In Matt Yglesias’s post on the December employment situation report he remarks:
If instead of subtracting 12,000 government workers from the 212,000 private ones we’d added a few thousand to keep up with population growth, then the headline number would look a lot better.
The only industries in which you’d envision the norm as adding more employees as its market grew are those that are a) labor intensive and b) produce no returns to scale.
Is government inherently labor intensive without returns to scale? Inquiring minds want to know.
Why stop at 12,000 or the number that offsets population growth? Why not go with 100,000? Then the numbers would look stupendous.
Of course, what exactly does government produce? When you go home tonight look around your home and figure out what products in your house the government produced.
Oh f-ck it, make it a million. After all, printing more money isn’t an issue for the government. Ben told me so.
To give a serious answer to a rhetorical question, look around your house and identify the products that are produced by your lawyer, your accountant, your physician, and your insurance man. There aren’t any because they all provide services.
The government provides protection against enemies foreign and domestic, puts out the fire if your house is burning, paves the roads, enforces contracts, and ensures that the products you buy are safe to eat, drink, wear, use, etc. just to name a few of the services that it provides.
I think it’s perfectly reasonable to distinguish among services that are necessary, those that are unnecessary, and those that are deleterious. I also think it’s reasonable to ask, as I have, why we can’t expect government to provide its services more efficiently?
Let’s assume:
200,000 government jobs at an average $50k salary and benefits for a total labor compensation of $10billion.
Then increase wages and benefits 10% on the year for total labor compensation of $11 billion. To stay at $10 billion, the government would need to cut 18,182 jobs.
So what’s more important to the economy number of government jobs or amount of total government compensation?
Yeah, I considered bringing that up, PD, but thought better of it. Here in Illinois at least the message is clear: given budget constraints lawmakers and state and local government employees would rather reduce the number of people on the payroll than reduce the pay of those who remain. I think that undermines MY’s assumptions but I also think it’s too complicated to argue.
BTW, your estimate on government payrolls is way low. A half dozen or more years ago the average salary for state employees (nationwide) was $50,000 and the average for federal employees $60,000. And both have definitely gone up since then. There’s an old post around here somewhere with the statistics and citations.
Not sure if you’ve been paying attention, but we will be cutting the number of active duty military personnel over the next couple of years. The numbers aren’t settled yet, but it will be in the five-figures. In the discussions of the defense budget and personnel costs there is zero talk of reducing current compensation and very little discussion of reducing future compensation (pensions). Of course reducing military pay while the military is engaged in Afghanistan is a non-starter politically. But DoD civilians will also see personnel cuts. There’s no real chance for a pay decrease their either, though there was a pay freeze. I seem to remember MY criticizing the pay freeze for civilians, so that tells you where he stands on the issue.
I was trying to keep the math simple, to in effect ask that if in 2010 a state has 200,000 employees making an average of $50k, which would be preferred outcome in 2011?
A. 200,000 employees making $50k; or
B. 181,818 employees making $55k?
I think government is largely experiencing B, while the private sector is seeing more of A.
And from a Keynsian perspective does the difference matter? I think per Krugman it does, the number of jobs is more important than the total compensation for jobs.
@PD
If the ultimate goal is sustainable economic growth (meaning not based on ever-growing debt) then I think Keynes would have been the first to point out that the key is ensuring sufficient FLOWS of money through the economy. You can get that by direct government job creation or by dumping money in the streets a la Milton Friedman.
The primary argument against unemployment as I see it is recognition of the pernicious social and psychological costs to people who don’t or can’t work to support themselves. Should society step in to provide them with work? My tendency is to say yes, but I recognize that significant unintended consequences might accompany the effort which is why I advocate starting small by replacing unemployment insurance with a time-limited JG and evaluating the results.
Dave,
Okay, now explain the other 99% of government. [/sarcasm]
I know the defense is far more than 1% but that is because our military is doing far, far more than defending us from foreign threats. Our involvement in obscure parts of the world is dubious at best when it comes to protecting us. Our involvement in the Afghanistan back in the 1980s when the Soviets where there is an excellent example that resulted in substantial blowback that has led to the next chapter of foreign adventures.
Not to mention why we still have troops in places like Italy, Germany, Japan and the United Kingdom? And is National Defense really something you want to consider as a “good or service”? Simon Kuznets amongst others, has argued that National Defense is probably best left out of the GDP numbers since it is a “necessary, but regrettable, expenditure” hence their inclusion into the GDP numbers is at the very least questionable.
So sure, your list sounds great Dave, but we spend far, far more than just:
Police,
Fire,
National Defense (that actually defends vs. engaging in dubious foreign wars),
Legal system,
Roads,
Sanitation and water systems.
The point is that adding tens of thousands or even hundreds of thousands to make unemployment/employment statistics look better is kicking the can down the road at best, at worst it is siphoning off productive resources into unproductive activities.
