Private Sector Shrinking, Public Sector Growing in Most States

By:  Michael Tennant
Private Sector Shrinking, Public Sector Growing in Most States

Since 2007, private-sector employment has declined in almost all states, leaving government with an ever-larger share of the labor force, according to a new study.

Despite the Obama administration’s claims of economic growth, the truth is that in most states the private sector is shrinking and the public sector is expanding as a proportion of the workforce. In fact, say researchers Keith Hall and Robert Greene, since the beginning of the Great Recession, the private sector has shed jobs in almost every state, while the increase in taxpayer-funded employment has been masked by the use of contractors rather than outright employees.

“In 2012,” Hall and Greene wrote in a recent report for George Mason University’s Mercatus Center, “public-sector employment made up more than 16 percent of the U.S. labor market.” That in itself is bad enough; but as the men observed, “Direct government employment fails to capture the full impact of government spending on state labor markets.”

To determine that “full impact,” Hall and Greene estimated the number of jobs in each state that are funded by federal contract dollars and added them to the number of actual public employees in that state. When they did that, they found that public-sector employment grew by almost 3.5 million jobs to a national average of 19.2 percent of the workforce. In other words, nearly one-fifth of all workers in the United States are employed either directly or indirectly by government.

The percentages, of course, vary from state to state. In some states, such as Delaware and Oregon, federal contract-funded private-sector jobs make up just 0.7 percent of the workforce. Indeed, “in more than half of the states, less than 2 percent of the labor market is employed by jobs funded by federal contract dollars,” noted Hall and Greene. In others, however, contractors account for a significant portion of the workforce: 7.7 percent in New Mexico and Maryland and 10.7 percent in Virginia. (Virginia and Maryland are in the ambit of Washington, D.C., so it’s not surprising that they get large numbers of federal contracts.)

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