Putting People Back To Work Must Be Top Priority

A couple of recent articles underscore the serious employment crisis we continue to face, even as economists tell us things are slowly beginning to improve.

At Power Line, Scott discusses an important Forbes magazine column by Thomas F. Cooley and Peter Rupert. Scott captures the essence of our problem:

The trend in private employment appears particularly intractable. Indeed, as Thomas Cooley and Peter Rupert put it, the labor market presents a dismal view by comparison with other indicators of economic activity, and not just because employment is a lagging indicator of recovery.

Of particular concern is the pattern in private employment shown by Cooley and Rupert. After noting improvements in consumption and investment, they write.

So is this a recovery--is the recession over as the pundits proclaim? Unfortunately the labor market presents a more dismal view. The next two figures show total employment and the fraction of the population over 16 years of age who are employed.

Although job losses slowed in December, there is no evidence of recovery in employment. This will be a continuing drag on the economy and on the fiscal condition of both state and federal governments.

Study those graphs carefully. There's a lot to digest. The columnists do an excellent job of making  complicated stuff clear, so I urge you to read the whole thing. 

Another valuable perspective comes through this issue brief by Josh Barro at the Manhattan Institute. He notes that government and private sector workers have experienced very different recessions.

Workers in the public sector have experienced a very different recession from those in the private sector.

While private-sector employment fell sharply in the last two years, the public-sector, civilian workforce continued growing until mid-2008. It has since remained essentially flat. As a result, while private-employment rolls are nearly 7 percent smaller than they were three years ago, public-employment rolls have grown by nearly 2 percent.[1] (Approximately 17 percent of U.S. civilian employment is in the public sector.)

Not only have they been better insulated from job losses, public employees have continued to enjoy relatively generous pay packages.

From the first quarter of 2007 through the last quarter of 2009, the average value of hourly compensation (wages plus benefits) rose by 9.8 percent for employees of state and local governments, compared to 6.9 percent in the private sector.[2] After adjusting for inflation, public employees have seen a rise in real hourly income over this period, while private employees have not.

Over this period, public-employee compensation has risen nearly 50 percent faster than private-employee compensation. Governments are aggressively increasing public-employee compensation even though labor markets are loose and states face record budget deficits.

It's a theme we've written about before, in this post and this column. Barro, in this short analysis, provides compelling data and suggests a few things government should do to restore the balance. (I forget who sent me to the article, but thanks!).

Taken together, the analyses provide additional, powerful reasons for why state lawmakers should focus on putting people back to work. The key is not more public spending. Rather, they must concentrate on reducing employer costs to stimulate private sector hiring.

Inexplicably, from entertaining business tax hikes to increasing UI benefits to rejecting sensible workers' compensation reforms, they are moving in the opposite direction. Let them know it's time for them to change course.