Report: Public sector cuts kill private jobs, too

WASHINGTON (PAI) — Budget-slashing and job-cutting by state and local governments since the start of the current “Great Recession” have directly cost 627,000 workers their jobs and directly and indirectly cost the economy 2.3 million jobs, the Economic Policy Institute calculates.

Had those jobs all been saved or restored to the U.S. since the “Bush Crash” recession, the U.S. jobless rate would be as low as 6.7 percent, not its present 8.2 percent, the think tank adds.

EPI says the multiplier effects of the state and local job cuts during the current recovery – cuts that did not occur during or after prior slumps – “represent a serious drag that was not weighing on earlier recoveries.”

EPI analysts Heidi Shierholz and Josh Bivens calculated that in addition to the actual workers whom state and local governments fired, they also did not hire 505,000 more workers since the 2009 end of the slump, just to keep up with population growth.

And the fired and un-hired state and local workers also meant reduced state and local demand for private-sector goods and services, as well as reduced consumer demand, they pointed out. That costs jobs, too.

“Firefighters need trucks and hoses, police officers need cars and radios, and teachers need books and desks,” Bivens and Shierholz said. “When public-sector jobs are lost, it stands to reason that the inputs into these jobs will fall as well, and indeed research shows that for every public-sector job lost, roughly 0.43 supplier jobs are lost.”

Not only that, but every dollar cut in public workers’ pay and supplies takes another 24 cents out of worker buying power in the private economy, they calculated.

“Teachers and firefighters stop going to restaurants and buying cars if they’re laid off, which reduces demand for wait staff and autoworkers and so on. Add the influences together – supplier jobs and jobs supported by this multiplier impact – and roughly 0.67 private sector jobs are lost for every public sector job cut.”

That’s two private sector jobs lost for every three public workers cut. The lost public jobs are added to the un-hired public workers, the lost private jobs and another 425,000 private jobs lost because recipients of state spending, such as on Medicaid or unemployment insurance, lack cash. The grand total job loss is 2.3 million.

But several former political and business leaders, guided by former New York Lieut. Gov. Richard Ravitch, said the fiscal travails of six big states – including New York, California and Illinois – demand more sharp cuts in state spending, particularly on state and local workers’ pay and pensions.

Ravitch said the federal government is ignoring states’ fiscal ills and their impact, though his solution, more cuts, was drastically different than what EPI recommends.

And EPI points out public sector job cuts are politically motivated, orchestrated by the Republicans and disproportionately hurting women and minorities.

“It’s obviously nuts to maintain, as some do, that the government doesn’t create jobs. It creates millions of them, and we very much need them if we’re going to educate kids, drink water, put out fires, have public safety, etc.” adds former White House advisor Jared Bernstein, who was EPI’s chief before joining the administration. “But public sector jobs also create private sector jobs upstream and downstream. It’s all connected, man.”

Photo: AFSCME workers march in Madison, Wis., against attacks on public workers and collective bargaining rights. PW


Mark Gruenberg
Mark Gruenberg

Award-winning journalist Mark Gruenberg is head of the Washington, D.C., bureau of People's World. He is also the editor of the union news service Press Associates Inc. (PAI). Known for his reporting skills, sharp wit, and voluminous knowledge of history, Mark is a compassionate interviewer but tough when going after big corporations and their billionaire owners.