Public Sector Pay

This Chart says it:

Tyler Cowen calls this a must read and I totally agree.

Talk about stoking fury. Public sector workers’ pensions (defined benefit) have always been an economic fantasy, and they will eventually die. But how do you index their wages? How is this dataset constructed?

Fundamentally, public sector workers are not part of the economy and so do not react to the same economic constraints that force companies to hold down wages. That’s my view, at least. I can imagine an ideological firestorm brewing on this point.