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Posted at 2:22 PM ET, 02/24/2011

Unemployed public workers are bad for the economy

By Ezra Klein

22economix-employment-blog480.jpg

David Leonhardt posted the chart above to prove that there hasn't been a surge in government hiring, and he's right. But I also think the chart above speaks to what's driving the events in Wisconsin: a perception that people in the "real" economy have suffered greatly, while public workers have been cosseted by their union contracts, their lobbying might and stimulus dollars. And there's some truth to that. The public sector basically sat out the first year of the recession.

Since then, public-sector jobs have been falling -- and that's been particularly true in recent months. The graph obscures this a bit: The "Y" axis is measuring thousands of jobs, and although there are 106 million private employees in this country, there are only 22 million public employees. It's a bit hard to do an apples-to-apples comparison, as the hiring bump on the graph was the product of temporary workers needed to conduct the decennial census, but the public sector lost 378,000 jobs between January 2009 and January 2011 -- that's proportionally equivalent to losing about 1.8 million jobs in the private sector.

All that said, the (perhaps temporary) retention of public-sector jobs was one of the great successes of the stimulus. The worst thing for an unemployed person is another unemployed person. It means more competition for job openings, lower wages and less job security. The idea that it would somehow have been more "fair" for the public sector to shed jobs in 2008 and 2009 is one of these intuitions that cuts against the economic logic of the situation: More unemployed public workers would've meant more competition for unemployed private workers seeking jobs, lower tax revenue for states, worse services and more idle resources. It would've been bad on every level -- and with 9 percent unemployment, it would still be bad today. And yet there's a substantial number of voters and commentators who seem to abstractly favor the idea, despite the fact that it will, in practice, make most of our problems worse rather than better.

By Ezra Klein  | February 24, 2011; 2:22 PM ET
Categories:  Economy  
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Comments

"The worst thing for an unemployed person is another unemployed person."

Which is why the present drive (sadly from both parties) to cut spending is so misguided in this time of high unemployment. Obama would do more for his country if he were to forcefully (and continually) point out that cutting spending means putting people out of work.

Specifically, looking at how spending is cut:

1. Laying off government workers - they are unemployed, and their reduced spending ripples through the economy to result in other layoffs;

2. Reducing government purchases of goods and services, which reduces income of businesses contracting with the government, which leads to more layoffs and their corresponding ripple effects;

3. Reducing transfer payments to the poor and to students, which reduces their spending, with more corresponding ripple effects.

It's not a difficult case to make, and it's frustrating to me that Obama and the Dems are not making it loudly and clearly.

Posted by: quickj | February 24, 2011 2:50 PM | Report abuse

"Laying off government workers - they are unemployed, and their reduced spending ripples through the economy to result in other layoffs"

Why not hire new government workers to go around throwing bricks through windows too? The government could then buy new windows, employ a few glaziers, and spending could surge even higher.

Posted by: justin84 | February 24, 2011 2:58 PM | Report abuse

so you're against single payer because of the employment ramifications as well?


Forget that idea. We should give the union people raises. An extra 20k for everyone that's in a union across the board that way they're spending more money, the economy's doing better and we're all happy!

Posted by: visionbrkr | February 24, 2011 3:12 PM | Report abuse

The nature of use and entropy seems to be doing the same thing without directly hiring people, Justin.

Aging infrastructure is very unattractive to commerce. By your rationale though, I suppose the US deserves to lose.

Posted by: arm3 | February 24, 2011 3:13 PM | Report abuse

"Why not hire new government workers to go around throwing bricks through windows too? The government could then buy new windows, employ a few glaziers, and spending could surge even higher."

Because hiring window breakers is not necessary, there is plenty of valid work that public employees already do, and plenty of areas in which further work in our public sector ought to be done (such as our neglected and crumbling infrastructure).

Swelling the ranks of the unemployed will suppress demand, which will in turn suppress economic growth, which will in turn reduce government revenues.

