People seem sort of shocked when countries such as Greece and Spain come crashing down to earth or when an unlikely success story such as Israel or Singapore emerges. I’m wondering if a simple study could predict a country’s economic future: Is a young person better off going to work for the government, or in a quasi-government job, or for private industry?
China stagnated for centuries and many historians have put forth as a explanation that the best and brightest young people wished to enter the civil service rather than become merchants or engineers. Israel has one of the world’s most successful economies, despite a huge range of challenges. A schoolteacher in Israel starts at about $18,000 per year (source; compare to about $51,000 in Chicago (source)), despite the fact that the cost of living in Israel is higher than in most of the U.S. (see this ranking by city; Tel Aviv is at 24 while Chicago is down at 108).
Air traffic controllers in Spain could earn more than $1 million per year (see this entry from 2010). A young person would have been foolish indeed to choose a private sector career over a government or government-affiliated job in Spain back in 2010 and in 2012 we see where the country ended up.
How about the U.S.? We certainly have some great opportunities in government. A California state prison guard, who may have no education beyond high school, earns more than an average Harvard graduate (WSJ). It is not uncommon for police and fire department workers to earn $150,000 to $250,000 per year (more if the value of defined benefit pensions are included). Health care jobs in the U.S. must be regarded as quasi-governmental due to the fact that the government pays for roughly half of health care bills. Doctors in the U.S. earn more, on average, than private-sector workers with similar amounts of education (e.g., PhD engineers). Given the regulated nature of banking, the subsidies handed out to Wall Street in 2009 and 2010, it might be argued that some financial industry jobs are really government jobs.
I wonder if we could quantify this by looking at projected 10-year earnings, including the actuarial value of pension commitments, for young workers starting out in different standard careers across a variety of countries. The ones where the government jobs are the plum jobs are the countries whose relative decline we can expect.
“The ones where the government jobs are the plum jobs are the countries whose relative decline we can expect.”
I think there’s room to subdivide what “a government job” is. Certainly if young people are aspiring to low-skill but highly paid government jobs, that does not bode well for the economy.
However I don’t think there’s anything wrong for the best and brightest looking to be in government, provided the work culture gives them the latitude the deploy their talents. We could use some people who understand the role of government and how to work properly with stakeholders to develop good regulations. There are also certain government jobs where the salary has to be good enough to decrease the likelihood of corruption.
In short, some government jobs need to be plum, and some don’t. The problem is that governments rarely have the flexibility / will to price those jobs properly.
Singapore pays top government civil servants and ministers some of the highest govt salaries in the world (not even adjusted for its puny 5.5 million population).
http://en.wikipedia.org/wiki/Cabinet_of_Singapore
Starting salaries in Singapore’s administrative service is also extremely competitive and sought after.
So, Singapore is actually a glaring counter-example against libertarians who believe that less govt is always better.
Chao: Thanks for the link and the info. I am not sure why Singapore is the “glaring counter-example” of where big government works well. http://www.heritage.org/index/country/singapore says that the Singapore government spends just 17 percent of the country’s GDP. That’s one of the smallest percentages in the world, even if some individual government workers are paid well.
I call complete bullshit on the Israeli example.
Yes, Israeli teachers make very little money. As a result, the country’s educational system went into the toilet and we’re heading downhill… FAST. It’s not just “kids these days” in Israel, they really do know less and have fewer skills. Israel may well now receive more of its highly-skilled workers from aliyah (hello!) than from domestic education!
Quasi-governmental is also a very wishy-washy classification. All universities are nationalized here in Israel. This makes professor-level researchers quasi-governmental. Now you tell me if a country is heading for a bad future if its young aspire to become scientists?
(And, of course, Tel-Aviv is “the Bubble” to Israelis, the San Francisco of Israel: more international, more liberal, higher average salaries and VERY MUCH more expensive to live in than most of the rest of the country.)
According to the world bank (http://data.worldbank.org/indicator/NE.CON.GOVT.ZS),
1) USA govt expenditure is 19% of GDP
2) Hong Kong govt expenditure is 8% of GDP
3) Japan govt expenditure is 20% of GDP
4) Israel govt expenditure is 24% of GDP
Philg,
the best and brightest young people in Singapore do wish to enter the civil service.
A permanent secretary in Singapore earns around S$1.1M to S$1.5M in basic pay p.a. On top of that, he’s entitled to performance bonus pegged to GDP growth. On retirement, he gets a pension that’s 10% of his last drawn salary.
For young civil servants inducted into the Admin Scheme, their annual salary starts from S$240,000 onwards.
Ben: Those OECD numbers you cite would be grounds for huge celebration for Americans if not for the fact that the federal government is not the same as “government”. State and local governments fund a lot of the most expensive programs, e.g., schools, fire protection, police, etc. That’s how we end up with government at all levels consuming 40% or more of GDP.
http://www.kauffman.org studies these issues then writes insightful papers and policy proposals. They’ll even send you their printed yearly “Thoughtbook” for free, or you can download the PDF.
Folks: If Singapore truly has a government sector large enough to employ most of the country’s bright young people AND those jobs are more attractive to young people than private industry jobs, I think that I must conclude that the theory of the original posting is wrong.
It seems like the decent salary offered to members of parliament in Britain isn’t robbing the nation of too much talent
http://www.bbc.co.uk/news/uk-19801666
@philg “The economy of Singapore is dominated by government-linked corporations that produce as much as 60% of the country’s GDP” See http://en.wikipedia.org/wiki/Government-owned_corporation#Singapore
Singapore is truly a very interesting and perhaps instructive outlier in many ways. It has spent the last decade privatizing many once publicly run institutions, but a large number of these “privatized” entities are still monopolies or oligopolies largely controlled by the govt
Phil, I have to take issue with your comparison that assumes private sector engineers with PhDs and medical doctors have similar educational requirements. As you know, there is a nearly-universal expectation that medical school graduates will complete a residency to the level of being board-eligible, which in the USA anyways means at least three and as many as eight additional years of both work and study with inservice examinations and eventually a costly train of board examinations. The time commitment gets even longer for many academic physicians who commonly augment their M.D. degrees with MPH degrees, MBAs and even PhDs in order to remain competitive in academic practice. In effect, the time required is double that for a PhD without postdoc work.
CHenry,
This NY Times article shows that engineering and life science PhDs take 6-7 years on average now:
http://www.nytimes.com/2010/04/18/education/edlife/18phd-t.html?pagewanted=all
And that is not including the very long post-doctoral stints many people in science are taking:
“Post-docs used to last a year or two, but now it’s not unusual to find scientists toiling away for six, seven, even 10 years.”
http://www.washingtonpost.com/national/health-science/us-pushes-for-more-scientists-but-the-jobs-arent-there/2012/07/07/gJQAZJpQUW_story_1.html
Being a doctor may be a difficult profession, but the idea of not finding a job does not arise with many MD friends of mine. Their worries are usually about how much work they have to do. PhDs generally complain about how long it’s been since they were able to find a work, or how long they will have to work as a trainee.