Grandfather Economic Report series
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? ? While most eyes are riveted on Washington,
who is watching their own backyard ? ?
Employing More Workers Than Any Other Sector of the National Economy
with Spending Growth Faster than the General Economy
now spending $2.5 Trillion, $7,987per man, woman and child and 18% of the total economy
with an Excess of 12.2 million Government Employees
because the number of employees continues to increase
faster than the national population
with average Wages, Benefits, Job Security and Inflation
much Better than the Private Sector
If current spending had been at the 1947 ratio to national income
it would have been $1.14 Trillion less than it is - - equivalent to $3,851 excess per capita
|Few citizen recognize the massive growth of state & local
governments. If they think government growth is only at the federal level - - they
Most people know today's working people 'carry on their backs' more seniors than any prior generation - - with little expected in return.
This report shows each citizen also carries 3 times more state & local government employees 'on their backs', and govt. employee counts continue to increase faster than the general population, with higher earnings and benefits and job security than the private sector - - with less education quality in return. A double-whammy!!! Little wonder private sector family values & incomes suffer - - from what they could and should be.
This is a mini-report about the size and growth of state & local government.
Several color pictures show increases in spending and employee numbers at significantly faster rates of growth than the general economy and population - - thereby depressing the 'free market' private sector, compared to prior generations.
|This report is a part of the series of Grandfather Economic Reports, of certain negative economic conditions facing families and their children, compared to prior generations. Included also on this page is a section on Privatization of government services.|
Quick Links: Number Employees Trend, Employees per 100 Citizens, Spending % National Income, Govt. Compensation vs. Private Sector, Spending per Capita, Taxes, Debt, Comments, Actions
|QUESTION #1: Must young families and their children carry on their backs a larger proportionate number of state and local government employees than in my generation? The excess is 12.2 million employees - because their numbers increased faster than the general population.|
|The left chart shows the number of state & local government
employees growing faster than the population at large - a chart few have seen:
The upper rising curve (red) represents the actual number of government employees during the past 6 decades, rising from 3.3 million employees in 1946 to 19.2 million employees today - a 474% increase, while the national population increased just 110%.
The lower (dashed-green) plot shows the number of employees would have grown only to 7 million by today had they not grown faster than the general population increase of 108% in that period.
There is a 12.2 million difference between the two plots.
This means: if the number of state & local government employees had not grown faster than the increase in the general population, there would be 12,175,000 fewer such employees today.
AND, since 1990, state & local government employee head-counts increased 26%, compared to a 19% growth of the national population - That's 37% faster growth than the population. The excessive growth continues.
For the past 30 years nationwide inflation-adjusted median family real incomes and rates of saving have suffered - according to the Grandfather Family Income Report.
During this same period, the number of state & local government employees increased double the rate of the population - - and, according to a Bureau of Labor Statistics study, the total compensation of the average state & local government workers increased at a faster pace than did private sector employees. Why was this allowed?
Headcount should have increased slower than the 110% population growth over the past 59 years, if there were efficiency in government. But, government head-counts increased 474%.
Even with zero efficiency increases, a 64% headcount reduction would be required to eliminate the excess.
The difference between actual head-counts and what they should have been is an excess of 12.2 Million employees - - a quantity more than the total population of many of our states.
When you hear politicians brag about new job creation, you should ask how many are full-time private sector jobs with better pay and benefits than government workers receive - - and how many jobs were additions to state & local governments. See if they know the answer - - and if they do, watch how they answer when you ask: "WHY?"
"In the public (government) sector we routinely have five people doing the work of one. It's a simple fact. Are we over-governed in the United States? We are wildly, bizarrely, sickeningly, ludicrously over-governed." - by Tom Peters, also a consultant to the Vice President.
EVERY CITIZEN MUST CARRY 3 TIMES MORE GOVT. EMPLOYEES THAN BEFORE
|One more look at the graphic from the summary page -
- so it sinks in.
This chart compares the number of state & local government employees per 100 citizens in the total population. Look how much faster government employees increased than did the general population.
In 1946, there were 2.3 state & local government employees per 100 citizens.
Today citizens must carry 6.5 government employees per 100 citizens - - a new record high.
That's a load per citizen 3.2 times higher than before - - and, all those 4.2 extra government workers often have better job security with more time off, and more lucrative pensions, insurance and cost of living protection - - benefits not available to many citizens.
It should be noted that these charts actually understate the situation given the fact many functions previously performed by state/local employees in 1946-7 are now contracted out (such as trash collection, street repairs, planning, etc.).
