Overpaid Feds: Some Market Evidence

November 9, 2010

In a story titled, “Federal government upping pay, seniority to lure skilled workers from private sector,” the Washington Business Journal notes:

“Government contractors are losing their upper hand in hiring and retaining the best and brightest former feds, as several economic forces under way hint at a potential mass migration from the private sector to public service… .

’Government employment is growing more attractive during the economic downturn because it brings job security and the comprehensive benefits that a lot of private sector firms are doing away with,’ said Alan Balutis, director of Cisco Systems Inc.’s Internet Business Solutions Group.”

Aside from adding evidence to my overpaid federal worker thesis, the article suggests trouble for the broader economy if more high-skill workers are running to the government for safe refuge. Federal hiring of the best and brightest imposes an “opportunity cost” on the economy by drawing talented people away from higher-valued activities in the private sector.

It is true that the relative economic harm is less when we are comparing, for example, hiring in-house computer experts to support wasteful farm subsidy activities, or whether we contract-out farm subsidy computer support to, say, Cisco.

So first we should downsize the government to its proper areas of responsibility, thereby releasing hundreds of thousands of smart people to engage in market-based activities. Then we should contract out the remaining core government activities if it makes economic sense.  

Hat Tip: Bill Erickson

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