The Government Workforce in an Era of Wage Stagnation

With private-sector wage growth outpacing the public sector's, it's more of a challenge than ever to attract and keep talented employees.
February 24, 2015
By Elizabeth K. Kellar  |  Contributor
Senior Fellow with the Center for State and Local Government Excellence and director of public policy for the International City/County Management Association

There's been a lot of talk lately about wage stagnation among middle-class workers, but there is growing evidence that this may be an even larger issue for state and local government employees -- one likely to make it harder for these governments to attract and retain the workforces they need.

Unlike the private sector, state and local government employment remains smaller than it was before the Great Recession. At its peak in 2008, these governments had 19,748,000 employees. In the six years after that, states and localities shed an estimated 565,000 jobs, according to the Bureau of Labor Statistics (BLS).

With a smaller workforce, one might expect wages to go up as the national economy improves. But because state and local revenues have not returned to their 2007 levels, wage increases have been modest at best. State and local government wages and salaries increased by 1.6 percent in the 12-month period ending last December, compared with a private-sector increase of 2.2 percent over the same period, according to the BLS.

The wage squeeze for these workers has been exacerbated by the rising cost of pension and health benefits, a cost that is shared by employees and employers. The percentage of employee compensation that goes to health and pension benefits rose from 16 percent in 2004 to 20 percent in 2013. The tight revenue picture and rising benefit costs are driving more governments to make changes to their health and retirement benefits. According to a survey of state and local government human-resources managers last year by the Center for State and Local Government Excellence (SLGE), 53 percent of respondents' jurisdictions shifted more health-care costs to employees while 34 percent increased employee contributions to retirement plans.

These fiscal realities underline the long-term challenge for talent development and recruitment that state and local governments face. The same SLGE survey found that while more governments were able to hire last year, more positions were difficult to fill.

There are still many who seek a career where they can make a difference. Unfortunately, these aspiring public servants often think of nonprofit or private-contractor opportunities before they consider a government job.

Now that state and local governments are starting to hire again, there is more competition to attract public-service-minded people. Whether creating career paths and professional development opportunities, partnering with academic institutions to create a pool of qualified individuals, rewriting stodgy job descriptions, or retooling compensation packages to be more competitive, state and local governments are testing ways to attract and keep talented employees.

For governments to meet these challenges, flexibility will be required, whether that means finding new strategies to deliver essential services or providing increased flexibility to workers. We will always need bright, creative, dedicated people to make government work well.