Tags
ECI, economy, Employment, Employment Cost Index, government, Jobs, private sector, public sector, {What's Left of) Our Economy
The release yesterday by the Labor Department of the Employment Cost Index (ECI) once again understandably focused attention on perhaps the two leading intertwined economic and political and economic questions of this year.
First, in after-inflation terms, has this comprehensive measure of worker compensation (which includes wages, salaries, and benefits) recovered enough since tanking in the first half of 2022 to help Americans better keep up with more slowly rising living costs? If it has, and if the trend continues, will enough voters give President Biden enough credit to strengthen his reelection chances?
Here I’ll concentrate on another question that’s generally economic (though not without a political angle): Which groups of workers have been benefiting most and least? The following figures should make clear that the answers are far from ideal for anyone hoping for an American prosperity built on a sustainable basis. For mirroring some other recent trends, the answer is “government workers.”
Improvement has undeniably been made over the past year for U.S. Workers overall. The ECI’s broadest grouping is called “civilian workers” (which includes government workers at all levels except for the military, along with private sector workers), and between the third quarter of last year and the fourth quarter, this compensation advanced from 0.6 percent to 0.9 percent at yearly rates.
For the private sector alone, however, the latest annual increase was just from 0.6 percent to 0.7 percent. For some reason, the ECI leaves out federal government civilian workers, but for state and government workers, the yearly gain was from one to 1.3 percent.
Public sector employees (at least in the state and local government sectors) have fared considerably better than their private sector counterparts during the entire Biden administration, too. In fairness, they started out further behind the eight ball. Their ECI fell on an annual basis by 0.6 percent in the first quarter of 2021 – Mr. Biden’s first full quarter in office. In the fourth quarter of 2023, this rate climbed to the aforementioned 1.3 percent.
Between the third and fourth quarter of last year, the private sector ECI ticked up only from an annualized 0.6 percent to an annualized 0.7 percent – a pace slower than for both civilian workers overall and for state and local government workers.
During the entirety of the Biden presidency so far, the annual increase in the private sector ECI improved by much less than it did for either the whole civilian sector or for state and local government workers – from 0.2 percent to 0.7 percent.
As RealityChek regulars could well recognize, these outsized pay gains for the public sector mirror the increasingly disproportionate role in job creation being played by government employment and employment classified as private sector but heavily dependent on government spending. (See, e.g., here.) Obviously, many and even most such jobs are important and even essential. But the recent data can’t help but raise the questions of whether the economy can have too much of a good thing, and why in the nation’s main engine of productivity and innovation, wage and employment hikes are lagging.