Tuesday, June 12, 2012

Local government employment

Writing in The Nation, Bryce Covert wrings her hands over the decline in local government employment: 
Since the recovery officially began, the number of local government jobs has fallen by 3 percent, while the private sector has actually been able to add jobs—4.3 million, to be exact. And it’s worth comparing those numbers to recent recessions to get the full effect of just how bad, and abnormal, this trend is. Romney is at least partly right in that the private sector isn't doing as well as it could be. At this point in the recessions experienced in 1992 and 2003, it had added 5 million and 4.5 million jobs, respectively. 
But the public sector looks far, far worse now than it did then. As Ben Polak and Peter K. Schott write in the New York Times today, “In the past, local government employment has been almost recession-proof. This time it’s not.” Local government employment actually grew in the past two recessions by 7.7 percent and 5.2 percent for each respective period. This time around, it's hemorrhaging jobs. 
So it seems that while both candidates’ exaggerations were a bit off—Obama misspoke in suggesting that the private sector is completely shielded from pain—he gets closer to the heart of the problem than Romney. The huge fall in public sector employment really is dragging down the economy. 
Two points: first off, the notion that a 3 percent drop in local government employment is a "huge fall" or constitutes a "hemorrhaging" of jobs is absurd. After all, can anyone imagine a store offering a 3 percent discount on their items and claim that they were slashing prices or that it was a huge reduction? Consumers would find it ludicrous. (I placed this line of questioning to Bryce Covert on twitter but she has thus far declined to respond).

Here's a visual representation of the meager decline in local government employment:

Source: Economix blog

In fact, from a historical perspective it seems that local government employment remains at elevated levels. Eye-balling this graph, it appears that in 1967 the ratio of citizens to local government employees was 331:1 (198,712,056 divided by 600,000). In 1974 it was 265:1 (211,908,788 divided by 800,000). In 1986 it was 1:240 (240 million divided by 1 million). And in 1996 it was 225:1 (269.4 million divided by 1.2 million). Today it's 223:1 (311.6 million divided by 1.4 million).

More importantly, it must be remembered that government employment is a means to an end, not an end of itself. Government exists to provide services, not employment. For there to be a true crisis in local government employment, one must demonstrate that the quality of the services that government is tasked with providing has significantly deteriorated. 

Even then, one must also demonstrate that government has also wrung out all possible cost savings before engaging in cuts to key areas. Let us recall that private enterprises routinely find new means of cutting and realizing efficiencies in response to budget pressures. If they are able to constantly innovate and cut without sacrificing quality then it is not unreasonably to think that government, that institution most synonymous with bloat and inefficiency, can do the same. 

Covert continues:
The massive job loss we’ve been experiencing in the public sector is no random coincidence or unfortunate side effect. It is part of an ideological battle waged by ultra conservatives who were swept into power in the 2010 elections. Republicans seized control of eleven states, and of those, five were at the top of the list for public sector job loss. Only seven states lost more than 2.5 percent of their government workforce from December 2010 to December 2011, and those five newly Republican states were among them. All others fared far better: they lost an average of .5 percent of their government employees. 
This means that the eleven states that went red two years ago were responsible for 40 percent of these public sector job losses in 2011. If we add in Texas, a massive red state, we can pinpoint the source of 70 percent of those losses. And these losses were the result of deliberate decisions: even in the face of tight budget constraints, many of these states cut taxes for corporations and top earners while slimming down the public payrolls. It was part and parcel of a new agenda that came in with Tea Party–esque Republican legislators.
If public employment is a key contributor to economic prosperity (recall her last sentence in the first excerpt that "The huge fall in public sector employment really is dragging down the economy"), and Texas has led the way in cutting public employment, then logically its economy should be in something of a tailspin. The reality is that it continues to outperform the broader US economy:

TX unemployment: 6.9%. US: 8.2%

The case that the fall in local government employment is either dramatic, or should be regarded as a cause for worry, has yet to be made. 

Update: Also see this post from Jim Geraghty for further perspective on the decline in local government employment. 

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