Regions With High Federal Government Employment Are Not Economically Better, Have An Innovation Deficit

Richard Florida, urban studies theorist and Editor of the
Atlantic
Cities, examined federal government job levels in U.S.
metro areas and determined that that
there is no correlation between a region’s share of federal
jobs and economic success. He also found a negative correlation
between federal government job levels and innovation.

The study was part of his
ongoing series documenting the varying characteristics of American
cities. In a
previous article, Florida mapped out the prevalence of
different employment sectors in the nation’s capitol. In this

study, he asked labor market data and research firm EMSI to measure which metro
areas have the highest and lowest shares of federal government jobs
across the U.S., and then his colleague ran a simple correlation
analysis to determine the relationship between the job levels with
several economic indicators.

First, Florida found that many of the metro areas with the
highest federal government employment are in the “gunbelt”—those
regions heavily reliant on military bases. For instance, when
accounting for both direct and indirect federal employment,
Honolulu, Hawaii and the Virginia-North Carolina region actually
surpass Washington D.C. with 43% and 42% of the population working
for the federal government versus a relatively small 36%. Maps of
the data can be found
here.

When Florida’s colleague measured how well these federal
government-heavy regions compare to the rest of the country’s metro
areas, she came away with two major findings:

Strikingly, there was no correlation at all between share of
federal jobs and a wide range of economic indicators, including
economic output per capita, the share of professional, knowledge
and creative workers, or the share of college grads. Even more
remarkably, we found a negative correlation between federal
government job levels and innovation (-.26, as measured by patents
per capita).

She also found that “America’s leading high-tech centers, in
Silicon Valley and the San Francisco Bay area, Boston-Cambridge,
and the Research Triangle, have relatively low shares of direct
federal employment.”  

What does this mean? Keeping in mind that the data just measures
correlations, not causation, and that Florida does not offer any
theories to explain the data, one could postulate that federal
employment does not stimulate the economy any more so than the
private sector. Additionally, given that data shows federal
employees
get paid more for the same work than their private sector
counterparts, the effect may move in the opposite direction.

In regards to innovation, the implications seem clearer;
particularly in light of the fact that the regions responsible for
driving the new knowledge economy have the least federal
employment. Some social scientists however, have
criticized Florida’s use of patents per capita as an
ineffective way to measure the elusive concept. It is not
unprecendented though: the OECD
also uses patents per capita to measure innovation levels among
member countries.