Read the full report | In the private sector, productivity is defined as the sum of all goods and services produced (as measured by Gross Domestic Product) divided by the number of workers. The estimation of private sector productivity is easier than the estimation of government productivity. In the public sector there is no reliable measure of the “goods and services” received because prices are not set on a voluntary basis. Rather, citizens pay taxes to fund a government that is deemed necessary by elected legislators.
Unfortunately, citizens have no direct way to judge whether or not they are getting the most “bang for their buck” for the goods and services provided by the public sector. This study provides an indirect way to better understand the productivity of the state bureaucracy by examining employment levels across the 50 states. The basis of comparison is to examine the number of government jobs for every 100 private sector jobs in Maine versus the national average. There is nothing magical about the national average; however, since it represents an amalgam of 50 states, it is reasonable to assume that being above the national average indicates “low productivity,” via excessive bureaucracy, and vice-versa.
More specifically, this study examines Maine’s state government employment levels. As shown in Chart 1, in 2006, the state government employed 5.35 people for every 100 the private sector employed—hereafter referred to as the “employment ratio.” Relative to the national average of 4.35, Maine’s state government employment ratio is 23 percent higher. Chart 1 also reveals that Maine’s employment ratio was falling steadily between 1979 and 2000; but since 2000 has been on the upswing.
If Maine’s state government employment level had been reduced to the national average in 2006, it could have saved taxpayers up to $215,330,035. In addition, as previously reported by MHPC, adjusting the state government compensation ratio to the national average would have saved an additional $200,366,421. As a result, Maine’s tax burden (as measured by tax collections as a percent of personal income), in FY 2006, could have fallen by up to 11.1 percent, to 7.71 percent from 8.67 percent. To put this reduction into perspective, the state individual income tax could have been cut by nearly one-third. One solution to these problems is to eliminate all state government jobs that are vacated due to retirement.
Finally, the study examines several different measures of state government employment provided by the Bureau of Economic Analysis, the Census Bureau and the Maine State Bureau of Budget. Generally speaking, all of the measures point to higher state employment since the late 1990’s.