Chapter 12
Government and the Labor Market

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1.Public-Sector Employment and Wages

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Government Employment
25.0
• The number of federal civilian and state and local government employees has risen over time. • The growth of federal employment has been much smaller than the growth at the state and local level.

20.0
Millions

15.0 10.0 5.0 0.0 1950 1960 1970 1980 1990 2000 2004 2006 Federal Civilian Military State and Local

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Relative Government Employment
16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 1950 1960 1970 1980 1990 2000 2004 2006 Federal Civilian
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• The share of employment in the public sector has risen over time. • This increase is due to increased demand for government services due to factors such as the schooling needs of the baby boom, higher real income, public sector unions, and increased regulation.
Millions

State and Local

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Public vs. Private Pay
 Most government units attempt to set pay equal to those to comparable privatesector workers.  In the past, Federal government workers earned premium relative to their private sector counterparts.
 The premium has fallen over time.

 Public sector workers receive a greater fraction of the their compensation in the form of fringe benefits.
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2. The Military Sector: The Draft Versus the Voluntary Army

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Draft vs. Voluntary Army
 Before 1973, the military used to draft or compel people to serve in the military.  The pay for those serving in the military was low.  In 1973, military switched to an all volunteer army.  Military pay was raised significantly.

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Draft vs. Voluntary Army
• If the military drafts OG number Wage rate of workers and