Since the AEI/Heritage authors intended their paper as a rebuttal to an Economic Policy Institute paper by Jeffrey Keefe, that found no such discrepancy of pay, Keefe looked over the conservative effort and issued a reply. It says, rather dryly:
The authors, Andrew G. Biggs of the American Enterprise Institute and Jason Richwine of the Heritage Foundation, concur with the EPI paper’s conclusion that public employees earn less in wages and salaries than comparable private-sector workers. But they object to the findings on compensation, writing, “Missing from the Keefe study are several aspects of compensation; specifically, retiree health benefits, the guaranteed nature of public-sector pensions, and the value of job security” (Biggs and Richwine 2011, 5). According to Biggs and Richwine, these omissions produced a 46 percent net increase in the value of public employee compensation. But their analysis is flawed because they projected a very low rate of return on public pension fund assets and committed other errors and obfuscations.
Now, what might the nature of those obfuscations be? A fuller list can be found at the link, but I found these especially noteworthy:
Arbitrarily reducing private-sector employer tax contributions for Social Security from 6.2 percent of payroll (up to $106,200) to 2 percent of payroll because they do not believe the Social Security benefits are worth 6.2 percent.
What's that, you spent 6.2 percent on Social Security? Oh, well we don't think Social Security is really worth it, so for that one we're gonna put down, let's say a 2.
Arguing that public employee job security confers a premium worth 9.3 percent that should be added to the estimated cost of employee compensation, even though there is no guaranteed job security in the Ohio public sector and no empirical evidence offered by the authors to support their claim of a job security premium or penalty.
Yes. There is nothing more "secure" than being a public worker in Ohio right now. You're living the good life. Your job and pay is so secure, we're just gonna say it's worth an additional 9.3 percent of your pay. (Not 9.2 or 9.4, mind you. 9.3 is just right!)
Double counting Ohio retiree health benefits—which in Ohio are prefunded from employer and employee pension contributions—by counting them in addition to employer pension-fund contributions.
Well, maybe they're so good they should be counted twice. Like wives. Wait, what?
Using a 4 percent interest rate to project the value of future pension assets, when the Ohio Public Employees Retirement System (OPERS) has achieved 8.99 percent rate of return over the last 30 years.
Yeah, what we're going to do here is just assume in advance that we at Heritage are going to fuck up the global economy so bad that you'll never get a decent rate of return again. Well, all right, I'll grant you that one. That one actually sounds plausible.
Add to that a host of apparent math errors and, to quote EPI, calculations that "could not be replicated"—boom, you get that public workers are really just coddled, spoiled, and they earn forty-eleventy-two percent more than private sector workers.
So basically what we have here is the AEI and Heritage version of "research." If the plain numbers show one thing, but you're funded to prove another, then just start changing numbers around until you get the conclusion you want. So a six percent becomes a two, for no good reason, and the Heritage notion of "cushy job security" becomes a 9.3 percent addition tacked on to the public sector worker, which is then pointed to as obvious evidence that they have too damn much job security and we need to reduce it some.
According to what more normal people call "math" or "facts," this argument has been long settled. We've covered those earlier findings here and here, among other places, and the facts remain that public workers are both compensated slightly less than private sector workers, and tend to be more highly educated than their private sector counterparts, which would suggest that maybe in a "free market" world they'd be getting paid more, not less.
If the only way conservative think tanks can counter those findings is to just start making up numbers until they get the results they want to get, that should tell you a few things about just how in-the-tank their "thinkers" are.