Government employee pay and benefit

Boyes invites consideration of the allocation impact of government spending on compensation. In thinking about this post and the reading for the October 2009 ASET book club - Stealing from Each Other there is a great deal to reflect upon.

Using an allocation scheme other than a decentralized market approach has both incentive and outcome consequences that are predictable.

Elaborating on Boyes's post:

Government employees have radically better benefits and pensions than private sector workers. “When wages and benefits are combined, federal civilian workers averaged $119,982 in 2008, twice the amount of $59,909 which workers in the private sector averaged for wages/benefits. The value of benefits for federal civilian workers averaged $40,000/year, four times the value of benefits that the average private sector employee receives. Only 12% of retirees from the private sector have defined benefit pensions to supplement Social Security. ( http://www.openmarket.org/2009/09/30/overpaid-bureaucrats-expand-in-number-and-pay/ )

An interesting example/comparison of public v private sector compensation and employment suggests the extent of resource mal-allocation.

USPS - average pay - $83,000 - employees - 656,000

UPS - average pay - $70,000 - employees - 425,000

FedEx - average pay - $74,000 - employees - 240,000

USPS is bankrupt and dependent upon subsidy for existence, while UPS and FedEx earn a profit and work toward efficient outcomes.

Here we have an illustration of Browning's thesis - predatory results as one segment of society (government employees) engage in rent seeking (stealing) from another group. There is a moral dimension to this process that Browning explores and that we all might reflect upon.

A dimension of the increasing scale and scope of the government is the steady increase in government employment. The 10 year growth rate in government employment in my home state of Arizona for example presents a clear and present danger to those who understand the incentives and consequences of command systems of allocation upon future growth and liberty.


This growth has resulted in direct employment by the government in Arizona over 20 per cent. (http://ebr.eller.arizona.edu/azeconomy/AEApr2009/AECurrent/AZ.asp) However, in addition to direct government employment, the level of military contractors, health providers and assorted other activity dependent upon the government would certainly increase total employment related to government.

The expansive presence of the government in labor markets and that impact on liberty needs little elaboration, nor does the impact on future growth. Tom Rex, in a dated analysis that bears reading concludes:

"The public sector is not too large - the private sector is too small. (I disagree with the first portion of this observation, but Rex's error here does not negate his conclusion)

Outside the Phoenix metropolitan area, most of Arizona suffers from too little economic activity other than of a governmental nature. A great need exists for private sector economic activity . . . to enhance living conditions for the existing populace."

Government Employment Growth, 1997-2007 10-year rank State 10-year growth 3-year rank 3-year growth 1-year rank 1-year growth Total 2007 employment (000s) 1 Nevada 47.2% 1 13.1% 1 4.4% 156.8 2 Arizona 28.8% 6 5.8% 2 3.5% 422.7 3 North Carolina 20.6% 2 6.6% 5 2.3% 695 4 Utah 19.9% 17 3.9% 29 1.0% 206.6 5 Florida 19.4% 7 5.5% 6 2.3% 1124.4 6 New Hampshire 18.8% 18 3.8% 16 1.5% 93.6 7 Colorado 18.8% 12 4.5% 7 2.1% 374.8 8 Vermont 18.2% 20 3.3% 34 0.6% 54 9 Idaho 17.5% 21 2.9% 25 1.2% 117.5 10 Georgia 17.1% 4 6.1% 10 1.9% 675.9 11 California 16.7% 14 4.2% 11 1.8% 2497.4 12 Texas 16.5% 13 4.4% 23 1.2% 1727.8 13 Washington 16.4% 30 1.8% 35 0.5% 532.8 14 Oklahoma 16.2% 3 6.3% 36 0.4% 320.9 15 Wyoming 15.5% 16 3.9% 4 2.4% 67 16 Delaware 15.3% 5 6.1% 30 1.0% 61.2 17 Virginia 15.0% 8 5.4% 15 1.7% 686.1 18 Arkansas 14.7% 9 4.9% 20 1.3% 210.3 19 New Jersey 13.7% 28 2.4% 41 0.2% 648.3 20 Maryland 13.3% 19 3.5% 13 1.7% 479 21 South Carolina 13.0% 15 4.0% 8 2.1% 337.7 22 Maine 12.2% 44 -0.4% 43 -0.1% 104.3 23 Kentucky 11.6% 11 4.7% 9 2.0% 324.6 24 Alaska 11.6% 42 0.5% 38 0.4% 81.7 25 Indiana 11.5% 32 1.5% 18 1.3% 431.8 26 Oregon 11.5% 22 2.7% 17 1.4% 290 27 Mississippi 11.3% 40 0.7% 12 1.8% 243.7 28 Tennessee 10.8% 33 1.5% 27 1.1% 421.3 29 Connecticut 10.3% 24 2.6% 22 1.3% 249 30 New Mexico 10.1% 47 -1.8% 50 -1.5% 194.8 31 South Dakota 9.9% 38 0.8% 37 0.4% 75.6 32 Kansas 9.4% 25 2.5% 24 1.2% 257.6 33 Hawaii 9.2% 31 1.6% 33 0.6% 122 34 Alabama 8.7% 10 4.7% 14 1.7% 376.4 35 North Dakota 7.8% 35 1.3% 42 0.1% 75.6 36 Nebraska 7.8% 26 2.5% 28 1.0% 164.1 37 Wisconsin 7.6% 37 0.9% 40 0.2% 416.1 38 Montana 7.0% 48 -2.0% 48 -0.5% 85.1 39 NEW YORK 7.0% 34 1.4% 21 1.3% 1504.3 40 Minnesota 6.7% 41 0.6% 45 -0.3% 414.7 41 Iowa 6.5% 29 2.2% 26 1.1% 249.9 42 Missouri 6.5% 27 2.4% 19 1.3% 439.6 43 Ohio 5.3% 45 -0.5% 46 -0.3% 797.6 44 Illinois 5.2% 39 0.7% 32 0.6% 850.6 45 Massachusetts 4.4% 23 2.6% 31 0.8% 432.6 46 West Virginia 4.3% 36 1.3% 39 0.3% 145.1 47 Pennsylvania 4.2% 43 0.0% 44 -0.2% 744.4 48 Rhode Island 2.2% 46 -1.4% 47 -0.5% 64.6 49 Michigan 1.5% 49 -3.3% 49 -1.2% 657.2 50 Louisiana -1.5% 50 -6.1% 3 3.1% 358.8 U.S. total/average* 12.3% 2.5% 1.1% Source: Public Policy Institute analysis of Bureau of Labor Statistics data (not seasonally adjusted) *Calculated by the PPI The Public Policy Institute of NYS, Inc. • 152 Washington Avenue • Albany, NY 12210• 518-465-7511 • www.ppinys.org

For an in-depth analysis of the effect of the widespread unionization of government employees, see the new Cato Institute Policy Analysis, “Vallejo Con Dios: Why Public Sector Unionism Is a Bad Deal for Taxpayers and Representative Government,