Only the Public Sector Is ‘Doing Fine’
Sorry, Mr. President: There’s no need to bail out the state and local governments.

Source: Authors’ calculations, Current Population Survey


But even if we ignore the broader context about unemployment rates and focus instead on the impact of the recession, the private sector has still been hit much harder than the public sector. One way to see this is to look at the change in total wages, which captures the combined effects of conventional unemployment (people out of a job but looking for work), labor-force “dropout” (people out of a job and not even looking), and cuts in pay for those who have kept their jobs.

Our data run from the third quarter of 2007 — when the economy was near its cyclical peak — to the third quarter of 2011, the most recent data available from the Quarterly Census of Employment and Wages published by the BLS. Each sector increased total wages paid, if only because of inflation. But state and local governments saw greater payroll growth (10.8 and 8.5 percent respectively) than the private sector (6.4 percent), and the federal government grew most impressively of all (20.6 percent).

Once again, adding some context to the president’s comments goes a long way. Despite his warnings, the public sector hardly faces an employment crisis of any kind. To the extent that public employment decreased in recent months, it has only slightly diminished a long-standing gap that favors government employment.

Far from ailing, public-sector employees still experience lower unemployment rates and higher wage gains than private-sector workers. A slight reduction in the public sector’s advantage hardly justifies the argument for a bailout of state and local government finances.

— Jason Richwine, a senior policy analyst at the Heritage Foundation, and Andrew G. Biggs, a resident scholar at the American Enterprise Institute, are authors of the recent paper The Impact of Act 10 on Public Sector Compensation in Wisconsin.”