Pity the Poor Private-Sector Workers

by Liberty and Power

Has the recession ended? If not, do “green shoots” foretell a recovery’s advent in the near term? The answer, of course, depends on which indicators we check. Unfortunately, the mainstream economics profession and the public alike place too much emphasis on highly aggregative measures, such as estimates of quarterly GDP and the standard rate of unemployment, in their attempts to grasp what is happening. As usual, we must delve into the aggregates and inspect their components in order to gain a clear understanding of how the economy got into its present condition and to arrive at a well-founded conjecture as to where it is likely to go in the near-term future.

Mindful that both the public and the policy makers place heavy emphasis on “jobs, jobs, jobs,” I have been thrashing about in the employment data collected, organized, and distributed by the Bureau of Labor Statistics. At this point in the recession, everyone knows that the standard rate of unemployment, for what it is worth, has risen greatly since 2007 and lately has been stuck in the neighborhood of 10 percent. Because of this statistic’s various ambiguities (which I have discussed elsewhere), however, I am concentrating here on a more unequivocal indicator—employment.

There is no happy news on this front, of course. Total employment peaked in 2007 at 137.6 million persons on nonfarm payrolls, fell slightly in 2008, and then dropped precipitously in 2009 to 132.0 persons, for a two-year loss of 5.6 million jobs. In 2009, total employment was approximately equal to its magnitude in 2001, even though the labor force had grown substantially in the interim. The sharp recent decline in employment, which normally increases from year to year along with the labor force, has been bad enough, but when we examine the components of aggregate employment, we discover even worse news.

We find that the loss of employment has occurred entirely in the private sector: employment fell from 115.4 million persons in 2007 to 109.5 million persons in 2009, a decline that took private employment back to its level at the end of the 1990s. As private employment has collapsed since 2007, however, the government payroll has actually grown slightly from 22.2 million persons in 2007 to 22.5 million persons in 2009, which puts this class of employment roughly 1.7 million persons above its magnitude in 2000.

Monthly data for the most recent year display this difference starkly. From December 2008 to December 2009, total employment fell from 135.1 million persons to 130.9 million, while government employment remained essentially constant at 22.5 million persons. The government employees also enjoyed increased compensation during recent years. Nice work if you can get it: no risk of losing your job, plus practically iron-clad prospects of rising real compensation, notwithstanding that millions of former private-sector employees now find themselves without jobs.

Of course, much of the Obama administration’s “stimulus” spending has been directed toward ensuring that state and local government workers do not lose their jobs, and federal employees, as usual, have not had to fear joining the unemployment line, owing to the rapidly growing appropriations for practically every department and agency in the recent, skyrocketing federal budgets.

This situation bears an eerie resemblance to the employment situation during the Great Depression, when private nonfarm hours worked fell steeply from 1929 to 1932 and did not get back to the 1929 level until 1941, notwithstanding (or perhaps because of) the millions of persons added to government payrolls during the New Deal period. In both cases, the possibility that government employment crowds out private employment, rather than stimulating it, cannot be dismissed out of hand.

Unless private employment growth resumes soon, the United States risks falling into the same long-term economic “sclerosis” that has plagued the welfare states of western Europe for decades. Already it appears that the past ten years may prove to have been America’s second “lost decade” (the 1930s having been the first), an interval of little or no net economic gain, owing to destructive government policies that produced only unsustainable booms followed by inevitable busts, along with such huge, frequent, and unsettling changes in government policies that private planning, especially for long-term investment, has become too risky for private investors to bear—a situation I call regime uncertainty.

Vulgar Keynesians like to suppose that whenever the government undertakes new spending to augment the ranks of its employees a multiplier effect will result, causing private economic activity and employment to follow the same upward course. Here again, however, a closer examination of what the government does and how it goes about doing it may serve to shield us from the fallacies of overly aggregative economic analysis.

comments powered by Disqus

More Comments:

Maarja Krusten - 1/13/2010

You mention government workers. I’m one (a GS-170 Historian under Office of Personnel Management Standards). I’d like to draw you out regarding a phrase in the article to which you linked at http://www.independent.org/blog/?p=4383 on “The Federal Bureaucracy-Plutocracy.” The article discusses productive workers (which it views as existing in the private sector) and a plutocracy in the federal work force. It describves the plutocrats drawing 6-figure salaries cartoonishly as “the blank-faced bureaucrats, dozing over their desks in nondescript office buildings.” Yet most civil servants at agencies that historians know best (such as the National Archives) are knowledge workers, a phrase not mentioned in the article to which you link.

