Testing the Assumptions

This analysis assumes that the ECEC East North Central region statistics are an appropriate proxy for the average cost of private sector benefits in Michigan. This assumption was tested using the Bureau of Economic Analysis report on “supplements to wages and salaries.” This report includes employers’ payments for retirement, insurance and legally required benefits, but does not include the value of paid leave or other supplement benefits that may be offered in the private sector.[74]

Using these data to calculate the average level of benefits per employee suggests that the ECEC East North Central region statistics are an appropriate proxy for average private sector employment benefits in Michigan.[*] From 2005 to 2012, there was never more than a 3 percent difference between the average cost of benefits for private sector employees in Michigan and the average cost of benefits for private sector employees across the entire East North Central region.[†]

To check whether state government employee benefits are indicative of total state and local government employee benefits as a whole, state government health insurance costs were compared to school employee health insurance costs. Data from a survey of school district health insurance costs collected by the Mackinac Center in 2009 was used for this comparison.

This survey of every school district in the state found that the average full-family insurance premium purchased by public schools for all employee groups cost about $15,460 in 2009. Since family health insurance premiums increased 22 percent from 2009 to 2013, using the average state employee health insurance costs as a proxy for all government workers seems reasonable (in fact, conservative), especially considering that the 186,000 FTE school employees make up the single largest chunk of government employees.[75]

Finally, as stated above (see “Retirement Benefits”), the costs for MPSERS is roughly equivalent to MERS, suggesting that using average MPSERS’ costs is an appropriate approximation of retirement benefit costs of Michigan government employees.

[*]  The calculation used total payments for supplements to wages and salaries for private sector employees in Michigan, Ohio, Indiana, Illinois and Wisconsin. These were divided by the average annual, non-seasonally adjusted payroll employment in those states, according to the Bureau of Labor Statistics’ Current Employment Statistics survey. "State and Metro Area Employment, Hours & Earnings," (U.S. Bureau of Labor Statistics, 2013), http://www.bls.gov/sae (accessed July 9, 2013).

[†]  Unfortunately, these proxies were only available at the aggregate level — data are not available to check the voracity of each individual benefit (insurance, retirement, etc.).