Centralization 

Government Employees and the Public Sector

The data presented below presents another common "index" of the size of government, based on the concept of public sector employment share. Most analysts agree on a few basic facts: 

  • The public sector (especially at the federal level) grew dramatically, from the early 1900s to 1945 

  • Since 1945, the federal share of government employment has remained flat (some scholars argue it has fallen)

  • By contrast, the number of state and local government employees has grown dramatically. By our estimate, the number of state and local employees has quadrupled, from around 5 million in the 1950s to over 20 million as of 2021 (source: FRED economic data: https://fred.stlouisfed.org/series/CES9093000001)

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Federal Outlays

Employment Share

IMF Data

Power Shift

Summary

De/Centralization

Government Civilian Employees as Percentage of Civilian Labor Force 1908-1984

The first chart captures public sector employment share by measuring Government [Federal] Civilian Employees as a percentage of Civilian Labor Force (1908-1984). Data is taken from Robert Higgs, Crisis and Leviathan (1991 p. 25):

Source: Robert Higgs, Crisis and Leviathan, 1991 p. 25. Note: Higgs counts civilian employees, which removes employed military from the numerator. ​Also of note: we have been unable to replicate Higgs' data. 

Government Civilian Employees as Percentage of Civilian Labor Force 1955-2019

The table below presents an updated rendering of the research by Higgs and others, above. These measures are in accord with other studies, which indicate a steady drop in employment share from highs in the 1970s (around 15%). Most analysts attribute this relative drop in federal employment share to the rise in employment share at the state level (see Federal and State FTE below). 

The data was retrieved from the U.S. Bureau of Labor Statistics, Civilian Labor Force Level. Calculations are based on an estimate of local, state, and federal employees as a percentage of total government employees (displayed as a percent of total civilian labor force). *Not including enlisted personnel 

Source: U.S. Bureau of Labor Statistics, Civilian Labor Force Level, retrieved from FRED, Federal Reserve Bank of St. Louis

Federal and State FTE

If employment share has fallen, or remained flat in recent decades, what could explain the relatively constant rise in spending? As the chart below illustrates, there is a dramatic difference between the number of employees marked as full-time equivalent (FTE) at the federal level and the number of employees marked as FTE at the state level. While the federal civilian workforce (in raw numbers) has not expanded significantly, since 1952, the number of state-and local-government employees has quadrupled to over 20 million. Analysts do not all agree on the cause. Some have attributed this remarkable growth at the state level to the increase in federal aid to states.

 

To learn more, users may want to examine the inflation-adjusted value of federal grants to states. Readers may also want to consider the increase in federal spending on for-profit contractors and nonprofit organizations, both of which can sometimes mask the true size of the civilian workforce employed indirectly by the federal government.

 

For updated statistics, and for analysis of methodology, see Federal Workforce Statistics Sources: OPM and OMB, 2020: https://fas.org/sgp/crs/misc/R43590.pdf

Further Reading

The "true size" of government is a fascinating but thorny topic. For analysis and commentary, readers may be interested in a series of recent reports on "Big Government" by the Brookings institute. We select the following three articles as an overview and introduction: 

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