All societies depend on a professional public workforce. To do their jobs well, public servants need to be paid enough to attract competent people, keep good people around to preserve institutional memory, and support honest administration. But governments can also err in the opposite direction, using taxpayer money to support bloated compensation systems, overtime abuse, and pension games that have little to do with the actual value delivered to residents.

The goal is not to drive compensation to the bottom or to defend every existing compensation package. The goal is to “Goldilocks” public employee compensation: not too low, not too high, but just right.

The goal is to “Goldilocks” public employee compensation: not too low, not too high, but just right.

The Cost of Paying Too Little

Paying too little is not mainly a moral problem. It is a state-capacity problem. When governments cannot attract and retain qualified people for hard-to-fill roles, the result is not savings. The result is weaker service, slower enforcement, and lower-quality government.

One concrete example comes from New York City. In 2022, the New York City Comptroller reported severe understaffing in resident-facing roles across multiple agencies: the Department of Social Services’ Child Support Services division was staffed at only 415 people against 775 authorized positions, the City’s Cyber Command had a 36 percent vacancy rate, the Administration for Children’s Services’ Head Start and Daycare unit had a 35.2 percent vacancy rate, and the Department of Finance was short auditors and accountants.1 State-level oversight has likewise documented continuing strain in city agencies, with elevated vacancies in Environmental Protection, Transportation, Health, and other service-delivery agencies.2 For residents, understaffing in those kinds of agencies can mean slower benefit administration, weaker child-support enforcement, longer waits for services, and less consistent follow-through on basic government functions.

The same problem appears beyond New York. Recent research on U.S. local health departments found that non-competitive salaries are one of the main barriers to recruitment and retention.3 That is exactly what one would expect in a competitive labor market: if government employers pay too little for specialized work, strong candidates go elsewhere.

That said, vacancies do not automatically prove that government should simply hire more people. Better-governed places should also ask whether they are assigning public employees work that could be handled more efficiently through better institutional design. In housing and construction permitting, for example, licensed architects and engineers can often certify routine compliance, leaving public officials to focus on audits, field inspections, enforcement, complaints, and genuinely higher-risk cases.4 New York City already uses professional certification for some filings, and Chicago and Phoenix also have self-certification programs for qualifying projects.5 Staffing needs in this area should therefore be understood partly as a compensation issue and partly as a process-design issue.

The Pitfalls of Paying Too Much

Governments can also fail in the opposite direction. Compensation becomes too high, or too poorly structured, when earnings are driven less by labor-market scarcity and job difficulty than by political protection, weak oversight, or contract terms that are easy to game.

In the United States, this problem often appears not as obviously inflated base salary but as overtime abuse, leave manipulation, and pension spiking. Pension spiking is the practice of boosting late-career compensation in order to raise pension benefits tied to final-average salary.6 The core problem is not that every public pension is illegitimate. It is that badly designed systems can reward strategically timed compensation rather than long-run public value.

California audits have documented how these problems can grow under weak controls. In one overtime review, the California State Auditor found that a small number of employees in specific classifications accounted for strikingly high overtime costs, including nurses at Napa State Hospital whose average overtime exceeded their average regular pay.7 That is not just a budget warning sign. It is also a safety and fatigue problem. When systems rely too heavily on extreme overtime, employees are being encouraged to work hours that can degrade judgment and performance rather than supported by better staffing design.8

New York offers another example of how excessive overtime can become a structural fiscal problem rather than a short-term management tool. In 2025, New York State agency overtime reached $1.6 billion, with the Office of Corrections, the Office for People With Developmental Disabilities and the Office of Mental Health together accounting for most of the concentration described in the Comptroller’s report: those agencies comprised 21.7 percent of the workforce but generated 68.3 percent of overtime hours and 70 percent of overtime earnings logged by state agencies.9 When that happens year after year, the issue is no longer occasional flexibility. It signals a compensation and staffing system that is not being managed clearly or sustainably.

Overpay is therefore best understood as a jurisdiction-specific governance problem. Some places may still pay less than market for certain roles. Others may have compensation systems that are plainly too generous, too opaque, or too manipulable. Benchmarking should help residents distinguish between the two.

