Government waste. Corporate waste. Are we stuck?

There is a great deal of truth in the increasingly popular sentiment that the compensation levels for government employees have become distorted, more so during this Great Recession.  But, such distortions are prevalent in the private sector too.

I do not mean to deny the problem in the public sector.  My graduate school professor, who has semi-retired now, often joked that he became a libertarian because of his experiences when he worked as a student intern with the Los Angeles County government—and this was forty-some summers ago! 

In my own experience as a student intern and later as full-time employee with different government agencies in California, I did encounter employees who did not seem to be delivering service that was equivalent to their high salaries.  In the decade since I returned to academia, one of my former employers has practically doubled the number of people in its payroll.

But, such issues are not only a characteristic of the public sector—they plague the private sector as well.

When it is a small business, like the one my neighbor owns, it is quite easy to maximize efficiency.  But, as organizations get larger, much to our displeasure as consumers and taxpayers, wastes do arise.  Various forms of economic inefficiencies, of which compensation levels are one, are characteristic of large organizations—private, public, and even the non-profits. 

Academics and management experts have been studying these issues for a long time.  One of my fellow graduate students—also from India—did his doctorate in “organizational behavior” and focused on such inefficiencies.  The interesting irony was that until we met in Los Angeles, as new graduate students, we didn’t know that we had worked for the same employer in India, Indian Oxygen Limited, after which, naturally, we shared many jokes about the wasteful practices at the firm.

Perhaps it is easy to go after public sector compensation because it is the metaphorical fruit lying on the ground.  But, while bending down to pick these up, are we overlooking far plumper fruits in the private sector?

A typical argument for ignoring the inefficiencies in the private sector is that options exist for us consumers, while as taxpayers we have no alternative but the government, which is a monopoly.  I.e., if we do not like, for instance, a multinational company’s wasteful approaches, then we can stop patronizing that business and move to somebody else.  However, as we find with the oil companies, there is rarely a difference between large firms, which means that there isn’t really a choice for us consumers—it is tweedledum or tweedledee!

Finally, looking at inefficient resource allocations within my own world of higher education, I would rather that we target first the ever increasing expensive spending for athletics.  It is no longer any news that often college coaches earn far more than corporate CEOs.  But, this is a losing battle—after all, even my left-leaning faculty colleagues love sports to the extent of organizing betting pools during the “March Madness.”

I suppose we are stuck with inefficiencies that we don’t like!