If today's state & local government employees were more efficient than in 1946, then today's head-count ratio should have been less than 2.3 per 100 - but today it is higher - 3 times higher. This implies state & local government bloat and inefficiency, compared to the past.
QUESTION: If we had quality education and low crime rates when we had 2 government employees per 100 citizens, why the heck should we need three times as many today.
Another Question: In prior decades local trash was collected by city employees. No longer. Trash is now mostly collected by private carriers, with the city only processing the billing. Again, why do we have more city and local government employees per capita than then?
Again. City and local government employees used to take care of most street repairs. No longer. Most is now contracted-out to private sector firms, with government employees only 'playing' paper managers. So, again, why more government employees per capita than before?
These are a few examples of work no longer performed by government employees, as many government employee jobs changed from workers to overhead paper-pushing employees.
Bottom-line > there are 12.2 million excess state & local government employees, nation-wide - - indicating huge inefficiencies.
How do we justify this for our young generation?
Another item impacting rising state & local government spending ratios is increased overhead.
For example, suppose in our public school system non-teaching employees per 100 students rises - - yet output education quality does not rise, but falls.
As the chart at the left clearly shows, that's exactly what has happened.
So, while the total numbers of state & local government employee increase faster than general population growth, school overheads also rise faster than the number of students. This is covered in the Education Report - - in its non-teacher section.
This is just one example of inefficiency in, and one of the causes for, run-away state & local government.
How do we justify this for our young generation?
QUESTION # 2: Must our children face an economy where state & local government spending now eats nearly 3 times more of the economic pie than before, resulting in a smaller share for the private sector and standard of living enhancements?
|Excess spending equates to 11% of the total U.S. economy - - or $1.05 Trillion, or about $3,534 per person, or $14,136 per avg. family of 4.|
|We should not only expect that federal spending as a share of the economy be not larger than it was when we grandparents were young (instead of being larger per the Federal Government Spending Report), but that the state and local government sector also be down-sized from its current 18% ratio to national income closer to the 6% ratio of 1947.|
|The pie charts at the left represent the economic pie of our nation in
1947 vs. today, showing a break-down of its components: federal spending (red) vs. state
& local government spending (yellow) vs. the remaining private sector (blue).
The yellow slice of the pie represents the share of the economy consumed by state & local government spending. See how it grows in size from the left chart to the right one?
In 1947 the yellow slice, state & local government spending, consumed 6% of the economy. Today it consumes 17% of the economy.
That's means today state & local government spending consumes a nearly 3 times larger share of the total economic pie than before.
Note how much smaller is today's blue slice of the pie, compared to 1947. That's the shrinking private sector, meaning the part of our economy NOT dependent on government spending - dropping to a 55% share of the economy from a 78% share.
It shrank in relative size 23 points, due to expansion of both the federal government spending share (red slice) AND expansion of the state & local spending share (yellow slice).
This means state & local government spending consumes an extra 12% of our economy, compared to 1947 - - reducing the share of the economy remaining to the private sector (blue slice of the pie chart). That 12% extra (some call it excess) in today's dollars equates to $1.14 trillion excess - equivalent to an 'excess $3,851 per person, or $15,404 per avg. family of 4.
(note: this data is from the Bureau of Economic Analysis and, per their methodology, does not include additional state & local government spending of grants-in-aid transferred from the federal government)
|These charts show 23% of the entire economy has been transferred from the free-market private sector (blue color), due to the combination of federal AND state & local government spending. Some label this a 'march of socialization.'|
REGULATORY COST IMPACTS NOT INCLUDED
Additionally, the above chart showing about 17% of the economy represented by state & local government spending understates the impact, as it does not include regulatory compliance costs mandated to the private sector by these government entities. The Regulation Cost Compliance Report shows $300 billion, or an additional 4% of the economy, is represented by the cost to the private sector of complying with state & local regulatory mandates - - bringing total state & local government cost impact to 21% of the entire economy - - and these regulatory costs are not accounted for in government budgetary mechanisms, or in impact backup statements.
All those extra 12.2 million state & local government employees (4.3 extra per 100 citizens) are not sitting still - - many are dreaming up and issuing new regulations which they mandate on the private sector which must bare both the cost of paying taxes to cover those extra government employees PLUS bare the cost of complying with their regulations. (note: no attempt is here made to differentiate between 'good and bad' regulations, just the cost of same and lack of accounting & control thereof).
|QUESTION # 3: Must families of private sector workers pay more taxes to support higher wages, benefits and job security for state & local government employees than they receive?|
31% HIGHER WAGES,
60% HIGHER BENEFITS + MORE JOB SECURITY
A. Higher Wages: State & Local government employees receive higher wages than does the private sector. The National Compensation Survey of Occupational Wages in the United States, July 2003, published by U.S. Department of Labor Bureau of Labor Statistics in September 2004 stated >
"Average hourly earnings in private industry were $16.98, compared with $22.22 in State and local government (31% higher).