Posted by: Patrick_M | February 24, 2011 3:18 PM | Report abuse

Ezra Klein writes
"More unemployed public workers would've meant more competition for unemployed private workers seeking jobs, lower tax revenue for states, worse services and more idle resources."

To that I would add that laying off government workers does not entirely remove them as a cost to taxpayers. Layed off workers are removed as costs for salary and benefits - but they are added to the unemployment rolls as new costs. So now you're spending money on them (albeit less money), but getting nothing in return. At least when they're on the payroll you're getting a return for that expense.

Posted by: bsimon1 | February 24, 2011 3:33 PM | Report abuse

Standard dishonesty.

There's nothing in this piece about how the opportunity cost of bloated public sector unions is bad for the economy.

Posted by: krazen1211 | February 24, 2011 3:49 PM | Report abuse

"To that I would add that laying off government workers does not entirely remove them as a cost to taxpayers. Layed off workers are removed as costs for salary and benefits - but they are added to the unemployment rolls as new costs. So now you're spending money on them (albeit less money), but getting nothing in return. At least when they're on the payroll you're getting a return for that expense. "


Really? What exactly do we gain with a student:teacher ratio of about 15 rather than a much more appropriate and cost effective student:teacher ratio of about 18?

Such an increase would let us slash billions of dollars from the deficit.

Posted by: krazen1211 | February 24, 2011 3:52 PM | Report abuse

If the Y-axis is misleading, re-do it using January 2009 as the normalized value.

Posted by: ctown_woody | February 24, 2011 4:00 PM | Report abuse

"Because hiring window breakers is not necessary, there is plenty of valid work that public employees already do, and plenty of areas in which further work in our public sector ought to be done (such as our neglected and crumbling infrastructure)."

That's a ringing endorsement for government - the politicians get to spend hundreds of billions of other people's money on stimulus, citing in particular the ability to improve infrastructure, and several years after the bill was signed infrastructure remains neglected and crumbling.

We put windows on an unused building as part of the stimulus, so I just figured we could go around and create more shovel ready projects. Demand is demand, is it not? Could even bury money in a cave, and pay people to dig it up - I hear it works just as well.

"Swelling the ranks of the unemployed will suppress demand, which will in turn suppress economic growth, which will in turn reduce government revenues."

Remember all that "cash" corporations and China are sitting on? That's the other side of ARRA.

Posted by: justin84 | February 24, 2011 4:15 PM | Report abuse

"Really? What exactly do we gain with a student:teacher ratio of about 15 rather than a much more appropriate and cost effective student:teacher ratio of about 18?"

That's a bit of a non-sequitor, as well as a stretch. I can't imagine that 15-1 is anywhere close to the student-teacher ratio in this nation. I would be interested in your source on this. As it stands, it's a pretty limited, specific example of the services those in the public sector provide.

(I don't know about you, but I tended to learn more in school when the teacher was able to spend more time with me directly. Unsurprisingly, I learned more in classes where I was 1 of 10 instead of 1 of 32.)

In the meantime, I'm interested in continuing to enjoy the police and fire departmental presences in my neighborhood keeping my town a safe place to live, taxes on our property high enough to continue supporting the award-winning school district I live in, and work continuing on the interstate so that my commute may someday, somehow not suck so bad. We get what we're willing to pay for.

Posted by: arm3 | February 24, 2011 4:16 PM | Report abuse

@arm3,

here you go.

http://www.statemaster.com/graph/edu_ele_sec_pup_rat-elementary-secondary-pupil-teacher-ratio

National avg,- 15.5 to one.

Posted by: visionbrkr | February 24, 2011 4:27 PM | Report abuse

"That's a ringing endorsement for government - the politicians get to spend hundreds of billions of other people's money on stimulus, citing in particular the ability to improve infrastructure, and several years after the bill was signed infrastructure remains neglected and crumbling."

I am sorry your neighborhood is crumbling. Near where I live, there have been several ARRA funded projects that are much-appreciated improvements. Nobody argued that ARRA's infrastructure component was large enough to address ALL of the infrastructure in need of repair around this country.

