Is Puerto Rico’s Public Sector too big? myth or fact

Updated: Sep 30, 2020



The size of the public sector in Puerto Rico is often criticized and assumed to be large for such a small island; but is it really that big? The answer to this question has become increasingly more important amid a governmental bankruptcy, agency reorganizations and regulations by a fiscal board. Before answering this question, we must remind ourselves the objective of the Public Sector and what entails. Primarily the public sector is in place to cater for the needs of its population and to provide them with fundamental services such as the right to water, electricity, justice, security, health, etc. As defined by the US Census , “The Public Administration sector consists of establishments of federal, state, and local government agencies that administer, oversee, and manage public programs and have executive, legislative, or judicial authority over other institutions within a given area.” In saying this, a government’s size could be related to the scale of the population that must service. To determine whether Puerto Rico’s public sector is too large we can compare it with other states as well as with the Dominican Republic. The two variables considered and compared are: the number of employees in the public sector as a percent of the total jobs available, and the number of employees for every 1,000 residents. The purpose of using these two main variables is to determine the importance of the public sector in the offering of jobs, and to measure the public offering per capita. The compared states have some similarities with Puerto Rico in the aspect of size, demographic distribution and economics. None of the comparable have all three variables nor are completely like Puerto Rico’s reality. The selected offer a sense of what the size of the government should be in comparison to its population. The comparison of employees in the Public Sector by selected States and Country is as follows:


“ The Public Sector is exactly where it should be, when compared to the population and the services it must provide.”

Results


The size of Puerto Rico’s public sector has shrunk considerably in the last decade. As compared in the previous table, the current number of employees in the Public Sector in PR is within the average range of the total in the United States of 60 employees per 1,000 residents. Meaning, that the size of the Public Sector in Puerto Rico, in comparison with its population is not that large and considered reasonable when compared to other states. When you compare Puerto Rico’s Public Sector to comparable states, such as Connecticut and Mississippi (3 million residents), it’s evident that the size of the Public Sector is exactly where it should be, when compared to the population and the services it must provide. On the other hand, when the size of the public sector is compared to the entire job offering of Puerto Rico we realize that 22% of the total jobs are in the Public Sector. This is a very large job representation for the Public Sector, especially when considering that the average in the United States is of 12% and the largest representation is of 16% for the state of Mississippi. When compared to other countries, such as the Dominican Republic, the trend is the same, stating that 12% of the total job offering should go to the public sector.


What's the answer?


The Public Sector of Puerto Rico is not over-employed, it’s over-represented when compared to the island’s private sector. Investigating the trend by population, the current number of employees in the public sector of Puerto Rico is in line with similar jurisdictions to. The problem is that the number of employees in the private sector is low, thus distorting the distribution of total job offerings in the island. In effect, it seems that the government of Puerto Rico is large, but is not.


Employment in the Public Sector already has been reducing at an average rate of 3.2%, which is much higher than the attrition suffered by the private sector of 1.3% per year over the past ten years. Growth peaks in public employment happen prior or in an election year and are undone the subsequent year. In saying this, the solution to this problem should not be, necessarily, reducing or redistributing the employees in the Public Sector, it should be looking for other options to increase the private sector. Solutions to increase the private sector could be: reduction of the unemployed into the private sector, improvements to infrastructure (utilities) that will increase ease of doing business and expedite permitting to promote the creation of new businesses. All solutions to increase the private sector are cumbersome to accomplish, but the reduction of the public sector is not necessarily the best way to accomplish this task since they are needed to service the current population.

Sources

1 https://www.census.gov/eos/www/naics/reference_files_tools/1997/sec92.htm

2 The comparison of Public Sectors in each state and country, considers the Annual Survey of Public Employment & Payroll Methodology published by the U.S. Census that measures employees by State in the U.S., Puerto Rico and the Dominican Republic. Employees in the public sector include all employees as defined in NAICS code Sector 92--Public Administration, which include: Executive and Legislative Offices, Public Finances, Justice, Public Order, Safety, Police, Correctional, Fire Protection, Public Health, Environmental, Air, Water, Solid Waste Management, Housing, Urban Planning, Utilities, among others at the state and municipal levels.

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