This study presents estimates of the wage elasticities of demand for state and local government employees. Almost uniformly each functional category of state and local government employee's employment level is shown to be statistically significantly negatively related to the category real and relative wage level. However, the magnitude of these relationships appears quite low. Consequently, although there is evidence that state and local government decision makers respond to market forces in determining their employment portfolios, these market forces do not appear strong enough to prevent public employees from demanding substantial wage increases in the future. (NTIS)