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Government Employment in Minnesota

By Dave Senf
December 2011

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While the public sector is the second-largest employer in Minnesota, state and local government employment as a percentage of all jobs here has been shrinking since 1976.

State and local government employment, wages, benefits, and pensions have became a hot-button issue nationally over the last few years as public officials struggled to balance budgets during the Great Recession. Because payroll expenses eat up a large share of budgets, state and local governments have been holding down payroll costs through layoffs, wage and hiring freezes, furloughs, and other strategies.

The public sector versus private sector compensation debate had been smoldering for a long time, but it has flared up with the government budget woes. The heated debate created its own cottage industry in academia and at think tanks that churn out studies providing abundant ammunition for both sides (see the Public Sector Compensation Studies box on below). In the past year alone, three reports have looked at Minnesota public sector compensation.

Public Sector Workers Overpaid Studies

“Issue Backgrounder: Public and Private Sector Compensation in Minnesota,” Freedom Foundation of Minnesota, April 2011.
www.tinyurl.com/freedomfoundationofminnesota

“Minnesota Public Sector Compensation. Part 1. Costs, Trends, and Comparisons to the Private Sector,” Minnesota Taxpayers Association, October 2010.
www.tinyurl.com/taxpayersassociation

“Public Sector Unions and the Rising Cost of Employee Compensation,” Cato Journal, Winter 2010.
www.tinyurl.com/employcomp

“Assessing the Compensation of Public-School Teachers,” Heritage Foundation, November 2011.
www.tinyurl.com/hfstudy

“Employee Compensation in State and Local Governments,” Cato Institute, January 2010.
www.tinyurl.com/employeecomp

“Are California Public Employees Overpaid?” Heritage Foundation, March 2011.
www.tinyurl.com/calpaystudy

Public Sector Workers Underpaid Studies

“Are Minnesota Public Employees Overcompensated?” Economic Policy Institutes, March 2011.
www.tinyurl.com/briefingpapers

“Debunking the Myth of the Over-compensated Public Employee,” Economic Policy Institute,
September 2010.
www.tinyurl.com/epinstitute

“Out of Balance? Comparing Public and Private Sector Compensation Over 20 Years,” National Institute on Retirement Security, April 2010.
www.tinyurl.com/nirsstudy

“The Truth about Public Employees in California: They are Neither Overpaid nor Overcompensated,” Institute of Research on Labor and Employment, University of California, Berkeley, October 2010.
www.tinyurl.com/irlestudy

“Workforce Characteristics and Wages in the Public and Private Sectors,” MassBudget, March 2011.
www.tinyurl.com/massbudget

“The Wage Penalty for State and Local Government Employees in New England,” Center for Economic and Policy Research, University of Massachusetts Amherst, September 2010.
www.tinyurl.com/umasstudy

Comparisons between public and private compensation are complicated by a number of factors. Some studies, however, ignore those factors and end up comparing apples to oranges, reaching questionable conclusions. The apples to oranges comparison problem is spotlighted in Tables 1 and 2. Table 1 lists the top occupations among Minnesota private sector workers and state and local government workers. The occupational mix of jobs isn’t the same, and as a result the educational attainments of the two workforces differ. Educational background is a key determinant of wages, so any comparison should start with accounting for the education gap.

Table 1
Top 10 Occupations in Minnesota, 2009
Private Sector		State and Local Government Sector
Retail Salespersons	74,667	Elementary School Teachers	23,690
Cashiers	60,528	Teacher Assistants	22,503
Combined Food Preparation and Serving Workers	50,454	Secondary School Teachers	16,608
General Office Clerks	50,389	Postsecondary Teachers	15,732
Registered Nurses	49,376	Middle School Teachers	11,019
Waiters and Waitresses	45,134	Police and Sheriff’s Patrol Officers	7,669
Farmers and Ranchers	43,866	Janitors and Cleaners	5,583
Business Operations Specialists	40,203	Firefighters	4,992
Customer Service Representatives	38,501	Registered Nurses	4,948
Stock Clerks and Order Fillers	37,890	Special Education Teachers	4,788
Source: Minnesota Department of Employment and Economic Development based on Occupational Employment Statistics data

Table 2 displays the educational attainment gap between Minnesota’s private sector employees and state and local government employees. The public sector workforce has a higher percentage of workers with post-secondary training than the private workforce. Comparing average private wages to average public wages ignores the educational difference as well as other characteristics that might exist between the workforces. Most of the studies attempt to control for education along with other factors such as age, years of experience, size of firm, and even job security.

