Oregon Labor Market Information System
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Hot Topic: Government Employment in Oregon
by Gail Krumenauer
Published Apr-1-2014

 
Tracking government employment is a surprisingly tricky affair. The North American Industry Classification System (NAICS) is the official "go-to" authority on what is, and is not, included in an industry. While the NAICS doesn't have an industry reserved for government, it does have a public administration industry - which is very near to the same thing?sort of.

"The public administration sector consists of establishments of federal, state, and local government agencies that administer, oversee, and manage public programs and have executive, legislative, or judicial authority over other institutions within a given area..." according to the NAICS manual. So far so good, right? But "government establishments engaged in the production of private-sector like goods and services should be classified in the same industry as private-sector establishments engaged in similar activities."

As an example, workers at public utility companies are counted in the utilities industry. This grouping of government and private activities into the same industry gives rise to the need to use another grouping called ownerships as a way to differentiate employment at private and public establishments, and allow for breakouts of federal, state, and local government employees.

Government Employment Mostly in Education
 
About two out of five of Oregon's government workers (41%) were employed in the education industry in 2012, while more than one out of four (30%) were employed in public administration. The remaining public-sector workers were mostly in social assistance, transportation, or a non-classifiable industry.

This employment pattern for public workers differed significantly from the private-sector employment pattern. Five industries employed the bulk (66%) of private-sector workers: professional and business services; retail trade; manufacturing; health care and social assistance; and accommodation and food services. By comparison, these industries accounted for a small piece (13%) of total government employment. The other one-third of private-sector workers were fairly evenly distributed among the remaining broad industries.

Oregon Slightly More Concentrated in Government Employment
 
In February 2014, there were 293,000 government employees working in Oregon, accounting for roughly 17 percent of the state's employment (Table 1). Government employment tends to be counter-cyclical, meaning that government employment levelsrise when private-sector employment goes down, and vice versa. Government often adds jobs during recessions because of an increase in demand for social services. During the recent recession, government employment held somewhat stable while the private sector was losing jobs. As the private sector in Oregon started to recover from the recession in 2010, government employment declined until late 2013 when the sector started posting year-over-year employment gains.

Historically, Oregon tends to have a higher concentration of state and local government employment than the nation. Graph 1 shows Oregon's concentration of employment by government sector compared with the national average. In this analysis, Oregon had a location quotient of 1.32 in February 2014, indicating Oregon's employment is more concentrated in state government than the nation as a whole. Oregon's consistently low concentration of federal government employment is likely due to the state's relatively rural nature, smaller population, and fewer major economic hubs compared with our West Coast neighbors.

Table 1
Oregon's Government Employment
February 2014, Seasonally Adjusted
  Employment Percent of Total Nonfarm Change From February 2013
Total Nonfarm 1,702,000 100% 42,900
Total Government 293,000 17% 4,000
Federal 27,500 2% -400
State 82,800 5% 2,500
Local 182,700 11% 1,900
Graph 1
Oregon's concentration of employment in govenment sectors compated to U.S.
Public Sector Compensation Generally Larger Than Private Sector
 
Each quarter the Bureau of Labor Statistics publishes results from their Employer Cost of Employee Compensation Survey. The survey, which has been conducted since 2004, shows the total value of compensation to employees and provides detailed categories for many types of compensation provided by employers. Data are only available at the national level. In the fourth quarter of 2013, the average cost of total compensation for all private employment was $29.63 per hour (Table 2) compared with $42.89 for state and local government employees (statistics are not available for federal employment). In general, state and local employees across the nation tend to have higher wages and benefits than private employees.

Over the past five years, total compensation for private employees has grown by 8 percent, while total compensation for state and local government workers has grown by 9 percent. Private-sector employees made similar gains in wages and salaries, but state and local employees have made greater gains in total benefits.

In Oregon, earnings for public-sector workers averaged $47,200 in 2012. While this figure is about $3,600 higher than the average wage for private-sector workers, it is significantly influenced by the high average wage ($68,900) of federal government workers in the state. Oregon's state and local government workers had average earnings - $43,800 and $45,000, respectively - much closer to the private-sector average of $43,600.

Table 2
Average Hourly Compensation Rates
United States
  2008 2013 Percent Change
Private      
Total Compensation $27.35 $29.63 8%
Wages and Salaries $19.37 $20.76 7%
Total Benefits $7.98 $8.87 11%
State and Local      
Total Compensation $39.25 $42.89 9%
Wages and Salaries $25.87 $27.65 7%
Total Benefits $13.38 $15.24 14%
Note: Data are for the fourth quarter 
Source: U.S. Bureau of Labor Statistics
Why Do Government Employees Earn More?
 
One of the reasons average compensation tends to be higher for government employees is that the occupational mix for government employment is more concentrated in high-wage occupations. In 2012, roughly two out of five government workers worked in a professional or related occupation, compared with about one in 10 private-sector workers. The private sector also had a fairly diversified occupation mix, while public employees were more concentrated in a few occupation groups.

Some of the difference in compensation is also likely explained by differences in age. Older workers tend to have more work experience and are therefore able to command a higher wage from employers. In comparing the age distribution of private- and public-sector workers, we see that public employees tend to be somewhat older. In fact, more than one-half of Oregon's government employees were age 45 or older in 2012, compared with 42 percent of private-sector workers.

Another area where public and private-sector workers differ is education. Although there is no data on the education levels of specific workers, we do know the educational requirements of jobs in both the public and private sectors. In general, jobs that require a bachelor's or advanced degree pay more than those requiring only a high school diploma. Of Oregon's private-sector jobs in 2012, about two-thirds (67%) required a high school diploma or less, and less than one-fifth (17%) required a bachelor's or advanced degree. In the public sector, roughly two-fifths (42%) of jobs required a high school diploma or less, while 44 percent required a bachelor's or advanced degree (Graph 2).

There is also a much higher incidence of union coverage among government employees, which may lead to higher compensation levels. Union coverage in Oregon's public sector was 53.7 percent in 2013, while the private-sector coverage rate was 7.7 percent. In the fourth quarter of 2013, the cost of compensation to private unionized employees at the national level totaled $41.54 per hour, slightly below compensation rates ($42.89) for state and local employees. Private non-union employees had an average total compensation rate of $28.48 per hour, slightly lower than the $29.63 total private average.

Graph 2
Employment by education Oregon 2008