Is The Government Hiring Overqualified Workers?

Dylan Matthews tries to tackle the question of whether public sector workers are overpaid. He concludes that they’re not:

Keith Bender and John Heywood, economists at the University of Wisconsin at Milwaukee, did a comparison of state and local and private sector compensation that controlled for age, education level, experience and other factors, and found that state and local workers are consistently underpaid, and have been growing more so since the early ’90s.

The more I think about this question, the less sense I think it makes. In a competitive labor market, nobody is “overpaid.” If one restaurant pays its line cooks more than another restaurant, it’s presumably trying to get privileged access to higher quality workers. The question is whether or not public agencies are purchasing unduly high-quality labor. And that’s not a question that it makes sense to ask in general. Baltimore probably should be investing more in obtaining the best police officers possible than Bangor. Doing statistical controls ends up sort of further obscuring this.