Your window-breaking argument is below your usual level of argument, justin84. Everyone wants government budgets balanced, but reasonable advocates for austerity will concede that spending reductions that increase unemployment have costs to the economy, as well as benefits. You may find the costs acceptable (as in John Boehner's "So be it!") but that does not negate the fact that the beneficial effects of closing the budget deficit shall also have worrisome downside effects in the economy at large.

And, whatever side you come down on as to the wisdom of further stimulus, it is interesting that the Democratic leadership will not argue for a sustained FDR-style approach to counter-cyclical stimulus and employment, as quickj observes.

Posted by: Patrick_M | February 24, 2011 4:35 PM | Report abuse

Huh. Guess that's what I get for being raised in a state like Kentucky.

Posted by: arm3 | February 24, 2011 4:37 PM | Report abuse

Being unemployed is bad but there are varying degrees of bad. In addition to unemployment benefits, unemployed government workers here are compensated for their accumulated vacation days and sick leave. Even when jobless, they are better off than their unemployed private sector brethren.

Posted by: tuber | February 24, 2011 4:54 PM | Report abuse

"I am sorry your neighborhood is crumbling. Near where I live, there have been several ARRA funded projects that are much-appreciated improvements."

My neighborhood isn't crumbling, but the only ARRA work was repaving a road which wasn't even in bad shape. More or less a breaking a window and fixing it (potentially worse, because it created traffic - I believe that's a negative externality).

You're the one who made the case that infrastructure is neglected and crumbling, and there was valid work to be done in fixing it. If that's no longer the case, then what? Should we be breaking windows?

"but that does not negate the fact that the beneficial effects of closing the budget deficit shall also have worrisome downside effects in the economy at large."

The negative effects are short term and largely illusory - government deficits require funding, and that funding cannot go towards other uses. That's why you see all sorts of institutions sitting on "cash" - that "cash" is debt, and represents money the government has already used.

Go read up on the Depression of 1920-1921 - the last time the government responded by slashing spending and getting out of the way. It was severe (11% unemployment at the trough), but the economy was roaring just 2 years later, with 3% unemployment.

"And, whatever side you come down on as to the wisdom of further stimulus, it is interesting that the Democratic leadership will not argue for a sustained FDR-style approach to counter-cyclical stimulus and employment, as quickj observes."

It is interesting, given that stimulus has been the bread and butter of politicians for generations.

Perhaps the Dems realized that despite FDR's various interventions (or more precisely because of them), the economy remained in depression from his election in 1932 until 1941, and true prosperity didn't return until 1946.

Counter-cyclical stimulus has been employed for several years now, the economy remains depressed, the job market recovery makes 2002-2003 look good in comparison. All that for a ton of debt.

Posted by: justin84 | February 24, 2011 5:10 PM | Report abuse

-------------"Standard dishonesty.
There's nothing in this piece about how the opportunity cost of bloated public sector unions is bad for the economy."------------

Yes krazen1211 you are being dishonest. Considering the fact that government employees are compensated around 7% less then private employees with the same amount of schooling/skills/experience.

Posted by: mynameisblehbleh | February 24, 2011 5:11 PM | Report abuse

"You're the one who made the case that infrastructure is neglected and crumbling, and there was valid work to be done in fixing it. If that's no longer the case, then what? Should we be breaking windows?"

I said that the ARRA infrastructure spending was small when compared to the volume of infrastructure that is in need of repair and replacement. So there is much work still to be done. I never said it was "no longer the case" that we had problems with our infrastructure.

"The negative effects are short term and largely illusory."

Your evidence of this is 1921 ... the economy of 90 years ago. I guess we will all have to hope that is the perfect model.

"Perhaps the Dems realized that despite FDR's various interventions (or more precisely because of them), the economy remained in depression from his election in 1932 until 1941, and true prosperity didn't return until 1946."

Dramatic gains took place during the 1930's under FDR, but you are correct that we did not achieve "true prosperity" until after the massive government spending program (and various measures that narrowed income inequality), otherwise known as WWII.

