Too Many Bureaucrats

The Governor's Task Force on State Employee Compensation has been meeting and studying and will soon issue a report. But one can't really talk about government employee compensation without first discussing one glaring fact: there are simply too many government employees in Oklahoma.

Indeed, in looking at the ratio of government employees to private-sector employees, one discovers that Oklahoma has the 5th highest ratio in the country.

According to the Bureau of Economic Analysis, in 2006 Oklahoma's state and local governments employed 271,656 people (full and part time), or 17.7 percent of the state labor force. Of the total, Oklahoma state government employed 83,769 people (this includes higher-education employees) and local governments employed 187,887. Overall, they were paid $11,191,666,000 in total compensation, or 13.1 percent of the earnings in the state (wages and salaries plus benefits).

Unfortunately, Oklahoma citizens have no direct way to judge whether or not they are getting a good "bang for the buck" for the goods and services provided by the public sector. One way to better understand the productivity of the public sector is to compare government employment and compensation levels across the 50 states.

The basis of comparison is to examine the number of jobs and their pay in Oklahoma versus the national average. There is nothing magical about the national average, of course, but since it represents an amalgam of 50 states it is reasonable to assume that being above the national average indicates low productivity among the government's workforce.

In 2006, Oklahoma's state and local governments employed 21.45 people for every 100 people employed by the private sector (this is the "employment ratio"). As mentioned above, this is the 5th highest ratio in the country. This employment ratio is 32 percent higher than the national average.

In 2006, Oklahoma's state and local government compensation was $41,198 per job while private sector compensation was $40,726 per job. The average state and local government job paid 1.2 percent higher than the average private sector job (this is the "compensation ratio").

Adjusting the employment and compensation ratio to the national average would have saved Oklahoma's taxpayers a whopping $2.7 billion in 2006. Such massive budget savings could have been used to significantly reduce taxes. For example, in 2005 (the latest year of available tax data), Oklahoma's tax burden could have been reduced to 7.35 percent of personal income from 9.75 percent of personal income--a reduction of nearly 25 percent.

Policy-makers should be aware that one way to solve the state's challenges is to grow private-sector businesses, allowing them to better compensate and hire additional employees. Policy-makers must pursue pro-growth economic policies--such as lower regulations, lower taxes, and secure property rights--that will promote economic development. Such policies are a win-win for both the private and public sectors.