The Pentagon and the Service Sector

Abstract

The substantial literature on military spending has largely overlooked the service sector, in which the vast bulk of the U.S. labor force is employed. This paper focuses on Pentagon prime contracts to service firms in 1990, including their sectoral and spatial distribution. Roughly 12 percent of total prime contracts, or $14.6 billion, was awarded to service firms, including large quantities to universities, engineering, communications, and water transportation. Geographically, the largest recipient communities were California and Washington, D.C., although metropolitan areas were also disproportionately represented. The analysis employs a series of 51 state-specific regionalized input-output models to estimate the employment effects of prime contracts to service firms, which generated a total of more than 620,000 jobs. The occupational composition of this employment is compared to that of the labor force as a whole. The conclusion points to the policy implications of potential reductions in such funding.

Key words:

• Pentagon
• military spending
• prime contracts
• services