Following is a breakdown of several categories > Average hourly earnings among white-collar occupations in private industry were $21.12, compared with $25.09 in State and local government. Among white-collar major occupational groups, workers in professional specialty and technical occupations earned $29.80 an hour in State and local government, while their private industry counter- parts earned $27.73. Average hourly earnings of workers in administrative support occupations were $13.69 in the private sector and $14.17 in State and local government. Workers in executive, administrative, and managerial occupations had average hourly earnings of $32.60 in the private sector and $30.06 in State and local government. In State and local government, blue-collar workers earned an average of $17.11 an hour, compared with $14.91 for their private sector counterparts." (http://www.bls.gov/ncs/ocs/sp/ncbl0658.pdf)
B. Higher Benefits:
'States pay more for public retirees too. According to the Employee Benefit Research Institute (EBRI), the average public-plan retiree got $16,188 a year in 2003, far more than the $7,200 their private company counterparts could expect. All in all, EBRI concludes, state and local government wage and salary costs are 40% higher than the private sector's; its employee benefit costs are 60% higher. According to the U.S. Census Bureau, major public pension plans paid out $78.5 billion in the 12 months ended Sept. 30, 2000. By the comparable period in 2004, that had grown to $117.8 billion, a 50% climb in five years.' "Sinkhole", Business Week June 2005 - http://www.businessweek.com/magazine/content/05_24/b3937081.htm
C. Inflation Protection: Generally state & local government employee wages and benefits are protected from inflation, whereas most private sector employees have no such inflation protection.
Question: Why should government employees receive better wages and medical insurance coverage (at lower premium costs to themselves than the taxpayers who are paying for their coverage?
Were you surprised with the above report showing state & local government employees earning more than those in the private sector? How about federal government employees? The Federal Government Spending Report chapter shows the following > >
Federal Government Employees Earn
Twice as much
as the Average Private Sector Employee
The closest thing to a lifetime sinecure in
So, let's again ask that QUESTION:
Why should government employees earn significantly more than those in the private sector?
Here's the Per Person Cost for State &
Local Government Spending
- which continues to climb
You may have seen this chart elsewhere in the Grandfather Government Spending Report
It is repeated here because it includes the per capita national average for spending by state & local governments - the chart bar at the right - at $5,433 per person. This equates to $21,732 for a family of four.
- and that does not count federal spending per person as shown in the chart.
Much of this spending is covered by a combination of state income taxes, sales taxes, excise taxes, property taxes (tenants also pay for property taxes as a portion of their rents), and many, many taxes hidden in the cost of goods & services families purchase - - and some federal transfers.
If today's state & local govt. spending ratio were equivalent to the 1947 generation (at 6% of national income instead of today's 18%), then the per capita spending by state & local governments would be $1,899 instead of the $5,433 shown in the chart. That excess today amounts to $3,534 per person, or $14,136 per avg. family of 4.
That's $1.14 Trillion excess spending by state & local government, compared to prior spending ratio.
If families could pay $1 trillion less state & local government taxes by supporting the prior spending rates, would that increase their living standards and saving rates AND reduce their need for debt? Of course !!
Are neighborhood streets safer today? Is today's education system better preparing the current generation to face the future, than the system of prior years prepared past generations to meet their challenges? No!!
How do we justify this extra drain per family drain for state & local government? The author could not find any justification, since education quality is less today than before and less than foreign nations, crime rates are higher, the percentage of families without 2 parents is higher, real median family incomes are not climbing long-term as in the past, and household debt ratios are climbing while personal savings rates are falling.
Another thing we know is that this rapid expansion of state & local government has partly 'justified' itself by loading more regulations on the backs of citizens, reducing their freedoms.
THE TAX TAKE FROM THE ECONOMY BY STATE & LOCAL GOVERNMENTS
The chart at the left shows the percentage of the economy consumed by state & local government taxes.
This is the sum of property taxes, state personal & corporate income taxes, sales taxes and other tax-charges (revenues from federal grants are excluded).
If state & local taxes had not increased faster than the size of the economy in the past 50 years then the right bar on this chart would be the same height as the left bar.
But the chart clearly shows that whereas taxes were 5.9% of the economy (left bar), they are now 16.1% of the economy (right bar).
This means this 'tax take' has increased 273% faster than the economy.
This reduced the effective share remaining to the private sector, and reduced the share of family income power, compared to prior generations.