Finding the “Just Right” Zone

The practical test is not whether a compensation package looks high or low in the abstract. The test is whether the jurisdiction can recruit and retain competent people for important work without creating compensation systems that insiders can exploit.

If a city repeatedly cannot fill inspector, engineer, accountant, health, or social-service positions, compensation may be too low, work conditions too onerous, the hiring process may be too slow, or the role may be structured poorly. If a jurisdiction sees chronic overtime spikes, pension gaming, or politically connected hiring into unusually attractive positions, compensation or management may be too loose.

Good government requires both discipline and flexibility. It means paying enough where genuine scarcity exists, holding the line where roles are easy to fill, and redesigning processes so public employees are used where they add the most value.

Tools for Controlling Compensation Drift

Conduct Classification Reviews

Bureaucracies tend to inflate titles and compensation over time. A classification audit compares what workers actually do with the job descriptions on file. The U.S. Office of Personnel Management describes a desk audit as an interview conducted by a human-resources specialist to understand the duties and difficulty of a position.10 These reviews can uncover situations where roles no longer match the compensation attached to them or where titles have drifted away from actual responsibilities.

Benchmark Against the Labor Market

Compensation should not be set in a vacuum or defended by habit. Governments should benchmark compensation against comparable labor markets, but they should also benchmark outcomes: vacancy rates, overtime trends, turnover, service quality, and pension costs.11 A place with moderate compensation but chronic vacancies may be underpaying. A place with large payrolls and runaway overtime may be mismanaging compensation in the opposite direction.

The real question is not whether compensation debates can be settled in the abstract. The real question is which jurisdictions are getting specific roles wrong, and what residents are receiving in return.

Address Rigid Compensation Structures

In some parts of government, compensation is made less flexible by rigid salary schedules, job classifications, seniority rules, and bargaining structures that are not designed for fast labor-market adjustment. The clearest evidence comes from public education, where traditional salary schedules often pay almost entirely by years of experience and credentials rather than by subject-area scarcity or school-specific staffing difficulty.12 That can make it hard to raise compensation for shortage areas without raising it across the board.

The point is not that collective bargaining itself is inherently bad. The narrower point is that some compensation systems are too rigid to match pay to actual recruitment conditions. When that happens, governments can end up undercompensating hard-to-fill roles while overcompensating easier-to-fill ones.

There are examples of jurisdictions trying to reform that problem. Denver’s negotiated ProComp system added differentiated compensation for hard-to-serve schools and hard-to-staff assignments within a unionized teacher-pay framework.13 In Georgia, a statewide bonus program for certified math and science teachers reduced attrition substantially, showing that targeted compensation changes can improve retention where shortages are real.14

Reduce Abuse and Future Liabilities

When collective agreements or personnel rules make it easy to inflate late-career earnings, convert overtime into pensionable compensation, or hide the true cost of staffing, taxpayers eventually pay for design failures that should have been fixed earlier. Employees should be paid clearly, fairly, and transparently for the work they actually do. Clear limits on pensionable earnings, tighter overtime controls, and better disclosure of unusually large compensation packages help make that possible while reducing opportunities for manipulation.

Paying a Premium for Public Safety

Public safety work can justify premium compensation. Police officers and firefighters face risks, scheduling burdens, and responsibilities that do not map neatly onto most civilian roles. Communities should be willing to pay enough to attract capable people for genuinely demanding public safety jobs.

But premium compensation is not a blank check. The existence of danger does not justify opaque overtime, inflated staffing hierarchies, or pension rules that reward manipulation over performance. The right question is not whether public safety workers deserve good compensation. They do. The right question is whether the compensation system is disciplined, transparent, and tied to actual public value.

Nepotism: A Persistent Threat

Few things destroy morale and public confidence faster than nepotism. When attractive public jobs are awarded on the basis of family ties or personal connections rather than merit, compensation becomes more than a budget issue. It becomes a governance issue. Would you want to be the supervisor of the mayor’s slacker nephew or the council president’s entitled mistress?

Would you want to be the supervisor of the mayor’s slacker nephew or the council president’s entitled mistress?

