Monetizing Job Security
By Bryan Caplan
Federal workers’ total compensation far exceeds that of private sector workers. The CBO says so, and so does a large academic literature. One glaring omission, though, is federal job security. High job security is nice to have during normal times, and a godsend during recessions. But since it has no explicit budgetary cost, researchers ignore it. At least all the researchers I’ve seen.
Question: If you had to monetize job security, how would you do it? The obvious Google Scholar searches yield no good hits. (Anything I’m missing?) Presumably you’d want to start by multiplying (a) the difference between your probability of being unemployed in a normal job and being unemployed in your actual job and (b) the difference between your total compensation and your reservation wage. But that’s clearly inadequate. You’d also want to factor in risk aversion, shame, and more.
Personally, you’d have to pay me at least $50,000 extra per year to get
me to renounce my tenure. It’s a terrible system, but I love it.