This 16.1% is made up of 4% property taxes, 4% sales taxes, 3% individual state income taxes, 0.5% corporate income tax, and 4.5% other. This does not include revenue from the federal govt.
(for those interested in seeing the total tax-take, including federal taxes, see the Tax Report - showing the average citizen now works 5 months per year to pay all taxes, compared to 1.4 months in prior generations.)
In 2005, according to the U.S. Census Bureau (http://www.census.gov/govs/www/statetax.html), state tax collections (not counting rapidly increasing local city and county taxes) increased by an average of 9.7 percent across the country, which translated into $57 billion more in state coffers. On average, states charged each of their residents $2,192 ($8,768 per family of four), mostly from income and sales taxes.
|Few comprehend the significant drain on families by the fact state & local
government spending and taxation have chewed up more and more of our economy, rendering
same less free and efficient - and more socialized and government-dependent - than for
There is an apparent generational gap of major proportions.
DEBT of state & local governments = $2 trillion, or $6,689 per capita
|According to the America's Total Debt Report and the Debt Summary Table Report, combined debt of
state & local governments was $2 Trillion in 2006. This equates to about $6,689 per
man, woman and child. Data source: Federal Reserve - web site:
In addition to the above debt, state & local governments have an estimated un-funded liability for pensions and medical of $700 billion to $1 trillion - as of June 2006. http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_mysak&sid=aITbEuT1.SN4
This brings total debt to $3 trillion, actual and un-funded.
For additional data, see the Federal Government Debt Report.
The increase in the relative size of state & local government is explained not by increases in public services but by the soaring compensation of public employees (and their headcount)
The relationship between spending on public assistance and economic growth is strongly negative. The chief culprit was government employee compensation, which grew much faster than private sector wages in almost every state. The excess pay to public employees, the equivalent of a major income transfer program, has sharply inhibited growth. Data show that spending on education has some positive though diminishing effects on student learning when the money is spent for actual instruction, but administrative expenditures, which have been growing in relative importance, tend to have negative effects on learning. Source: Richard Vedder, "Economic Impact of Government Spending: A 50-State Analysis," NCPA Policy Report No. 178, National Center for Policy Analysis.
AN EXAMPLE OF ONE STATE:
This State and Local Government Report page includes nation-wide data. To get a 'feel' for how a similar treatment would appear for just one state, as an example, see the Florida Government Spending Report with its own long-term trend pictures of spending and headcount ratios - quite dramatic, and similar to the nation-wide findings. By showing this specific state it is hoped others will take a similar look at other states, using the format of the Florida report. The author would like to hear from those who have made similar studies of other states, to exchange information - email Michael Hodges.
RECOMMENDED ACTIONS - - PRIVATIZE
There are numerous studies proving that privatization of state and local government can realize tremendous savings and efficiencies. From studies of Lawrence Reed of the Mackinac Center for Public Policy to the Imprimis of October 1997 - - Governments must say "We are no longer going to perform this work with our own workforce." States are privatizing utilities, prison management, data processing, foster care and others. Counties and cities and schools are privatizing fire protection, police protection, waste-water treatment, street lighting, tree trimming, snow removal, hospitals, custodial and jails." And, "government must be most careful with the savings realized, less they be squandered on some other dubious government enterprise." The best thing is to prove the mettle, but passing back all savings to citizens via tax cuts. (author). A few examples from 'Imprimis':
- For a sample planning format for establishing action targets, See the Grandfather Action Plan Report. -
|BOTTOM LINE: Attention should be given to run-away state & local government spending, and its increased consumption of the economic pie of our young generation, compared to prior generations. If long-term family incomes, savings, values and living standards are to be improved, these spending and headcount ratios must be brought back into line with historic norms.|
In the end, the real losers are our youth - - - from childhood to adulthood.
SHOULD WE DO SOMETHING
EXCESSIVE STATE & LOCAL GOVERNMENT
The action required is clear !
Total Federal + State/Local Govt. Spending - - America's Total Debt Report - - Family Income - - Social Security
Regulation Cost - - Federal Government Spending - - Inflation
and Education Productivity
Return to HOME Page of the Grandfather Economic Report, and select another subject of your interest from the collection of mini-picture reports documenting economic threats to families and their children, compared to prior generations.
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Copyright © 1997-2016 Michael W. Hodges. The Grandfather Economic Report series is the intellectual property of its author; all rights reserved under Copyright Conventions. Permission to redistribute all or part of this series for non commercial purposes is granted by the author, provided the associated web page address (URL) is included and full credit given to the Grandfather Economic Report and the author, Michael Hodges. Notice appreciated via email.