2011 January 23 Sunday
Most Of Last 10 Year Compensation Rise For Govt Workers

Michael Mandel writes a great blog. Our masters are making more while large parts of the private sector lose ground.

This first chart shows the change in wage and salary payments by major industry from 2000-2009, adjusted for inflation, using BEA data. We see that healthcare and social assistance generated $210 billion in real wage gains from 2000 to 2009 (all in 2009 dollars). Next biggest was state and local government, which generated $151 billion in real wage gains. (The exact numbers change a lot if I change the end dates, but the pattern stays the same).

On the other hand, the big losers were manufacturing (-$245 billion), information (-$56 billion), retail trade (-$24 billion), and transportation and warehousing (-$6 billion). Itís interesting that the industries in the global supply chain were the big losers in real wages, but Iím not sure quite what to make of it.

Because some industries took it on the chin and experienced big losses the total dollar gain in private sector compensation from 2000 to 2009 was less than the total compensation gain among government workers. So federal government got 18% of total wage gains, state and local government got 37% and the private sector (which is of course far larger than state and local government) got only 45%. In the 2000 oughts the government became a bigger parasite on the private sector. Government and health care workers made out. Rich people did extremely well and their fates and interests are diverging from that of the bulk of the citizenry. The rest of us? Not so much.

At the state and local level I expect the rise in compensation for government employees to slow or even reverse. The unfunded retirement plans and public opposition to higher taxes combined with continued slow economic growth are squeezing state and local governments. The public has lost patience.

Another compensation pattern Mandel reported in a recent post: the gap between the most and least educated continues to rise. In a nutshell, the manual laborers are eating it. A huge influx of illegal aliens is swelling the ranks of the least skilled while much of the lower skilled manufacturing work is getting shipped abroad and eliminated by automation.

On a related note, I have just ordered Tyler Cowen's new Kindle book for $4: The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History,Got Sick, and Will (Eventually) Feel Better. He comments on it here and here.

Share |      By Randall Parker at 2011 January 23 09:42 AM  Economics Labor

Lou Pagnucco said at January 24, 2011 6:25 PM:

Very disturbing, but much, much worse when including in the massive income transfers to the financial sector and corporate officers. Since loss of income results in lost political power, my bet is that we'll see a continuation of the downward spiral for (formerly) middle class Americans.

Mike said at January 26, 2011 2:41 PM:

Similar story in Australia and New Zealand, high level government paid workers like surgeons, heads of local government and civil servants are creaming it in. The only difference is that semi-skilled manual workers are doing somewhat better, due to greater restrictions on non-skilled immigration. If the US is going to continue pursuing free trade, then it has to restrict unskilled and semi-skilled immigration otherwise it's going to end up with a lot of social problems in the near future.

Randall Parker said at January 26, 2011 6:32 PM:


We already have the social problems and those problems are growing. I envy both Australia and Canada for having more selective skills-oriented immigration policies.

California kit said at January 26, 2011 7:05 PM:

The Amazon blurb on Tyler's book says:
"We have failed to recognize that we are at a technological plateau and the trees are barer than we would like to think. Thatís it. That is what has gone wrong".

I think it's a bit more than that. Where does Tyler think tech comes from, Roswell ?
His blurb doesn't say a thing about the transformation of America after President Kennedy's murder. About how it was taken over by a troika of the Rich, the Liberal, and New York. About how they set in motion the systematic looting of the USA, a population replacement program, cultural degradation, the transformation of every culture-forming institution into instruments of destruction. He doesn't say a thing about the changing of America from a 90-10 majority/minority ratio to todays 60-40.

He doesn't understand that the type of people who invent things need a culture that backs them up. He doesn't understand or care, about the demoralization of the people as their whole country is hijacked and twisted into the opposite of what it was meant to be.

We should have been on Mars by now. Why aren't we ? Based on the Amazon blurb, you'll never learn it from him.

SF said at January 27, 2011 2:26 PM:

I suspect it isn't that government workers are doing so well, but that the rest of the economy is really tanking. Did school teachers stay ahead of inflation during that period? Probably yes if you count longevity pay, but not if you compare to teachers at the same point on the scale.

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