TL;DR the typical level of stupid from Matt Yglesias.
Andy,
Five figures, big whoops, so we’ll cut what 99,999 at most? Quick, somebody catch me, I think I might feint.
PD,
Don’t forget benefits with that so make it $60k/year. Plus the office space as well…unless we are going to hire people to stay home and watch Oprah. And how long do you higher them? One year? Two? Ten? Indefinitely? And how long do you keep that kind of hiring practice up? Lets grab the BLS data and assume our target level for the payroll survey is 350,000/month. So for just 2011, we’d need to hire around
2,560,000 people or so.
Now, lets assume the term of employment is for 1 year form the point of hire (to keep the math simple) this will cost us, $128 billion and we’d have no unemployment problem at all. Of course, you’d end up with these people back unemployed in 12 months so…you’d have to higher them again. If we started this back in 2009 we’d have on the government payroll 15,083,000 for a nice sum of $754,000,000,000.
And if you keep re-hiring these people after the initial 12 months, how long of a hiatus should they get? Two months? Three? A year? If it isn’t sufficiently long people might decide, “What the heck, I’ll “work” for the government get a few months off (will they qualify for unemployment?) then go back to work for them. Eventually, I’ll work in the down time into my budget and there we go, employment were I don’t have to worry about working hard, getting fired (after all I just wait a few months and I’m rehired), etc.
Yeah, I don’t see any incentive problems at all here.
Oh, and if it was implemented to start in 2001, we’d have to hire people in just about ever month (October 2004, April 2005, and July 2005 are the 3 months where we could actually let people go), we’d have to hire 46,785,000 people for a tidy sum of $2.34 trillion.
JFCOAFPS.
Steve V,
It would probably amount to a 3-5% reduction over the next two fiscal years – we don’t know for sure yet since the budget proposals aren’t available at this time. Over the long term it is likely to be quite a bit more than that. The people I know in the military who work personnel issues are expecting something similar to the 1990’s draw-down which cut about 25% of the force over about 7 years. That might not be impressive, but I would be surprised if any other part of government gets cut that much.
PD,
Krugman on the federal pay freeze. It would be interesting to see if his opinion would be different if the money “saved” from the freeze was used to hire more federal employees.
@Andy,
I suspect Krugman would be consistent in his opinion that the flow of spending is what ultimately matters in reaching the goal of stimulating aggregate demand, and that greater employment is always a net positive.
@PD,
Keep in mind that making continuous, large increases in the salaries of a set number of civil servants will inevitably suffer from diminishing returns: in general the higher one’s income the more one saves, reducing the flow of money through the economy. If you have a fixed amount of money (say $100 billion) to use for a jobs program, you are better off creating millions of low paying jobs than relatively fewer high-paying jobs because those with lower incomes will spend every penny and maximize flows. Every proposal I’ve seen for a Jobs Guarantee pays an hourly wage of $8 – $9 per hour.
@Ben Wolf, I was channelling Krugman whose written repeatedly that the purpose of the Keynesian stimulus is jobs, and that the worst part of a recession is job loss and the loss of human capital that occurs as a result of long-term unemployment. I don’t believe either alternative A or B is actually a Keynesian stimulus, in the sense that both keep spending at the same level. I do think though that taking the proposition that the most important thing is jobs (not stock prices, property values or other economic measures like GNP) necessarily means that one of those alternatives is better.
Unfortunately, I think in many states, particularly those with strong public union protections, wages and benefits are too sticky in the public sector and that even while increasing overall spending (particularly Medicaid), jobs will continue to be cut.
“The government provides protection against enemies foreign and domestic……………I also think it’s reasonable to ask, as I have, why we can’t expect government to provide its services more efficiently?”
The inefficiencies in defense spending are well documented. And yet, its one “service” that I think everyone would agree has worked in the sense that we are protected. And its the only one I know of that has exhibited scale economies in spades. Yet its the devil itself to the left.
But govt funded or run pension systems, education systems, health care support or poverty elimination systems range in efficacy from barely tolerable to piss poor, and are drowning the country in debt.
The employment application line for government jobs doesn’t have a bifurcation point: “all dim, ill-intentioned and inefficient applicants enter the line for the defense department, all bright, well-intended and heroically efficient applicants enter the SS Admin/FDA/HHS etc lines……..”
“Yet its the devil itself to the left.”
A lot of us on the “left” spent some time in the service. This is a gross mischaracterization. We may object to how it is misused, but not to the military itself. Also, I dont think anyone really believes military spending is very efficient. If money is tight, one should take a realistic look at what kind of military we can afford.
” education systems”
Our smart kids compete quite nicely with smart kids from around the world. We just arent good at educating poor kids.
@Ben- Not a JG guy?
Steve
And yet, its one “service†that I think everyone would agree has worked in the sense that we are protected.
yeah, and I’m sure the two oceans and the lack of any dangerous neighbors in the immediate vicinity doesn’t help at all.