Sorting through the various studies and settling the public-private compensation issue is beyond the scope of this article. Instead, four sources for Minnesota’s state and local government employment and compensation data are explored. The four data sources — Current Employment Statistics (CES), Quarterly Census of Employment and Wages (QCEW), Bureau of Economic Analysis (BEA) and the Government Employment and Payroll report (GEP) — offer insights into the size of the public sector and its effect on Minnesota’s economy.

Minnesota’s state and local government employment totaled 382,828 on an annual average basis in 2010, according to CES data. That is nearly 30,000 more public employees than the U.S. Census Bureau reports for the state in its annual GEP report. The public payroll shrinks even more to 339,297 if one relies on QCEW numbers (see Table 3).

Table 2
Estimated Education Attainment (Percent of Workforce)
	Private Sector	State and Local Government Sector
Less Than High School Diploma	10.3	5.0
High School Diploma or Equivalent	27.7	17.4
Some College, No Degree	26.4	20.3
Associate Degree	10.3	10.3
Bachelor’s Degree	18.4	26.9
Master’s Degree	4.5	15.7
Doctoral or Professional Degree	2.5	4.5

High School or Less	38.0	22.4
Post-Secondary or Higher	62.0	77.6
Source: Minnesota Department of Employment and Economic Development using 2009 American Community Survey data

Table 3
State and Local Government Employment
	CES	QCEW	BEA	GEP
Total State and Local	382,828	339,297	363,218	352,903

State Total	100,681	75,755	89,657	98,437
State Education	61,267	36,970		53,548
Non-ed State	39,414	38,785		44,889

Local Total	282,147	263,542	273,561	254,466
Local Education	135,059	132,677		145,379
Non-ed Local	147,088	130,865		109,087

Percent of U.S. Total	1.96	1.82	1.86	1.80
Source: Current Employment Statistics, Quarterly Census of Employment and Wages, Bureau of Economic Analysis, and U.S. Census Bureau

There are a couple of reasons for the discrepancies. The GEP survey — collected from a sample of state and local government units in Minnesota — asked about employment and payrolls for March.¹ Many public sector jobs are seasonal just as in the private sector. State and local payroll numbers peaked in November 2010, roughly 13 percent higher than the lowest August total, which primarily reflects seasonal school staffing patterns. Employment totals for the other sources in Table 3 are annual averages.

CES, BEA, and QCEW data have a number of other differences, including how they classify college work-study students and elected officials and convert teaching from nine-month to 12-month positions.

The cleanest state and local government employment dataset is QCEW for analyzing trends in public sector employment. One change that affected the numbers, however, was switching Indian tribal councils and other establishments, including gaming, from private to local government employment in 2001. Indian tribal council employment added roughly 17,000 jobs to local government non-education employment in Minnesota starting in 2001. This additional employment is in the CES, QCEW and BEA datasets.

Each of the data sources has unique features that can be used to analyze state and local government jobs in Minnesota (see Table 4). CES is the only monthly estimate of employment released with a lag of only three weeks. The public sector data are included with the monthly CES release, which includes job numbers across sectors and major industries. State and local jobs are broken into four categories: state education, state non-education, local education and local non-education (as shown in Table 3). Seasonally adjusted and unadjusted numbers are published. The one caveat for CES numbers is that once a year in February the estimates are benchmarked to QCEW employment numbers, which are reported to DEED quarterly as part of the unemployment insurance program.

Table 4
Comparing Sources of State and Local Employment Data
	Current Employment Statistics (CES)	Quarterly Census of Employment and Wages (QCEW)	Bureau of Economic Analysis (BEA)	Government Employment and Payroll (GEP)
Source	Minnesota DEED	Minnesota DEED	U.S. Bureau of Economic Analysis	U.S. Census Bureau
Time period	Monthly	Quarterly and Annually	Annually	Annually (March base)
Methodology	Survey of a sample of state and local governments	Census of all state and local governments	Census of all state and local governments	Annual survey covering all state and a sample of local governments
Public Sector Detail	State ed, state non-ed, local ed, local non-ed totals	State and local by NAICS industries	State and local totals	State and local totals by function
Geographic Detail	U.S., states, MSAs	U.S., states, regions, counties, communities	U.S., states, MSAs, counties	U.S. and states
Wage/Compensation Data	None	Wages and salaries	Wages and salaries and benefits	March wages and salaries
Additional Industry Coverage	All industries non-ag wage and salary employment	All industries including covered ag and non-ag wage and salary employment	All industries including farm and non-farm proprietors	None
CES link - www.PositivelyMinnesota.com/CES BEA link - http://bea.gov/iTable/iTable.cfm?reqid=70&step=1&isuri=1&acrdn=4 QCEW link - www.PositivelyMinnesota.com/QCEW GEP link - www.census.gov/govs/apes/ Source: Current Employment Statistics, Quarterly Census of Employment and Wages, Bureau of Economic Analysis, and U.S. Census Bureau

