Public sector develops jobs

Government fosters 16.5% of workforce, but trend is to cut

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During the presidential debate Tuesday, the candidates for both parties pledged to help create jobs -- while also disavowing the notion that government creates jobs.

The Republican candidate for the nation's highest office, former Massachusetts Gov. Mitt Romney, was emphatic: "Government does not create jobs. Government does not create jobs."

In his last statement of the night, the incumbent Democrat President Barack Obama also discounted job creation by government: "I think a lot of this campaign, maybe over the last four years, has been devoted to this notion that I think government creates jobs, that that somehow is the answer. That's not what I believe."

The fact is, as of August, there were 22 million government jobs, accounting for 16.5 percent of the entire U.S. workforce, according to seasonally adjusted Bureau of Labor Statistics data. Seasonal adjustment takes out the spikes that are standard every year, allowing a better view of long-term trends.

The trend since the end of the Great Recession in June 2009 has been for governments to contract their workforces by 2.5 percent, or half a million people.

PG graphic: Payroll numbers
(Click image for larger version)

Cutting government has been a promise of many politicians, but it's not always easy to execute.

In January 1981, when Republican President Ronald Reagan took the oath of office for his first term, there were 16.4 million employees at all levels of government. Despite Mr. Reagan's efforts to reduce government, when his successor Republican President George H.W. Bush took the reins in January 1989, there were 17.8 million government workers.

The trend continued.

According to figures from the Bureau of Labor Statistics, in the four-year term of the first President Bush, 1.1 million workers were added at all levels of government. During Democrat President Bill Clinton's two terms, the payrolls at all levels of government added 1.9 million workers. During the two terms of Republican President George W. Bush, government payrolls expanded by another 1.7 million workers.

The trend only reversed itself as cash-strapped state and local governments shed jobs in the aftermath of the Great Recession. Since Mr. Obama has been in office, the number of workers on government payrolls has decreased by 575,000 workers.

Those cuts are, for the most part, not coming from federal payrolls, according to two economists who looked at the issue of government shedding jobs.

In a recent study, Josh Bivens and Heidi Shierholz of the Economic Policy Institute in Washington, D.C., pointed out that in the three years following the recessions of 1990 and 2000, the government sector added jobs. In the three years following the Great Recession, 627,000 government jobs were cut.

"These public-sector losses are dominated by austerity at the state and local level, with federal employment contributing only about 6 percent of this entire gap," the researchers wrote. Jobs being cut as budgets tighten include those of police officers, firefighters or even the 293 teaching positions eliminated this school year in the Pittsburgh Public Schools.

As of June 2009, there were 7.3 public sector jobs for every 100 people in the country.

Between then and June 2012, the population grew by 6.9 million people. If government employment had grown at a comparable pace, there would have been 1.1 million more government jobs than there actually were in June.

In terms of overall job creation, the two economists noted that public sector employment helps produce additional jobs because workers use goods produced by the private sector. Police and firefighters wear uniforms, drive vehicles and use radios that are built by suppliers, for instance.

The economists said previous studies showed every public sector employee is supporting 0.43 private sector jobs, not including the so-called multiplier effect -- which would include jobs supported by public employees when they go to restaurants, for example -- that would bring the number up to 1.24 jobs for every public sector job.

Another way that government can create jobs is through hiring private contractors to pave roads, fix bridges and build buildings, vehicles and weapons. Those jobs, which would be on the payrolls of military and government contractors, are not reported as government jobs even though the government writes the checks.

That is one of the issues being raised around the so-called "fiscal cliff." If Congress and the president cannot come to an agreement to avoid the automatic spending cuts triggered by the 2011 budget compromise, defense contractors will take big hits.

Meanwhile, 116 construction jobs were supported in 2010 by $63 million awarded as part of the American Investment and Recovery Act for the North Shore Connector that extended the subway from Downtown to the North Side. Those jobs are no longer there, now that the work is done.

Kurt Rankin, an economist for PNC Financial Services, said other government efforts to create jobs include the Cash for Clunkers program, which encouraged people to turn in their old cars for new models, and the First-Time Homebuyer Tax Credit, which gave up to $8,000 in tax credits for buying a house, thus promoting home sales.

Those, he said, were short-term economic boosts, but long-term economic recovery is going to take more.

He said no small business is going to hire someone they don't need just because there's a tax credit in place; the only thing that will encourage them to hire permanent employees will be to meet the demand for a good or service they produce.


Ann Belser: or 412-263-1699.


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