A number of reports (such as the two by the Volcker Commission) have looked at the overall impact on hiring of decades long denigration of civil servants so I need not touch on that. But I would like to ask you as an historian, what would be the impact of changes in the civil service in the field for which history training affects the pipeline. Take a look at the standards for GS-170 historians, then consider that such workers exist throughout the government with graduate degrees in other disciplines. (Salary levels typically reflect a combination of level of responsibility and educational attainments.)

OPM states that at the six figure salary level “GS-14 historians frequently are required to visualize and anticipate management's requirements for historical information for both current and long-range program planning and policy deliberations and to tailor the scope and emphasis of their studies for most effective use by management in making important program and policy decisions. . . At this level, work assignments typically arise out of the continuing requirements of the agency historical program or out of the special needs of agency officials at the highest policy and program planning echelons. . . GS-14 historians (in recognition of the authoritativeness of their knowledge within their special areas of competence) may be called upon to provide ‘on the spot’ background historical data to agency officials at top management and policy levels in connection with urgent problems, or to attend interagency or international conferences for the same purpose. For example, GS-14 historians could be expected to serve as expert witnesses” in matters involving the Congress.

OPM cites examples of the type of assignments carried out by historians at the six-figure salary level. With the exception of Philip Zelikow, who worked at State during Condi Rice’s tenure, you rarely see their names mentioned as many work quietly behind the scenes. “The scope and importance of GS-14 assignments are illustrated by the following: (1) a study to be used as background material for high-level military policy deliberations on a subject of international significance involving such considerations as the strategic determinations and policy recommendations of the Joint Chiefs of Staff, the deliberations of the National Security Council, the foreign aid and military assistance operations of various agencies of the Department of Defense and their representatives in the field, the negotiating activities of the Secretary of State, and the internal political situations and foreign and military policies of other nations; (2) a study of similar scope to be used as background material for foreign policy deliberations on matters of major international importance; (3) a history of the significant aspects of the overall operations of a major component of the Department. . . “

You also may want to consider whom you would want at the National Archives dealing with former Presidents and with agency stakeholders. I worked at the Archives as an employee assigned to screen the Nixon tapes to see what could be released. Interestingly, one of the battles we fought on your behalf centered on Nixon’s anger at the BLS and his direction to Fred Malek to identify members of what Nixon called “a Jewish cabal” at the department. See my account at http://hnn.us/comments/113767.html of our struggles to release this historical information to you. Hardly the work of faceless drones, as you can see.

I’d be interested in hearing what you think would be the impact of not having knowledge workers drawing 6-figure salaries standing between you and former Presidents who fear disclosure of their darker actions, as Nixon’s with the Jew-counting directive at BLS? Would a demand for less educational attainment, less willingess to take on responsibilities, less willingness to take on high risk assignments result in better outcomes for scholars? These aren’t functions you can contract out, as they require institutional knowledge of disclosure precedents and case law. And they require a willingness to stand up to power players. This is where the issue of civil service protections comes into play. It’s hard to explain to outsiders, but the willingness to place oneself in the firing line on behalf of the customers and clients (in this case, historians) stems from a sense of duty which cannot be reduced to contractual task orders administered by a COTR.

Even the question of how to balance managerial and staff level positions is more complicated than many outsiders imagine. My late sister was a supervisory archivist in the National Archives’ records declassification division. She specialized in reading national security classified documents to see what could be declassified. She observed first-hand the impact of Al Gore’s National Performance Review flattening of managerial hierarchies. The reamining managers were forced to spend more time in meetings dealing with administrative issues and non-managerial staff had to try to work out some complicated issues related to declassification on their own without access to the team leaders who once had helped guide them. Should agencies such as the Archives largely be shuttered, with their functions handed back to creating agencies, whom you turn to in order to gain access to records? I know many members of the public would shrug and say, “Who cares? If historians have to wait longer for the records they need, or if the creating agencies (DOD, CIA, State) rather than impartial Archives’ employees make the release determinations, what’s the big deal?” But having done that type of work, I would argue for the need to have non-partisan, well-educated, highly motivated workers representing the public interest in matters that directly affect what historians eventually find out about their government’s activities and operations.

That just represents the field I’ve worked in for 37 years and which I know well. I know that knowledge workers in other parts of the government could explain how it looks in their areas of academic discipline, as well.

Maarja Krusten
federal historian and former NARA employee