Annual average state and local government employment (adjusted to account for American Indian gaming employment) dating back to 1956 are displayed in Figure 1 using CES data. Local governments (counties, cities, school districts, and towns) have nearly three times the jobs of state government including public universities and colleges. That ratio has stayed fairly constant through the years. Local government job growth was steady for 40 years, except for a significant drop during the double-dip recession of the early 1980s, before flattening out over the last 10 years. State government job growth also has been steady through the years but has leveled off over the past few years.

Figure 1: State and Local Government Employment in Minnesota, 1956 - 2010

State and local employment as a percent of all non-agricultural wage and salary employment topped out in Minnesota and nationwide around 1976 as baby boomer high school graduations were peaking, leaving behind empty schools and shrinking school staffs.

Minnesota’s state and local government employment share of total employment reached its lowest level since 1960 in 2007, before the steep private employment decline in 2009 caused the public sector share to rebound by 14 percent. Minnesota’s public sector employment (excluding federal employment) accounted for a larger share of total employment than nationwide until 2000. Since then state and local government jobs in Minnesota have accounted for a smaller slice of the employment pie than nationally.

Further evidence can be seen in Table 5, which compares the share of state employment for 23 sectors across all states using BEA employment data.

Table 5
Employment by Largest Sectors - 2010
	Largest Employer	Second Largest Employer	Third Largest Employer	Fourth Largest Employer
United States	State and local	Health care and social assistance	Retail trade	Manufacturing
Minnesota	Health care and social assistance	State and local	Retail trade	Manufacturing
Alabama	State and local	Retail trade	Manufacturing	Health care and social assistance
Alaska	State and local	Health care and social assistance	Retail trade	Accommodation and food services
Arizona	Retail trade	State and local	Health care and social assistance	Administrative and waste services
Arkansas	State and local	Health care and social assistance	Manufacturing	Retail trade
California	State and local	Retail trade	Health care and social assistance	Professional services
Colorado	State and local	Retail trade	Health care and social assistance	Professional services
Connecticut	Health care and social assistance	State and local	Retail trade	Finance and insurance
Delaware	Health care and social assistance	Retail trade	State and local	Finance and insurance
Florida	Health care and social assistance	Retail trade	State and local	Administrative and waste services
Georgia	State and local	Retail trade	Health care and social assistance	Administrative and waste services
Hawaii	Accommodation and food services	State and local	Retail trade	Health care and social assistance
Idaho	State and local	Retail trade	Health care and social assistance	Manufacturing
Illinois	Health care and social assistance	State and local	Retail trade	Manufacturing
Indiana	Manufacturing	Health care and social assistance	State and local	Retail trade
Iowa	State and local	Retail trade	Health care and social assistance	Manufacturing
Kansas	State and local	Health care and social assistance	Retail trade	Manufacturing
Kentucky	State and local	Health care and social assistance	Retail trade	Manufacturing
Louisiana	State and local	Health care and social assistance	Retail trade	Accommodation and food services
Maine	Health care and social assistance	Retail trade	State and local	Accommodation and food services
Maryland	Health care and social assistance	State and local	Retail trade	Professional services
Massachusetts	Health care and social assistance	Retail trade	Professional services	State and local
Michigan	Health care and social assistance	State and local	Retail trade	Manufacturing
Mississippi	State and local	Retail trade	Health care and social assistance	Manufacturing
Missouri	Health care and social assistance	State and local	Retail trade	Manufacturing
Montana	State and local	Retail trade	Health care and social assistance	Accommodation and food services
Nebraska	State and local	Health care and social assistance	Retail trade	Manufacturing
Nevada	Accommodation and food services	Retail trade	State and local	Health care and social assistance
New Hampshire	Retail trade	Health care and social assistance	State and local	Manufacturing
New Jersey	Health care and social assistance	State and local	Retail trade	Professional services
New Mexico	State and local	Health care and social assistance	Retail trade	Accommodation and food services
New York	Health care and social assistance	State and local	Retail trade	Professional services
North Carolina	State and local	Retail trade	Health care and social assistance	Manufacturing
North Dakota	State and local	Health care and social assistance	Retail trade	Accommodation and food services
Ohio	Health care and social assistance	State and local	Retail trade	Manufacturing
Oklahoma	State and local	Retail trade	Health care and social assistance	Accommodation and food services
Oregon	State and local	Health care and social assistance	Retail trade	Manufacturing
Pennsylvania	Health care and social assistance	Retail trade	State and local	Manufacturing
Rhode Island	Health care and social assistance	Retail trade	State and local	Accommodation and food services
South Carolina	State and local	Retail trade	Other private services	Manufacturing
South Dakota	State and local	Health care and social assistance	Retail trade	Accommodation and food services
Tennessee	Retail trade	State and local	Health care and social assistance	Manufacturing
Texas	State and local	Retail trade	Health care and social assistance	Accommodation and food services
Utah	State and local	Retail trade	Health care and social assistance	Finance and insurance
Vermont	Health care and social assistance	Retail trade	State and local	Manufacturing
Virginia	State and local	Professional services	Retail trade	Health care and social assistance
Washington	State and local	Health care and social assistance	Retail trade	Manufacturing
West Virginia	State and local	Health care and social assistance	Retail trade	Accommodation and food services
Wisconsin	Manufacturing	Health care and social assistance	State and local	Retail trade
Wyoming	State and local	Retail trade	Accommodation and food services	Construction
Source: Total full-time and part-time employment by NAICS industry, Bureau of Economic Analysis

