If this doesn't p*ss you off, - go back to sleep.
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Two Americas
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Dear Reader,
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About a month ago we ran the following chart, which shows total nonfarm employment and private employment on the left axis and government employment on the right axis. As you can plainly see, over the past three years total nonfarm employment and private employment has trended lower, while government employment has trended higher.
Here are the specifics:
Total nonfarm employment is down 4.6% since January 2007, reflecting a decline of 6.27 million jobs.
Private-sector employment has fallen 5.8% and lost 6.625 million jobs.
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Total government employment climbed 1.6% over the past three years and added 355k jobs.
Meanwhile, federal government employment (not shown on the chart) rose 3.7% and tacked on 100k jobs over the analyzed period.
What we stumbled upon when we ran the chart but failed to discuss at the time is the idea that there really are two separate Americas, the private sector and the public sector.
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While the private sector has been devastated during this recession, the public sector has flourished.
Consider some evidence put together by Dr. Mark J. Perry.
According to this report from the BLS, state and local government employers spent an average of $39.83 per hour worked ($26.24 for wages and $13.60 for benefits) for total employee compensation in September 2009. Total employer compensation costs for private-industry workers averaged $27.49 per hour ($19.45 for wages and $8.05 for benefits). Translation: government employees make about 45% more on average than private-sector employees.
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This report from the BLS indicates that compensation for private-industry workers has increased by 6.9% between December 2006 and December 2009, compared to a 9.8% increase for state and local government workers over the same period. Translation: government compensation has grown more than 40% faster than private compensation over the past three years.
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And this story by USA Today’s Dennis Cauchon reveals that the number of federal workers earning six-figure salaries has exploded during the recession. “Federal employees making salaries of $100,000 or more jumped from 14% to 19% of civil servants during the recession's first 18 months — and that's before overtime pay and bonuses are counted… The highest-paid federal employees are doing best of all on salary increases. Defense Department civilian employees earning $150,000 or more increased from 1,868 in December 2007 to 10,100 in June 2009, the most recent figure available. When the recession started, the Transportation Department had only one person earning a salary of $170,000 or more. Eighteen months later, 1,690 employees had salaries above $170,000. The trend to six-figure salaries is occurring throughout the federal government, in agencies big and small, high-tech and low-tech.†Translation: No translation needed.
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One of the best terms I’ve read to describe what’s going on in these two Americas is “Detroitification.†Coined by Jack McHugh, “Detroitification†is defined as the hollowing out of the private economy to prop up unsustainable government establishments.
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Please don’t read into this that I am somehow against public-sector workers. I don’t judge anyone; it’s not a useful exercise. But the problem with this is that it can only go on for so long until we’re all screwed. In economic terms, the government cannot produce anything. (You’re free to think the government is productive, but I would recommend reading the life works of Ludwig von Mises and Murray Rothbard if you yearn for enlightenment.
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Thus, if this “Detroitification†continues, at some point the private sector will be too hollowed out to prop up the bloated government, and the whole thing will collapse. Food for thought…
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Credit: Casey Research
