Recent discussions among Westford Taxpayers Association members raised a number of interesting questions about local government. Everyone seemed to have an opinion about the cost and size of government, but we found ourselves lacking the facts. We decided we needed definitive information, and that’s what this article presents.
Looking at Westford’s annual budgets, it wasn’t surprising to learn that the cost of personnel represents our town’s largest expense. Generous raises, robust benefits, and advantageous union contracts have created an unprecedented level of prosperity among local government workers. With the upswing in government spending, we were curious to know how local-government employees compare with employees who work in the private sector.
We also talked about current economic challenges such as growing inflation, reduced consumer confidence, and increasing healthcare costs. We noted that businesses react by implementing cost-cutting measures and downsizing. And we observed that our own family budgets require reprioritization to reduce or eliminate non-essential expenses during tough times.
However, this is not the case with government. Our research indicates that federal, state, and local governments continue to grow during good times and bad. In fact, government — and its employees — appear to be immune to adverse economic conditions that cause businesses and families to react and take action in order to survive. Apparently, there are no incentives to prioritize or downsize in government.
FACT: State and local governments employ more people
Based on research conducted by the Westford Taxpayers Association, state and local governments now employ more workers than any other sector of the U.S. economy.
- Over the last century, overall government spending in the United States has increased from about 7% of GDP in 1902 to about 37% of GDP in 2008.
- In the United States, state and local governments now spend $1.8 trillion annually. That’s $6,310 per man, woman, and child and represents 13% of the total economy.
- Over the past 60 years, the number of people employed by state and local governments rose from 3.3 million employees in 1948 to 19.5 million employees today. That’s a 490% increase, while the U.S. population increased just 67%.
- Since 1999 — less than 10 years ago — state and local government employee headcounts increased by two million, growing 11.4% while the U.S. population grew at 8%. That means government is growing 40% faster than the general population!
FACT: Local government employees make more money
According to the U.S. Department of Labor’s Bureau of Labor Statistics, as of June 11, 2008:
- Total compensation for all workers in private industry averaged $26.76 per hour, while average total compensation for all workers in state and local government was $37.84 per hour.
- Average wages and salaries paid to workers in private industry was $18.91 per hour, while average wages and salaries paid to local and state government workers was $24.95 per hour.
- Insurance (life, health, and disability) premiums paid on behalf of workers in private industry averaged $2.06 per hour, while insurance premiums paid on behalf of state and local workers averaged $4.30 per hour.
- Retirement benefits paid on behalf of private-industry workers averaged $0.96 per hour, while retirement benefits paid on behalf of state and local government employees averaged $2.87 per hour.
FACT: Local government employees get bigger raises
According to a recent report from the U.S. Department of Labor’s Bureau of Labor Statistics:
- Compensation costs for private industry rose 0.6 % from March to June 2008. In state and local government, the increase was 0.9%.
- Wages and salaries for private industry workers increased 0.7% for the March to June 2008 period. In state and local government, the increase was 0.9%.
- During the same period, benefit costs for private industry rose 0.5%. For state and local government, benefit costs increased 1.1 %.
FACT: Local government employees get better benefits
As reported by the U.S. Department of Labor’s Bureau of Labor Statistics on August 11, 2008:
- In private industry, 61% of employees had access to paid retirement benefits, compared with 89 % of state and local government employees. And in government, 86% of employees participated in a retirement plan, significantly greater than the approximately half of private industry workers.
- Medical care benefits were available to 71% of private industry workers, compared with 87% among state and local government workers. About half of private industry workers participated in a plan, far less than the nearly three-quarters of government workers.
- Employers paid 83% of the cost of premiums for single coverage and 71% of the cost for family coverage for workers participating in employer-sponsored medical plans. Employer share for single coverage was greater in state and local government (90%) than in private industry (81 %). For family coverage, the employer share of premiums was similar for private industry and government, 71 and 73%, respectively.
- Virtually all full-time employees in state and local government had access to retirement and medical benefits: 99 and 98%, respectively. In private industry, only 71% of full-time workers had access to retirement benefits and 85 % to medical benefits.
The advantages of working for a local government
Many government employees enjoy additional advantages. These make a government career more lucrative than a similar position in the private sector. Consider the following. (Note: All advantages do not exist in all government employment):
- More generous fringe benefits
- More paid vacation days and holidays
- Larger annual compensation increases
- Greater job security
- More paid personal days off
- More sick time and other paid time off
- Work weeks with fewer hours
- Generous severance pay
- Earlier retirement
- Unused sick leave credit at retirement
- Expensive defined-benefit retirement programs
- Routine pension benefits increases
- Paid retiree health care
What’s wrong with this picture?
Across the country, state and local government spending has been growing three times as fast as revenue. What’s more, state and local governments now have more than $1 trillion in unfunded liabilities for pensions and retirement medical benefits for public employees.
While businesses slash costs and families face stagnant wages with rising prices for gasoline, heating oil, and food, state and local governments increased spending by 7.8% last quarter while revenue rose 2.5%. Government continues to hire more employees, as private-sector jobs evaporate.
In Westford, we wonder why our elected leaders, professional managers, and volunteer board members seem incapable of reducing spending — even by a percent or two. Businesses and families do it all the time.
According to Tom Peters, author of In Search of Excellence:
“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.”