Manufacturing accounted for the largest share of employment in 29 states in 1990. But that was the case in only two states — Indiana and Wisconsin — by 2010. Minnesota’s manufacturing sector has slipped to the fourth-largest employer, partly related to the 47,000 factory jobs lost between 2007 and 2010.

Minnesota’s state and local government sector is the second-largest employer in the state behind health care and social assistance. The state and local public sector is the largest employer in 27 states, second-largest employer in 12 states and the third-largest employer in 10 states. The only big outlier is Massachusetts, where state and local government is the fourth-largest source of jobs. BEA data show that state and local jobs account for a larger share of jobs in rural counties than in urban counties.

State and local government employment data provided by the U.S. Census Bureau (GEP data) also include part-time jobs. As of last March, part-time employees accounted for 34.2 percent of total public payroll in Minnesota, ranking seventh among states and significantly higher than the 24.6 percent nationally (see Table 6). Part-time public sector jobs are more common in the Upper Midwest than in the South. Public fire protection, corrections, transit, and hospital jobs in Minnesota are much more likely to be part time than nationally.

Table 6
Part-time Employment in State and Local Government
State	Percent of Employment Part-time	Percent of March Payroll Part-time
Wisconsin	37.9	11.6
Utah	37.3	11.9
North Dakota	36.1	11.3
Iowa	35.3	11.3
Maine	35.3	11.6
South Dakota	35.2	9.6
Minnesota	34.2	11.8
United States	24.6	7.9
South Carolina	17.9	5.9
Arkansas	17.8	5.0
Tennessee	17.8	5.2
Georgia	17.7	5.8
Texas	17.4	5.3
Mississippi	16.6	6.8
Alabama	16.6	5.8
Source: Annual Survey of Public Employment and Payroll, U.S. Census Bureau

QCEW is the dataset to examine for state and local employment below the county level. QCEW provides state and local government employment and wages at the community level by NAICS industry. State government jobs accounted for 6 percent of Mankato’s 30,677 wage and salary jobs in 2010 (see Table 7), which was slightly smaller than the 6.8 percent in local government offices and schools. Most state jobs in Mankato were at Minnesota State University (1,440 of the 1,443 education and health services jobs). All of the 1,310 local government education and health services jobs were in Mankato’s public schools. State government workers in Mankato received 10.1 percent of all wages paid in 2010, while local government workers earned 7.9 percent of the wage pie.

State and local government employment and earnings can be made more transparent when viewed with the four data sets discussed above. All one needs is an Internet connection and a spreadsheet program.

Table 7
Mankato Employment 2010 Annual Average QCEW Data
NAICS	Total	Private	Federal Government	State Government	Local Government
Total, All Industries	30,677	26,443	297	1,848	2,089
Natural Resources and Mining	18	18
Construction	883	685		149	48
Manufacturing	2,361	2,361
Trade, Transportation, and Utilities	7,252	7,061	190
Information	1,145	1,100			45
Financial Activities	1,454	1,435	19
Professional and Business Services	2,017	1,994		22
Educational and Health Services	10,148	7,395		1,443	1,310
Leisure and Hospitality	3,261	3,248			14
Other Services	1,145	1,145
Public Administration	991		87	232	672
Source: Quarterly Census of Employment and Wages, Minnesota Department of Employment and Economic Development

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