public sector

Ready, Disclaim, Fire

Earlier today, newly-elected Michigan Governor Rick Snyder released his "Citizens’ Guide to Michigan’s Economic Health." The general purpose was to provide an easy-to-understand presentation of the state’s finances, and to encourage local governments to do the same. These are of course laudable goals, but one of the report’s major findings, also mentioned in the governor’s press release, was a familiar one:

Average annual compensation of state employees (including salary, wages, and benefits) was over twice the average annual compensation of private sector workers in 2009.

As might be expected, many reporters and editors dutifully ran this outrage-inspiring finding as a headline (also here and here), even before the report was officially released: State workers make twice as much as private sector workers. Governor Snyder rolled out the report as part of his presentation to the Business Leaders for Michigan Summit, in which he spoke about the state’s fiscal situation.

I’ve already discussed how these gross comparisons of public and private sector workers – whether nationally or in a single state – are invalid. That is, they compare two completely different groups of workers: Public employees, who are mostly professionals, and private sector workers, many of whom work in lower-wage, lower-skill jobs. But this time, you don’t need to take my word for it. After featuring the “twice as much” finding in a header and pull-out quote, the governor’s report says it directly:

However, this analysis does not compare private and public sector employees with similar jobs, years of experience, or education.

Let me translate that for you. It means: This comparison is meaningless.

Meet The Bureaucrats

You needn’t look far to see that state public employees are under intense scrutiny. Politicians and other commentators are using rhetoric that is simplistic and often misleading. But, in the debate over their relative value, these state workers have an additional problem: I get the strong feeling that most Americans have little idea what they do.

If you ask the average person to describe what a public employee does, you might hear the word “bureaucrat." Those who wish to dismantle large chunks of the public sector have come to use the term as the pejorative for all public servants (most often in the federal government context) - probably in the hope that it will conjure up images of large government buildings filled with endless rows of faceless, overpaid desk workers collating papers.

So, who are these state public employees? What are they actually doing? These are very basic questions, yet they are rarely addressed in detail, at least not lately. And, let’s be honest – in one way or another, our tax dollars do pay for these workers’ services, and regardless of your views on state budget troubles, it’s always good to know what you’re paying for. Luckily, of course, the question is easily answered. In the simple table below, using 2009 data from the Occupational Employment Statistics program of the U.S. Bureau of Labor Statistics, I present the breakdown of state government workers by occupational category (note: these categories are comprised of varying numbers of similar detailed occupations, and while my examples in the table are the largest, they are not the only ones in each category).

In order to summarize this table, let’s suppose you’re invited to a party to meet ten people, who are a roughly representative sample of the 4.5 million state employees across the nation. Let’s meet the bureaucrats!

GDP: Government, Democracy, Prosperity

Public spending has been under relentless attack in the U.S. since before President Ronald Reagan first took office.  The notion that “shrinking government” grows the economy, builds character and may even save our immortal souls is now one of the verities of our political discourse: public=bad; private=good. Indeed, it was the central belief uniting Tea Party members during this year’s campaign. Research and experience don’t support this conviction, but here we are.

The massive government spending that was deployed to push the economy back from the brink of depression has aggravated the always inflamed passions on this issue. With red lights flashing and sirens wailing, anti-spending Tea Party-backed politicians are now riding to Washington to slay – or at least rein in – the beast of government.

This is the narrative we live with.

There is an alternative narrative however, supported by years of research, that tells a different tale, one in which public spending is a positive good, for the economy and society. In this narrative, public spending rises naturally as societies prosper and voters – demanding better infrastructure and better public services for themselves and their families – understand the need to pay for the kind of society in which they want to live.

Selling The State

In a recent post, we discussed the explosive growth in privatization of public services, including one town that recently privatized everything and everybody. Along similar lines, this week, the Wall Street Journal published a story about desperate state and local governments, squeezed by declining revenues, selling or leasing public property to private interests. The reporter notes:

Cities and states across the nation are selling and leasing everything from airports to zoos—a fire sale that could help plug budget holes now but worsen their financial woes over the long run.

The notion that we should cede public services to the private sector has assumed the status of quasi-religious dogma in recent years. There was a brief time during the earlier, more dire days of the current recession during which many began to question this market fundamentalism. Such dissent continues in some circles today. But you wouldn’t know it looking at actual policy.

Things may even be getting worse. Cash-strapped governments have stepped up efforts in a new area: privatization of public assets.

The Jobs Imperative

With today’s Senate passage of the new public sector jobs bill, the federal government’s role in stimulating the economy is once again in the limelight. The use of public dollars to leverage jobs in the private sector is even more controversial. Historically (and today) U.S. business wants government to "get out of the way," and let market forces determine outcomes (at least until they themselves need to be bailed out). The priority is "maximizing shareholder value." The fewer workers you need to do that, or the lower their cost, the better.

Still, some worry that the axiom of maximizing shareholder value lately has been taken to a destructive extreme. One of those is Andy Grove, former CEO of Intel and still a consultant to the U.S. chip-making giant. In a recent interview in Business Week, Grove noted that U.S. business is "...largely oblivious to emerging evidence that while free markets beat planned economies, there may be room for a modification that is even better."