This book chapter taught me several facts. Based on its Table 2.1, 3.9% of workers worked for government in 1900 and this percent grew to 6.7% in 1935, 15.1% in 1970 and shrunk to 14.1% by 1984. The military is not included in these percentages. Here is the break out of employment in 2010 by sector for state employees. If I'm reading this BLS table correctly, roughly 17% of national employees work for government in the year 2010. As government seeks to reduce its deficit, how many government jobs will be shed?
As federal, state and local government reduces its employment, who will bear the incidence of these declines? Are center city residents more likely to work for government and local hospitals than suburban residents. Are minorities more likely to hold these jobs? This issue matters for public policy because cities such as Detroit face tough choices over how to reduce their deficits. Mayor Bing is likely to turn to President Obama and HUD for some financing. Will Republicans push back and say that local deficit reduction must be financed with reduced expenditure rather than increased Federal transfers? Economists have examined public employment as a form of local redistribution. Here is a well known paper. During this time of "Occupy Wall Street", I believe that this issue will arise again.
If center cities respond by raising their taxes, will we observe a new "Laffer Curve" as this will create tax flight as mobile skilled people and firms will suburbanize even faster?