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Factors Influencing Employment Capacities of Local Governments

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Agustin Leon-Moreta and Silvia Saenz
May 22, 2019

In this article, we discuss core factors influencing employment on the part of local governments. We focus on economic and interlocal factors that influence the choices of local governments in urban areas. Decisions on public employment are crucial for a number of reasons. First, the delivery of local services depends on a sufficiently sized workforce in local governments. Some local governments, such as financially distressed ones, have limited workforce capacities to deliver their programs. Second, public employment offers fundamental economic benefits to residents. In some cities, local governments can be among the largest employers.

What factors influence the differences in the public workforce of local government? First of all, the local economy plays a critical role in the employment levels of city governments. In general, economic development will encourage more public employment by local governments. More economically developed cities also have greater needs for certain public programs. For example, cities offer municipal services to residents and businesses. As the financial capacity of the locality increases, residents and businesses are more likely to demand more and better local services.

Legal institutions also play a crucial role in incentives for local government employment. One critical factor is, for example, the right-to-work legislation that may induces local governments to hire more workers. The increase in public employment, due to right-to-work laws, may not be necessarily an increase in high-quality employment. By weakening the role of unions, local governments may find it much easier to hire workers under more flexible conditions.

Another critical set of factors is that of intergovernmental interactions. In urban areas, there is a local labor market, and the public labor market is a subset of that labor market. The local labor market will influence the levels of public employment in urban areas. The organization of municipalities can have a significant impact on the public employment of governments. In a fragmented region, municipalities will compete with each other to attract and retain qualified labor. Consequently, the competitive configuration of metro areas can lead to lower or higher levels of employment in municipalities, depending on the degree of governmental fragmentation.

A specific factor of influence is the pattern of fiscal disparities in the metropolitan area. This relationship implies that the employment capacity of governments is directly affected by fiscal disparities. The fiscal capacity of local governments will affect their ability to recruit and support a public workforce. Fiscal disparities tend to increase in times of fiscal distress; for example, hiring freezes and layoffs are sometimes hard choices that local governments make to balance their budgets. During the last Great Recession, in fact, many fiscally distressed municipalities were forced to makes such decisions.

One response to disparities is interlocal cooperation. Interlocal cooperation is of growing interest due to their ability to support or redress disparities in fiscal capacity. Local governments in some regions are in fact devising mechanisms of fiscal cooperation to support fiscally distressed governments. However, cooperation between governments depends on resolving problems of collective action. Unless a government leads those efforts, municipalities can be trapped in an environment of fiscal disparities and unable to devise corrective actions. When feasible, interlocal cooperation can have a nontrivial impact on the ability of local government to support a local public workforce.

Disparities in fiscal capacity affecting public employment may call for fiscal support by higher levels of government. In the federal system, the federal and state governments play that important role. State governments have direct institutional linkages to their local governments. Thus state governments can be a level of government of last resort for redressing severe fiscal disparities affecting local governments’ ability to employ a workforce and deliver public programs.

In brief, both the local economy and the institutional context matter for explaining differences in the employment capacities of local governments. The local economy is obviously important because it underlies the demand and supply of workers in the local labor market. However, the intergovernmental system is also influential because the local governments make employment decisions within that intergovernmental framework. We highlight the influential context of intergovernmental interaction in urban areas. In contexts of metropolitan fragmentation, intergovernmental cooperation can be a powerful system for redressing employment disparities. And, ultimately, the state government will serve an essential role in assisting local governments to develop their workforce capacities.


Agustin Leon-Moreta is Assistant Professor at the University of New Mexico School of Public Administration. He received a PhD in Public Administration and Policy from the Askew School at Florida State University. His research has appeared in Public Administration Review, the American Review of Public Administration, Urban Studies, State and Local Government Review, and Public Administration Quarterly.

Silvia Saenz-Montenegro has over fifteen years of working experience in the private sector. In May 2017, Silvia received a Master’s degree in Organization, Information and Learning Sciences from the University of New Mexico. She is interested in evaluating how to use distance learning in the workplace effectively. Her research interests additionally include barriers in distance training and distance education.


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