Is Government Employment Shrinking

The WSJ Real Time Economics blog, hereafter to be known as the WSJ-RTE blog, attempts to make a case for a shrinking federal government workforce. Their graph of federal employees would seem to validate that claim.

Now, that’s not the only governmental unit which employs people. The states and local municipalities also chip in and there the picture is a bit different.

Does anyone think that block grants from Washington might have something to do with this? Perhaps Washington learned a lesson about out-sourcing from industry. But the article does try and put a happy face on the growth in the states and local governments by noting that as a share of the total workforce government employment at all levels is declining.

This, of course, is a fine example of the old axiom that no tree grows to the sky.

The article concludes by attempting to explain the contradiction of an historically high level of government spending as a share of the economy with a  declining level of employment as a function of increasing transfer payments. The author then concedes that there might be another factor at work.

Another reason government spending as a share of GDP remains high, even though the workforce has shrunk, is that government contractors — who may work primarily or entirely on projects for the federal government — are not counted as federal employees.

Which leaves us with the question, “How many government contractors are there?” I googled around a bit without finding a satisfactory answer, though what I did come across indicated that this might indeed be a big number. I suppose the best takeaway is to conclude that government employment data comes from government and they don’t have a vested interest in inflating the size of their workforces; we don’t have any handle on the size of their outsourcing; and it’s best to trust our instincts about the size of the leviathin absent all the data.

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