New York State’s own ethics rules recognize the risk. State law prohibits covered officials and employees from participating in decisions to hire, promote, discipline, or discharge relatives, and from awarding contracts to relatives.15 That is the right instinct but it only applies at the state level. If a job is attractive enough relative to other available options that insiders will fight to reserve it for friends and family, government needs stronger safeguards.

Nepotism can also compromise labor negotiations. It is hard to bargain at arm’s length when many of your friends and family are union members. Even well-meaning officials may find it difficult to separate private loyalties from public obligations, and the wider community can bear the cost.

Strict anti-nepotism rules, open competition, and transparent hiring are part of getting public compensation “just right.” Compensation systems that are much more attractive than comparable alternatives can invite patronage when hiring safeguards are weak. Compensation that is too low can leave agencies chronically understaffed. Both outcomes weaken government.

Are There Rare Exceptions?

There are rare cases where the rule may bend without breaking. If the mayor’s brother is a genuine financial savant, or the governor’s daughter is the kind of lawyer who could be billing ten times as much in private practice but wants to serve, blanket moralizing can miss the point. Public life has sometimes benefited from exactly that kind of high-talent, high-sacrifice service, including controversial cases like Robert F. Kennedy and non-family examples like Robert Rubin and John C. Whitehead, who left much better paid private-sector careers for government. But that is the exception that proves the rule. If an insider gets the job, the burden of proof should be brutal: clear legal authority, full transparency, real public scrutiny, and no doubt that the appointment reflects extraordinary merit rather than family convenience.

Conclusion

Public employee compensation is not a culture-war question. It is a governance question.

Some jurisdictions underpay the people they most need and get slower, weaker service as a result. Others tolerate compensation systems distorted by overtime abuse, pension manipulation, or political favoritism.

Better government requires a narrower and more practical standard. Pay enough to recruit and retain competent people for work that matters. Do not pay so much, or structure pay so poorly, that the system attracts rent-seeking, nepotism, or hidden long-term costs. And redesign public processes so government employees are doing the work that truly requires public authority rather than duplicating what licensed professionals can already certify.

That is the Goldilocks principle applied to government: not too little, not too much, and not in the wrong places.

If you have additional insights or examples of successful (or unsuccessful) efforts to balance public compensation, please share them at [email protected]. Benchmarking experiences and lessons from around the country will help our communities learn from each other.

  1. New York City Comptroller, “Title Vacant: Addressing Critical Vacancies in NYC Government Agencies”. ↩

  2. New York State Comptroller, “DiNapoli: New York City’s Government Workforce Expected to Increase for First Time Since Pandemic”. ↩

  3. Frontiers in Public Health, “A review of recruitment and retention strategies in U.S. local health departments: insights and practical solutions”. ↩

  4. Mercatus Center, “Streamlining the Approval Process for Housing”. ↩

  5. New York City Department of Buildings, “Professional Certification”; City of Chicago, Building Permit Professionals and program help; City of Phoenix, “Self-Certification Program”. ↩

  6. CalSTRS, “Preventing pension spiking”. ↩

  7. California State Auditor, “High Risk Update: State Overtime Costs”. ↩

  8. CDC/NIOSH, “Overtime and Extended Work Shifts: Recent Findings on Illnesses, Injuries, and Health Behaviors”. ↩

  9. New York State Comptroller, “DiNapoli: Despite Third Straight Year of State Workforce Expansion, OT Costs Increased by $1.6 Billion in 2025”. ↩

  10. U.S. Office of Personnel Management, “MSO-98-3” desk-audit fact sheet. ↩

  11. Governing, “A Better Way to Set Public Employee Pay: Benchmarking”. ↩

  12. CALDER Center, “Can Teacher Compensation Be Used to Reduce Teacher Shortages?”. ↩

  13. Denver Public Schools, “ProComp Payments”. ↩

  14. CALDER Center, “The Effects of Financial Incentives on Teacher Retention in High-Need Subjects”. ↩

  15. New York State Commission on Ethics and Lobbying in Government, “Nepotism - What to Know”. ↩