Government America vs. “Real” America

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Researching the Washington, DC real estate market, I came upon some facts that shocked me.  I started looking at federal government employment, knowing that the government is the biggest employer in the Washington Metropolitan Statistical Area (MSA). 

In fact, the federal government is the biggest employer in the country, with about 1.8 million civilian employees. While times get tougher for those of us who don’t work for the government, life for those in government continues to be pretty peachy.  In fact, things have gotten a lot better over the last ten years.

The growing discrepancy between the government economy and the “real” economy is causing many problems, but one is a growing disconnect between the government mindset and the private industry mindset. 

Consider: In private industry, you have a good chance of losing your job due to a layoff or company closure.  

The federal government almost never has layoffs except for one branch (coincidentally, the biggest), the Postal Service.  (Most federal employment analysis excludes the Postal Service and other “independent agencies,” and other statistics I quote here do not include the Postal Service.)  Agencies and departments almost never close, even when they have long outlived their purpose.

Raises in this economy?  Not a chance!

The average pay raise for federal employees in 2009 is 3.9%.  The average pay raise for federal employees in 2010 is expected to be between 2% and 2.9% To his credit, President Obama is pushing for the 2%.  Federal employees are holding out for the 2.9%.

In private industry, you’d better perform if you want to keep your job.
As of 2002 (the last study I’ve found, though there is no evidence that things have changed), the federal government fired an average of one in 5,000 employees each year.  While I suppose it is possible that the other 4,999 were all stellar, their coworkers don’t think so.  The study I’ve linked to quotes a survey of federal employees who “think it is a major problem that consistently bad employees are not fired.”

I do not want to imply that the majority of federal employees are lazy or incompetent.  Some are even heroic.  But the many, many good ones do recognize that they have bad ones they just can’t get rid of. By far, the biggest myth about federal employees is that they make less than their private sector counterparts.  The average wage for federal employees in 2008 was $79,200.  Combined with benefits, the total compensation averaged nearly $120,000; or just about double the average total compensation for private sector employees. The benefits include gold-plated health insurance and retirement plans.

Remember that the cost of government is really overhead.  Some of it is necessary overhead, but much of it is not.  Furthermore, even the most talented government employees can’t do much to create real prosperity.  Nearly all the money the government spends comes either from revenue generated by private industry or by borrowing.

Think of the corporate structure at any well-run major for-profit company where you have worked.  Who were the most important people at the company? 

They were the doers. 

They included the engineers who designed the products, the salespeople who sold them, and often the most skilled of the factory workers who made them.  All of these were considered much more important than the overhead departments – the HR staff, bookkeepers, and so on.  The overhead departments were necessary, certainly, but they did not produce revenue. Now imagine that when a company fell on difficult times, the engineers, salespeople and factory workers went through layoffs, pay cuts or freezes, and reductions in benefits, while the overhead departments still hired, still gave raises, and still enjoyed great benefits.  As a result, overhead costs rose at an astronomical rate, while revenues fell.

How long would that company stay in business?

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2 Comments

  1. So true. I work very closely with people in the a government organization. There are so many miserable poeple in that organization. You ask people why they do it and they say “job security.” These people don’t relize that their security has become a prison. You’ve never seen such a risk averse organization. I’ve been offered several jobs at the top of the GS scale and I have turned them down. I have seen the endless waisted hours sitting in meeting for no other purpose than to cover their own but in case something goes wrong. The time people spend looking at each other for guidance or cover is amazing.

    I’ve seen many of the more productive people leave for opportunities that would pay for production rather than just elevate the next in line.

    Good post.
    Justin

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