Myths About Public-Sector Employment

I’ve been thinking about public-sector employment for several reasons. Right now I’m working on a book to be titled 150 Best Federal Jobs. And in Wisconsin, New Jersey, Ohio, and many other states, governors are making noises about their states’ obligations to public-sector employees. So this is a good time to dispel some myths about work in the public sector.

One myth is that public-sector employment is increasing. This myth fits nicely into a broader narrative of creeping socialism. For example, last week, Speaker Boehner asserted that President Obama has added 200,000 federal workers since he took office. However, the facts don’t bear out such claims. The FedScope database of the Office of Personnel Management (a goldmine of data about federal jobs and an important source for my current project) reports a total of 107,057 nonpostal jobs added in fiscal years 2009 and 2010. Even with the addition of postal jobs, that’s well short of 200,000. Evidently the Speaker’s aides were also counting temporary Census jobs, so the Speaker was talking about cutting some federal jobs that actually are already gone.

The other factor to bear in mind is that the overall number of jobs increases as the population increases (except during recessions), so what counts is not the total number of government workers, but rather their fraction of the nation’s population. The Office of Management and Budget projects (PDF) that the fraction representing federal employment will decline slightly, continuing the trend of several decades. The OMB report notes, “In 1953, there was one federal worker for every 78 residents. In 1989, there was one federal employee for every 110 residents. By 2009, the ratio had dropped to one federal employee for every 147 residents.”

Another myth that is particularly current right now claims that public-sector workers earn more. The is true only if you look at all public-sector and all private-sector workers. But the two workforces are not comparable. For example, only about half as many federal workers are on part-time schedules as those in the private sector. On average, federal workers are also older and better educated. Most important, public-sector employees tend to work in higher-skilled occupations than private-sector workers. Think of all the fast-food workers, groundskeepers, home health aides, and other low-skill workers in the private sector. Some of these jobs do get done in government-run facilities (for example, the cafeteria in the state house), but these positions are few compared to those in the private sector, and the trend is toward contracting this work out to private businesses.

One interesting study by the Economic Policy Institute (PDF) focused on state and local government employees, who are receiving special attention in these times of drastic budget shortfalls. The study used data from the Current Population Survey to match comparable workers in public-sector and private-sector jobs. The researchers found that low-skill workers do have an advantage in jobs for state and local government, probably because they are more likely to be unionized than in the private sector. When total compensation (including pensions and other benefits) are quantified, “High school graduates received total compensation of $53,880 on average working for state and local government compared to $50,596 for workers employed by private employers, a public employment compensation premium of 6%.” However, more-educated workers actually pay a penalty in total compensation for taking a job with state or local government: 25% for those with bachelor’s, 31% for a master’s, 21% for a doctorate, and 37% for a professional degree.

Let’s not forget that many of the statements we read in the newspapers about public-sector employees are motivated by politics rather than by economics. Wisconsin is a perfect example of this. If the governor were concerned only with dollars and cents, why did he target only the public-sector workers who opposed him politically (the teacher union) and not the public-sector workers who supported him (the state police union and one powerful firefighter union)?

One advantage that public-sector workers definitely have, on average, over private-sector workers is job security. Some of this result from the higher unionization rate of public-sector workers. Some results from civil service regulations that are designed to prevent government workers from being favored or targeted for their political loyalties. And some results from the inertia of public-sector positions; private-sector businesses are more nimble at both creating and terminating jobs.