The myth of a bloated public sector

POSTED: 07/5/13 11:40 AM

graph employmentBy Jason Lista – Is St. Maarten’s government a bloated beast? Is it feasting on the fruits of a small, productive private sector? It’s an issue that is often brought up in public opinion and the general perception is that the government is a huge sponge, soaking up most of the island’s workforce in unproductive but secure jobs.

But is that perception fair? Is it true? Perhaps the best way to resolve the debate is to put St. Maarten in a comparative context. That is, to compare the relative size of its public sector to overall employment with those of other countries. To do that, however, requires good information. An analysis can only be as good as the information provided. This is the caveat before proceeding.

The data given in the Economic Outlook Sint Maarten 2012-2013 handbook provided for free by the Department of Economic Affairs at the Stats office in Philipsburg was used. It gives a breakdown of employment by sector of the economy. The accompanying graph shows how it looks as a whole with each sector represented as a percentage of the total as of 2009, the latest year of local data.

By far the single biggest employment sector of the island is the commercial trade sector at 19% which dwarfs public administration and social services at 7% of the nation’s total workforce. Factoring health, social work, and education as well, the public sector remains at a modest 13% of the total current workforce using the available data. One can argue that the transport and communications sector includes public companies that own the airport and harbor, but they are in fact managed as private companies and are productive and profitable.

To put things in international perspective, Sweden has an army of public servants who make up 34% of total employment according to a 2011 cross economic study done by Richard Posner of the University of Chicago and which is also supported by data from the Organization for Economic Cooperation and Development (OECD). The smallest public service in the world is that of Singapore, according to Posner, barely taking up 6% of its workforce. The United States is somewhere in between with its public sector accounting for about 16.5%. St. Maarten, if the local data provided is accurate, is also somewhere in the median of OECD member countries, with most countries having a public sector between 12 and 19% of their respective total workforce.

Despite the recent hype surrounding the fat government PIGS of Europe (Portugal, Italy, Greece, and Spain), the reality is that Spain, Portugal, and Italy have only marginally bigger public sectors than that of the Netherlands – which has the smallest in Europe – and actually have smaller public sectors as a percentage of total workforce than that of America, the supposed home of “small government.” In fact, Greece’s so-called monstrous public sector, at 22.3%, is only slightly bigger than the public sector of economic poster child Canada, which is at 20% of total workforce.

It would appear, then, that economic performance comes down to other factors besides relative government size, like levels of corruption, national debt, and good governance. All three Scandinavian countries mentioned, for example, are economically productive and wealthy, with high per capita incomes despite having big governments. And Japan, with a miniscule public sector of less than 10%, has for quite some time been consistently outperformed economically by Germany, which has a larger public sector deeply involved in its industrial policy.

Another vexing question is whether St. Maarten has too many civil servants for its population size. A simple calculation will give us the amount per 1000 people, the OECD standard. Assuming a static, legal population – after all, government represents its citizens and legal residents – at a minimum of 45,000, then we divide the 1,800 civil servants supposed to be working for the local government by 45 and we get approximately 40 civil servants per 1,000 people (40 per 1,000 is the same ratio as 1,800 per 45,000).

The average OECD figure is 76 civil servants per 1,000 people, according to a 2012 study done by Richard Boyle of the Institute of Public Administration, with Sweden at the highest end, employing about 125 civil servants per 1,000 people. So the OECD member average is, in fact, nearly double that of St. Maarten, with Sweden three times as high.

St. Maarten, with its own national government, police force, airport, etc. must be compared to other national governments, not their towns of equivalent population size which rely on their respective national governments for essential services like hospitals, police, and airports, etc. To be fair, however, St. Maarten does not have to provide for national defense or a large diplomatic corps, which also count as part of the public sector.

But what we cannot determine from the size of the public sector alone is its efficiency and productivity. Just how productive and how helpful St. Maarten’s civil service is for economic growth is another discussion entirely.

 

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