The bus driver interrupted him and explained it was very expensive to live in San Francisco. I pondered that thought since I had looked at a number of S. F. restaurant menus, purchased souvenirs and watched my Father purchase tickets to attractions. They had all seemed similar to Seattle prices. As we walked away my Father, a physician, leaned over and said his salary was about the same as the bus driver.

Later in the afternoon I listened to another NPR show about a "technology cluster school" in Greece.  The school Director stated at one point this school was needed since it was no longer possible in Greece to take your degree and get a government job. Herein lies the problem. The way to wealth in Greece up until the current financial crisis was to get a government job and live happily ever after.

In the United States I believe the average salary today is about $45,000. If you have a federal government employee making $400,000 and each private citizen pays federal taxes of $2,500 it takes 160 people to pay the public sector employee his salary. This does not seems so bad until you realize that if you calculate the cost of all government sector employees. Government sector employees are about 40% of the population and these employees earn much more than their business sector counterparts. Therein lies an impossible situation. The governments only choice is to borrow.

This inequality between the government sector and the private sector has effectively bankrupted Greece and is threatening to do the same to the United States in the next couple of years. A small business sector supporting an overblown government sector will never work. All activities of the government sector are funded from tax revenues from the business sector. I explain this in greater detail in my new book, the Rule of Money.

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