Tuesday, April 05, 2011

Government Employment vs. Private Sectors

Stephen Moore wrote an interesting piece in Friday's Wall Street Journal regarding the balance between government/public sector and private sector employment.

Here are some of his statistics,

"Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million)....More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined.....Nearly half of the $2.2 trillion cost of state and local governments is the $1 trillion-a-year tab for pay and benefits of state and local employees.....Surveys of college graduates are finding that more and more of our top minds want to work for the government."

Moore goes on to note that employment in teaching has doubled, per student, from 1970-2005, while test scores remained flat. Similarly, mass transit spending is up, while usage is a smaller share of transportation than in the past.

Now, I find some fault with Moore's simplistic presentation of data. For example, manufacturing value in America has remained high and stable for decades, but, thanks to productivity, employment has declined. Low-complexity, low-wage manufacturing goes overseas, now to Southeast Asia and China, while more difficult manufacturing remains onshore and pays well, albeit to fewer workers. More automation and mechanization ensures higher quality and more consistency of output.

So griping about a reversal of government and manufacturing employment from 1960 to the present isn't completely fair or representative of what's going on.

That said, it's stunning to simply read that there are 22.5 million government workers in America. How do we measure the value they create for our society? We can't and we don't. That is troubling.

Here's the way I prefer to consider Moore's numbers.

Jobs should entail adding value. When numbers of jobs, and total wages, increase, that should mean that the sector involved is creating more value. Thus, while private sector jobs typically follow that route, government does not. Or, more importantly, we can't tell.

The teaching and transportation statistics are troubling, because, as Moore puts it, they are backward. When we don't like results in those sectors, we do not, as in business, cut resources. Instead, we spend more. It becomes a case of buying service levels at any price.

That's why the average voter should ask why government ever does anything through its own employees, short of military and policing, rather than contract it out every 3-5 years? We don't want to employ people in government, because that's tax money. We want productivity, which is best bought via competitive contracting over the relevant time period to get the most out of facilities and the productivity gains of a contractor's operations.

I wish Moore had noted the total private sector US employment versus government employment, and those numbers over time. And, then, total wages and benefits for both over time.

Now that would be revealing.

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