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Are There Too Many State & Local Government Workers?

UPDATED April 2 for the March Employment Report

The labor unions of state and local government employees, have drawn tremendous attention in the last month, due to Gov. Scott Walker of Wisconsin throwing down the gauntlet over the state's workers' right to organize, and the cost of their benefits. Many states are running budget deficits, and it seems a foregone conclusion that there will be big cuts in the numbers of government workers. But has government employment really gotten that far out of proportion? (This idea did not spring from my head, but instead was posited by the Financial Times on Friday, regarding the potential impact on unemployment.)

There are plenty of workers in state and local governments -- about 19 million, equal to about 15 percent of the total nonfarm workforce. Everybody knows someone who works for the city or state: both my parents were schoolteachers along the way, as were a couple of my cousins, and another is a policeman.

About 10 million of them work in education, and there are about 14 million total workers at the local level, versus five million for states. This graph plots the history of the sector's employment (each line stands on its own; that is, they aren't stacked on top of each other):

Click to enlarge
Most of the squabble about state workers has been over their pensions and health care -- that "civilian" taxpayers don't enjoy the same benefits, and resent paying for others to have it. The underlying issue there, however, is that states have not contributed enough to fund those programs; whether there are too many people is another question.

Nonetheless there has been steady growth in government employment -- are the numbers out of whack?

Measured as a percentage of the workforce, no. The earliest figures from the Bureau of Labor Statistics say that the proportion rose steadily during the 1950s and 1960s, and first hit 14 percent in 1980. Since then, state and local employment has wavered around that level, peaking at 15.6 percent in 1975, and as low as 13.6 percent in 1998, 1999 and 2000.

In August 2008 -- just before the financial crisis really took hold -- the share of government workers went above 15 percent again, but has dropped a bit, to 14.8 percent in February.

The biggest period of layoffs was from 1980 through 1984, in the general local government category, at 6.5 percent of the workforce.

UPDATE: Local government has lost 416,000 jobs since an employment peak in September 2008, says the Labor Department. (Please see the related post from April 1.)

This graph shows the proportion of total state and local government workers to the total U.S. labor force.

Click to enlarge
Since the financial crisis began, governments have cut the workforce by about two percent overall, although within categories, the cuts to education have been lighter -- two percent, versus three percent for other employees at both the state and local level. Education employment has held up better in past recessions as well.

So -- are there too many government workers? To listen to tea partiers and other fiscal hawks, you would think the numbers had doubled over the years, but in fact their proportion of the total workforce has not grown much. And that means the number has grown roughly in line with the population.

The growth surely varies widely from state to state -- the salaries and benefits of government workers are states' biggest costs, and some states are showing terrible budget strains, while others are more in line. And from the perspective of my desk I can't say whether growth in line with the population is what's required to maintain service levels, or whether that growth should have been slower -- after all, states have been able to automate their processes just like many other businesses.

It could be that budget concerns will trump citizens' demands for government services, and the cuts this time around will be a lot deeper, but that hasn't happened in the past few recessions. To match the biggest cutbacks, 2.8 percent overall in the slumps of 1980 through 1982, another million or so workers would be let go. That would add about a percentage point to today's unemployment rate.

The budget battles will force a difficult choice for state and local legislators. To look at it cynically, every layoff is a lost vote. But every layoff also represents a decrease in government services, and the first to go would most likely be the discretionary things we like so much, such as libraries and parks, and extending into what we count on even more -- public safety and education. And of course there are always taxes to raise.

Equally important, state and local employees live where they work, so those layoffs also have a direct impact on the local economies, and on the social support systems, such as unemployment insurance and public assistance.

In all likelihood the extent of cuts government spending can bear before services break down is a local question. Responsible legislators will look beyond their slogans and their own tenure in office, make insightful choices for the long term of their communities.

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