Guest Column: Government should make a stronger effort to fight unemployment
September 6, 2010
For most Americans, the Labor Day weekend will be a welcome reprieve from the 9-to-5 daily grind. But for nearly 15 million Americans, today is little more than a sad reminder they are without a job. The number of people unemployed is almost double what it was at the start of the recession inDec. 2007. Eleven states report unemployment rates more than 10 percent. And these figures do not take into account the millions who have given up looking for work, or settled for part-time jobs or jobs in which they are highly overqualified. Since the end of 2007, the hospitality industry has lost half a million jobs. Same for the financial sector. The retail industry has lost more than a million jobs. The manufacturing sector has lost 2 million. You might be wondering if any sectors have added jobs. One notable area that has blossomed is the government. Since the recession began, the federal government has added more than 262,000 jobs. At a time when everyone else is being forced to tighten their belts and make painful budget cuts, many are perplexed that government continues to grow. The government workforce is 22.5 million. That means 22.5 million workers are relying on American taxpayers – not the goods-producing private sector – for their paychecks. While these jobs may put food on the table, are more government jobs really a path to recovery? The problem is not just that the government sector is growing while the rest of the labor market is shrinking; it’s also that those jobs appear to be paying above market wages. According to new data from theU.S. Bureau of Economic Analysis, average compensation, which is wages plus benefits, for a civilian federal employee is $123,000; for the private sector the same job is $61,000. Even the most conservative estimates, adjusting for differences in skill level and experience, suggest that private-sector employees have to work for 13 1/2 months to make the same amount earned by government employees in 12 months. While government seems highly confident in its decision to grow, the business world is not. Businesses are holding onto an estimated $1.8 trillion in cash reserves. This is money desperately needed to drive innovation and job creation. These enormous cash reserves are largely a result of uncertainty and lack of confidence about policies coming from Washington. All of the unknowns surrounding economic policy, for example, which taxes will increase and whether stimulus money will continue to distort the market, have left businesses unable to plan. Businesses must decide where or when to invest and whether to expand and hire. So they wait, as does our recovery. Washington continues to hold to its claim that its dramatic increase in spending has helped economic growth. For instance, a recent report from the Congressional Budget Office suggested that the $862 billion so-called stimulus act created between 1.4 and 3.3 million jobs. But as DianaFurchtgott-Roth, former chief economist at the Bureau of Labor Statistics, recently pointed out, the government promised us that enacting the stimulus would keep the unemployment below 8 percent; it is now 9.5 percent. Furchtgott-Rothcriticized the new report and asked, “If its models failed to accurately predict the effects of the stimulus bill then, why should we believe the models now?” Many Washington officials spent the last three months participating in a nationwide tour, dubbed “Recovery Summer,” to convince the public that government spending has worked to assuage the nation’s labor pains and jump-start economic growth. However, without real jobs and economic growth to back up the claims, Washington’s stimulus victory tour has done little but frustrate those who can plainly see the lackluster results. The greatest service we could do for the unemployed is to demand government get serious about the unemployment epidemic by cutting spending and restoring confidence to the private sector. It’s high time we stop playing politics with Americans’ livelihoods and there’s no better time to start than today.