Research Note 17 1997-98

Whither Public Sector Employment?

Geoff Winter
Statistics Group
1 December 1997

Overview

In Australia public sector employment has been shrinking since about the mid-1980s, the outcome of privatisations, outsourcing of functions, significant technological change and cessation of functions altogether.

Table 1 shows movements in various levels of public sector and overall employment in Australia over the past twenty-seven years. It shows that the Commonwealth sector's share of total employment has declined by almost 50 per cent since the mid 1980s, whilst the State/Territory sector has declined by about one-third and the local government sector by less than a quarter. These reductions do not automatically mean cessation of functions-where transfers between jurisdictions have occurred which eliminate duplication (e.g. the formation of the Australian Securities Commission) employment is reduced but the functions are still being carried out.

Table 1. Employed Persons(a): Australia, May 1970 to May 1997

Within the Commonwealth sector there have been significant changes in coverage over the years-functions have moved (mostly) from under the Public Service Act to other Acts, e.g. when the Post-Master General's Department was split into the Australian Telecommunications Commission and the Australian Postal Commission. Where functions have moved away from the Public Service Act, it has become possible to corporatise and (then) privatise some of them, which is where substantial declines in Commonwealth employment have occurred. (See also The Changing Size of the Commonwealth Public Service, Research Note No. 46, May 1996.)

It is by no means certain that the employees formerly in the public sector have been absorbed into the private sector-there has been much anecdotal evidence to suggest that many become unemployed or leave the labour force altogether. However, unemployment figures and those above do not indicate clearly the final labour force destination of all public sector leavers.

It should be noted that changes in employment do not necessarily mean commensurate changes in outlays, as functions previously performed by public sector employees may now be performed by private contractors or other private sector bodies paid or subsidised to provide the service.

International

Table 2. Government Employment: Proportion of Total Employment, OECD Countries

1970 to 1994

(%)

Table 2 shows the international comparisons which may be seen as relevant to Australia. (It should be noted here that the comparisons are limited by the fact that the Australian figures include all public sector bodies, including public enterprises which are not included for other countries. However, the trends shown for the other countries are still accurate for comparison with the Australian figures.)

It can be seen that European countries generally have not been reducing their public sector work forces-some in fact have increased them, although figures for later years when available may indicate changes to this situation. Japan seems to have maintained its public sector at much the same size continually.

It is only in English-speaking OECD countries where there seems to have been a significant reduction in the public sector work force (a lack of data for New Zealand not-withstanding, and Canada may be going against the trend). The reasons for this are not clear, but the 'Thatcherite revolution' certainly had not spread to non-English speaking countries during the 1980s and early 1990s. Traditionally, European countries have had much higher proportions of Gross Domestic Product coming from the public sector outlays, financed by taxation (see OECD, Revenue Statistics 1965-1996).

Other reasons may be cultural, reflecting a greater sense of community and less adherence to attitudes of individualism. These matters are discussed further by Michele de Laine in International Themes in Public Service Reform (Background Paper No. 3, 1997-98, Department of the Parliamentary Library, 22 September 1997). A further complicating factor arising much more recently is the push for a (more) integrated Europe, agreements for which may depend on adherence to certain minimum levels of public sector involvement in the various national economies.

Comments to: web.library@aph.gov.au
Last reviewed 17 October 2001 by the Parliamentary Library Web Manager
© Commonwealth of Australia
Parliament of Australia Web Site Privacy Statement
Images courtesy of AUSPIC