Has the Government Been Growing or Shrinking? Employment Edition

By :: August 6th, 2012

My recent post on government size prompted several readers to ask a natural follow-up question: how has the government’s role as employer changed over time?

To answer, the following chart shows federal, state, and local employment as a share of overall U.S. payrolls:

In July, governments accounted for 16.5 percent of U.S. employment. That’s down from the 17.7 percent peak in early 2010, when the weak economy, stimulus efforts, and the decennial census all boosted government’s share of employment. And it’s down from the levels of much of the past forty years.

On the other hand, it’s also up from the sub-16 percent level reached back in the go-go days of the late 1990s and early 2000s.

Employment thus tells a similar story to government spending on goods and services: if we set the late 1990s to one side, federal, state, and local governments aren’t large by historical standards; indeed, they are somewhat smaller than over most of the past few decades. And they’ve clearly shrunk, in relative terms, over the past couple of years. (But, as noted in my earlier post, overall government spending has grown because of the increase in transfer programs.)

P.S. Like my previous chart on government spending, this one focuses on the size of government relative to the rest of the economy (here measured by nonfarm payroll employment). Over at the Brookings Institution’s Hamilton Project, Michael Greenstone and Adam Looney find a more severe drop in government employment than does my chart. The reason is that they focus on government employment as a share of the population, while my chart compares it to overall employment. That’s an important distinction given the dramatic decline in employment, relative to the population, in recent years.

P.P.S. As reader Ernie Tedeschi notes, this measure doesn’t capture government contractors. So any change in the mix of private contractors vs. direct employees will affect the ratio; so will changes in the fraction of private employees who show up in the payroll survey. This is another reason why focusing on spending metrics may be better than employment figures.

6Comments

  1. Michael Bindner  ::  1:37 pm on August 6th, 2012:

    The real growth in spending since 2008 has been the government as non-employer (through the payment of unemployment insurance). While the GOP rank and file point to that as a bad thing, those who own securitized debt are likely thanking their lucky stars, since people who get benefits are less likely to simply default on all manner of debts. The lack of consumer spending that would occur would also harm investors – so I seriously debt any change in the role of government as non-employer of choice.

  2. FT Alphaville » The Closer  ::  5:34 pm on August 6th, 2012:

    […] Is government employing more or less of the workforce than […]

  3. Vivian Darkbloom  ::  6:29 am on August 7th, 2012:

    Why should the size of government as measured by spending *include* military spending, but the size of government as measured by employment *exclude* active duty and reserve military members? While the author does not say so, it appears the numbers in the chart exclude the latter.

  4. Robert VanEe  ::  7:47 am on August 7th, 2012:

    Can you re-post with the same data broken down by level of government? If my suspicions are right, it will show “The decline in government employment clearly wasn’t driven by job losses at the federal level. It came from state and local government.”, a quote from a similar Politfact analysis here….

    http://www.politifact.com/truth-o-meter/statements/2011/jul/11/paul-krugman/paul-krugman-says-government-jobs-have-fallen-half/

    If that same conclusion is supported, I’m pretty unhappy with what that says about federal responses versus local ties to the desire for fiscal responsibility in these times. If we need that level of overall government hiring (I hope we don’t), I’d much rather it would be at a local, rather than federal, level, so I might influence what’s done with it.

  5. The Government as Employer  ::  12:45 pm on August 7th, 2012:

    […] debate over the size of government spending as a share of the overall economy has prompted Donald Marron to ask another question: “how has the government’s role as employer changed over […]

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