Kevin Drum laments a policy of “austerity”:
This is the price of austerity. If public sector employment had been growing normally during this period, we’d have about a million more jobs than we do now and the unemployment rate would probably be below 6 percent.
echoing a theme that writers more eminent than he including Paul Krugman, Joseph Stiglitz, and Dean Baker have sounded from time to time over the last several years.
Before I react to that, let me provide a few definitions. By “employment” I mean the total number of full-time and part-time employees. By “payroll” I mean the total wages paid to employees. Now let’s go back to the graph of total government employment in Kevin’s post.
The graph shows steady increases in private sector employment, a spike in government employment in 2010 coincident with the bulk of the spending in the ARRA, the stimulus package, and a slight decline since then. There are several interesting things about that. First, there’s no sign of technological unemployment in that chart. Second, there’s no spike in private employment associated with the stimulus package. There’s the cyclical decrease in private sector employment associated with the recession and an increase associated with the recovery but the private sector effects of the stimulus if any were indirect. That’s consistent with some criticisms that have been leveled against the ARRA: that most of it went to bolster public sector employment and payroll and too little filtered into the private sector economy.
My best efforts have suggested to me that public sector payrolls (see here) after the recession have either held steady or increased slightly. How do you reconcile declining employment with constant or increasing payrolls? I would suggest that in state and local governments in particular revenues have not increased but labor contracts stipulating pay increases have left state and local governments with no alternative but to cut the number of employees. In the absence either of more revenue or wage flexibility what alternative do state and local governments have?
For the federal government the situation is slightly different. Wages have risen slightly while employment, other than the spike associated with the stimulus package and the temporary increase due to the census, has remained pretty constant.
None of the foregoing takes into account total public employee compensation, the bulk of which is in the form of healthcare and education benefits both of which have increased sharply over the last several years but which are very hard to nail down, or whatever public sector employment has been offset by private sector “contractors”.
Consequently, it would seem to me that Kevin’s actual complaints are that public employee pay has risen unrealistically when compared with revenues and state and local governments don’t have enough flexibility in employee compensation to adjust to changing times and instead trim the number of employees, aggravating an already difficult situation.