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Federal Jobs Look Too Good Not to Have Big Price

Author: Amity Shlaes, Former Hayek Senior Fellow for Political Economy
February 17, 2010
Bloomberg

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To hear Harry Reid or Mitch McConnell, you would think that the future of the American workforce depends on whether they can agree on temporary payroll tax holidays, highway funding, biodiesel subsidies and supplying teachers with enough cash to acquire new pencils.

None of these, or just about anything else in the various versions of the jobs legislation, gets at the big question about jobs. That question is whether Senate Majority Leader Reid or his Republican counterpart are even considering what might be called the jobscape -- the overall outlook for jobs, and especially how a job creator, the entrepreneur, fits in that picture. In recent years that jobscape has shifted in subtle ways that discourage enterprise, and so prospects for the economic recovery.

The first feature of that shift is a change in the federal workforce. In the 1990s, former President Bill Clinton and House Speaker Newt Gingrich managed to reduce the federal workforce to less than 2 million, excluding the postal service.

But from January 2000 to January 2010 -- first under President George W. Bush after Sept. 11, then under Barack Obama -- the number of non-postal employees in the federal government grew 15 percent, to 2.18 million from 1.89 million. The rise came in Homeland Security positions, Veterans Administration jobs, Justice Department posts, and so on.

This increase would mean less if the private sector had grown as well. But over the same period, private-sector employment decreased by 3 percent, to about 107 million from about 110 million. In short, the relative picture changed.

Better Jobs

Jobs with Uncle Sam aren't just more numerous than they used to be. They're better. Wages and benefits for federal civilian workers were more than double the average total compensation in the private sector: $119,982 versus $59,909. In the treacherous period between December 2007 and mid-2009, the number of federal employees earning more than $100,000 doubled, rising to 66,500 or so. Much of this was due to locked-in raises for workers who were rising through the ranks.

Then there's the allure of the stability of a federal job. About one in five jobs at the federal level ends in firing or resignation. By contrast that rate is one in two in the private sector, according to the Bureau of Labor Statistics' Job Openings and Labor Turnover Survey.

The same pattern of increase in government jobs for the just-closed decade shows up at the state and local level -- writ large. Federal data show that the number of total government employees in the U.S. rose to 22.5 million from 20.6 million.

Wrong Message

The new relative appeal of a government job sends a message that private-sector work, especially self-employment or a job at a start-up, may not be worthwhile. Recent wipeouts of big businesses and the recessionary struggles of smaller ones only reinforce that message. So do politicians' occasional disparagement of "risk."

The country has seen jobscapes like this before. In the 1930s and early 1940s, people gifted in higher mathematics became sixth-grade teachers not because they enjoyed the company of 11-year-olds but because the posts were relatively secure. The private sector wasn't offering many jobs, and federal jobs became so enticing that even economist Milton Friedman took one.

In the 1950s, the number of non-postal federal employees in the executive branch rose to 1.8 million from 1.4 million, more than 25 percent, outpacing the overall growth of the labor force. Many scientists and engineers placed their faith in what Irving Kristol labeled the Big PX -- government.

‘Depression-Proof'

Big corporations, for their part, offered jobs so regimented they felt like public-sector jobs. In "The Organization Man," scholar William H. Whyte reported that anxious graduates sought "a depression-proof sanctuary" and took work that seemed to provide that. College-placement officers noted that less than 5 percent of young men who intended to go into business said they wanted to be entrepreneurs. As one student put it in 1949: "I don't think AT&T is very exciting but that's the company I'd like to join. If a depression comes there will always be an AT&T."

This attitude can yield a cruel joke of a career. No depression came. And a young man who did join AT&T in 1950 and stayed at the company through the decades would live to see it break up and dump him just when he hit his mid-50s, when the job market turned unfriendly.

Today, the U.S. economy has more competition than it did in the 1950s. So the kind of policy change that would affect the jobscape, such as eliminating the capital-gains tax and simplifying the income tax, is necessary.

But you won't hear about those radical measures in the Reid-McConnell jobs debate of February 2010. That's a shame, because right now there are young people deciding whether they will be employers or mere employees. And they're considering the whole jobscape.

This article appears in full on CFR.org by permission of its original publisher. It was originally available here.

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