But the argument over FDR's depression era spending is well-worn. You favor the notion that the downside of shrinking the public sector in a time of 9+% unemployment will be "short term and largely illusory," and I am concerned the effects may be substantial and lasting and that they could trigger another sharp downturn. Time will tell, since nobody in government is talking about anything but cutting.

Posted by: Patrick_M | February 24, 2011 5:42 PM | Report abuse

"here you go.

http://www.statemaster.com/graph/edu_ele_sec_pup_rat-elementary-secondary-pupil-teacher-ratio

National avg,- 15.5 to one."

I do not have the time at this moment to look at the methodology behind this data (so please feel free to correct me if I'm wrong and my whole career I have just been foolishly missing out on those magical public school oases where you have 15 students in a classroom), but I would assume that to find these averages they took into account many employees who are NOT the primary classroom teachers, such as teaching assistants (generally untrained and paid something close to minimum wage for only 1/2 of the day so that they don't qualify for benefits), special ed teachers and reading specialists, etc., who generally do pullout work with small groups of students with special needs, and god knows who else in the building who are not actually a classroom teachers. If these stats actually measure the number of students sitting in a typical classroom at any given time, then every single public school teacher in Philadelphia (in a state with an alleged average class size of 15) are getting majorly hosed with our classrooms full of 24-34 students.

Posted by: jhoedem1 | February 24, 2011 5:49 PM | Report abuse

There are fewer federal workers now than there were in 1970. This is a right wing smokescreen.

http://wiredworkplace.nextgov.com/2010/09/too_many_federal_workers.php

Posted by: flydoc2000 | February 24, 2011 5:58 PM | Report abuse

They'll be great for the economy. Like the old ranchers who used to shoot a coyote and leave the corpse out where the other coyotes will see it.

They'll work even harder. So productivity goes up, and under the prevailing system all the productivity growth will be channeled upwards where it belongs, except for the moiety siphoned off to buy politicians and media to keep any redistributionist heresy at bay.

And that's what makes America great. The world's best, most productive workers in a permanent defensive crouch, not knowing from whence the next blow may come, cowed, contingent....

Posted by: davis_x_machina | February 24, 2011 6:03 PM | Report abuse

I work in private industry.

How come we don't get to re-elect our boss every two or four years? How come we don't get to vote when a new boss or manager is needed?

Why don't we get to elect who runs the company we work for so that we can elect one who will take better care of us?

Posted by: SweetOldBob | February 24, 2011 6:03 PM | Report abuse

"Yes krazen1211 you are being dishonest. Considering the fact that government employees are compensated around 7% less then private employees with the same amount of schooling/skills/experience"


That's a whole load of dung, mostly because public sector workers are so unproductive.

That's why they need so many of them, and why they hire people with more so called 'experience'.

Posted by: krazen1211 | February 24, 2011 6:40 PM | Report abuse

jhoedem1,

Yes there is a big difference between student-to-teacher "ratio" and average class size. And it is explained here:

http://www.heros-inc.org/pupil-teacher%20ratio.pdf

People often confuse the two, which leads to sorts of mistaken beliefs.

Posted by: Patrick_M | February 24, 2011 6:43 PM | Report abuse

"I do not have the time at this moment to look at the methodology behind this data (so please feel free to correct me if I'm wrong and my whole career I have just been foolishly missing out on those magical public school oases where you have 15 students in a classroom), but I would assume that to find these averages they took into account many employees who are NOT the primary classroom teachers, such as teaching assistants (generally untrained and paid something close to minimum wage for only 1/2 of the day so that they don't qualify for benefits), special ed teachers and reading specialists, etc., who generally do pullout work with small groups of students with special needs, and god knows who else in the building who are not actually a classroom teachers"


It's an interesting point you bring up here. Special education has proven to be a giant boondoogle that has skyrocketed in costs since about 1990 or so. It's really a massive special interest.


http://www.manhattan-institute.org/html/cr_32.htm


The manhattan institute found that many school districts increased their declaration of so called 'special education' students once they were rewarded for it with extra money.

