To the side is a schedule detailing the mix of public and private sector jobs for the state of Michigan (I'm dying to find a similar schedule for the nation as a whole, if someone could direct me, I would greatly appreciate it.).
What's significant about this schedule is that roughly 16% (1/6th) of the payroll employment in the state of Michigan is in the public sector.
Why is that significant?
Consider that for each employee in the public sector you must have private sector employees to pay their salary and benefit packages.
Assume that everyone in a community makes the same (for this example let's use forty thousand dollars annually).
That means it takes five workers in the state of Michigan to support one public employee and that costs each of those employees $8,000 each to cover one $40,000.
That doesn't even count the fact that in the real world most public sector jobs pay better and have more lucrative pension and health insurance benefits putting even more pressure on the private sector to cover this societal "overhead".
Now you may be saying "Gordon, your math doesn't work, people making $40,000 a year don't pay $8,000 a year in taxes."
Wanna bet?
Think of the all the real estate taxes, sales taxes, sin taxes, income taxes, levied on a society and you can damn well bet that this formula works.
Now also consider that we cannot all work in the public sector. There has to be private sector activity to fund all the stuff we have governments do today. Yet you'd never know that from how our elected officials behave. Each and every health care plan, cap and trade bill, congressional staffer, is just another straw on the camel's back.
If you ever wanted to know why this recession is going to take us a decade to get out of.... just look at the "U" shaped camel's back of for-profit businesses. It's too muich weight to carry and get moving.
So why did I become a conservative? Because I can see that public sector never shrinks it only gets so heavy it implodes from within. Just ask Michigan.
3 comments:
The national numbers are even more dismal: http://www.bls.gov/news.release/empsit.nr0.htm
130,848,000 nonfarm employement of which:
22,447,000 are govt employees (17.2% of workforce)
108,401,000 are private sector
That means 108,401/22,447 = 4.83 private sector employees for every 1 government worker. That doesn't take into account the fact that many private sector workers rely on government contractors/money.
-Jeremy
I agree with you. I'd bet someone earning $40K pays at least $8K a year in taxes. And that would be in direct tax cost; income, sales, property, etc..
What is very difficult to measure is the indirect and opportunity cost. Businesses pay payroll taxes, income taxes, property taxes, etc. These are built right into the costs of the products they sell.
Do you think that can of peas that you buy at the supermarket is not taxed? Think again. Every product sold in the marketplace has probably been taxed 15 different ways before it gets to the consumer. The multiplier effect has got to be enormous. I would bet that that $1 can of peas has 50% tax markup hidden in the price.
Then take the guy earning $40K in detroit right now. The opportunity cost on his salary is equally enormous. He has to take a $40K job in a economy being slowed down by the 900 pound government monkey on it's back. In a robust economy there would be serious demand for his labor. He might be able to command $80K a year.
So, of the $32,000 that he is allowed to keep, he has to pay $16K in hidden taxes and is therefore buying $16K in real goods. Of course he needs government just to get by. But in a world of lower taxes he would command a higher salary, and be able to buy products more cheaply. He would be more likely to not need a government dragging, er uh, helping him along.
This is a phenomenon I call the Socialist Death Spiral: "Higher taxes creates a perceived need for even higher taxes."
Stop the insanity.
And don't forget. That 1/6th of the Michigan economy that is in the public sector is probably the least productive 1/6th. If you have ever seen a government worker in action you know what I mean. 1/6th of the money spent probably means 1/10th of the actual economic output, if that.
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