Posted by: krazen1211 | February 24, 2011 6:45 PM | Report abuse

"(I don't know about you, but I tended to learn more in school when the teacher was able to spend more time with me directly. Unsurprisingly, I learned more in classes where I was 1 of 10 instead of 1 of 32.)"


High school graduation rights were much higher in 1969 than they are today despite a much, much higher teacher:student ratio.


http://nces.ed.gov/programs/digest/d09/tables/dt09_064.asp

Posted by: krazen1211 | February 24, 2011 6:47 PM | Report abuse

"It's an interesting point you bring up here. Special education has proven to be a giant boondoogle that has skyrocketed in costs since about 1990 or so. It's really a massive special interest.

http://www.manhattan-institute.org/html/cr_32.htm"

That is an interesting study, and not surprising. But coming from a teacher's perspective who has seen that countless students go undiagnosed/untested because of a district's inability to pay for the services that could be found to be (legally) required when the results come in, I would be interested in seeing some data on what the term "extra students" means in that study.

Meaning, if students who have no disabilities are being diagnosed with disabilities purely because schools want more money, that is of course a problem. But if the starting percentage in that study reflected gross oversights and inequalities in diagnosing and educating students with special needs, then it is a GOOD thing that the one system encourages more students to be classified as special ed. We want students who need extra services to get them.

So I guess we would need to see what percent of the local populations we would expect to have learning disabilities and see which numbers most accurately tracked with those numbers.


Posted by: jhoedem1 | February 24, 2011 9:19 PM | Report abuse

What nonsense. Forget the boon to society from saving money that would have been wasted on make-work jobs, funds that would have been better invested by the private sector, forget mal-investment in unworkable "renewable" technologies (ethanol) think about the most important benefit imaginable to public sector layoffs: fear.

After the herd is thinned by 10... 15... 80% hopefully for some classes of paper-pushers, the remainder, hearing stories about how their former public co-"workers" had suffered in the private sector, will be a bit more cautious in exerting themselves, and a bit more amenable to the private citizenry that pays their freaking salary.

Upshot: not only will I have fewer chances to deal with such governmental protections as outdoor smoking bans and attempts to control what I, a taxpaying adult, eat and drink, but as a business owner, I'll be a little less likely to hear from the county planning commission that they don't like my notion for the interior of a store, and wish instead to substitute their own ideas.

They'll be far too terrified I'll scream, loudly, and cost them their make-work existence.

And if you don't believe government employees are particularly susceptible to fear, consider, long ago an insurance researcher discovered that people who worked for the state took less risks than society at large. The difference was significant enough to merit an actuarial difference. So, to benefit from this, he formed a new venture, GEICO, or Government Employees Insurance Company, to capitalize on the innate inability of government workers to take risks.

Or consider our own Ezra, a "man" so terrified at the possibility of contradictory ideas to his own pro-statist notions infecting the airwaves, he helped formed "Journolist," a cliquish echo-chamber in which bad thoughts were squashed, rather than hurt his precious feelings or cause him to think.

Public sector cuts all us to remove some of the risk-averse bureaucrats from their seized-by-fiat-not-law power, and the rest too terrified to annoy the productive sector again. Once this happens, and they go, the economy will boom.

Posted by: twarrior | February 25, 2011 5:00 AM | Report abuse

twarrior, how about all the benefits you obviously don't see that are provided by government but nevertheless rely on everyday? All of us are much less self-made than we believe, and the ingratitude and disdain for duty owed by many is pretty breathtaking. But then, 22% of the population believes the ACA has already been repealed and people in black BMW 3 series (an entry-level status symbol) continue to cut me off all the time, so why am I surprised?

It's like you were born on third base thinking you hit a triple. Yes, you may have worked hard to set up your own business, but don't think your success isn't also due to security provided by your municipality, the utilities and roadways allowing people to access your business, public zoning councils keeping a wider eye on your business area staying nice and conducive to business, and a population sufficiently educated (at public expense, largely) to take advantage of your services and skilled enough not to have to resort to crime to live.

Posted by: arm3 | February 25, 2011 10:59 AM | Report abuse

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