March 6, 2010

Long-Term Unemployment, Private Sector Only

Justin Katz

By now, you've likely decided whether or not you agree with the statement that the Obama administration's approach to "stimulus" was meant not so much to stimulate growth in the private sector economy as to shore up the public sector and insulate government at all levels from the real effects of the recession. Whether the private sector will begin to grow again of its own accord and bail out the borrowing of the public sector remains to be seen.

George Mason University Economics Professor Alex Tabarrok is specifically worried about the bifurcation of the workforce:

... I am more worried, however, about the long term consequences of creating a dual labor market in which insiders with government or government-connected jobs are highly paid and secure while outsiders face high unemployment rates, low wages and part-time work without a career path. ...

Moreover, once an economy is in the insider-outsider equilibrium it's very difficult to get out because insiders fear that they will lose their privileges with a deregulated labor market and outsiders focus their political energy not on deregulating the labor market but on becoming insiders ...

Once again, we in Rhode Island have an especially relevant perspective on the direction in which the country is now headed, inasmuch as we've tested the waters, found them frigid, and continue to beckon in the other states anyway. We're well accustomed to arguments that the problem is that public-sector union jobs kept up with inflation while private-sector employment did not, and that we shouldn't respond to the latter by bringing down the former. We've all heard the "I got mine" responses that lie behind all related debates with supporters of public-sector unions.

It can be disorienting how quickly the very same advocate can switch from proclamations about fairness to denials that inequitable balances in the pay and benefits matter for measuring government employment packages. All we can do is stiffen our jaws and patiently explain that the objective isn't to tear down the publicly backed segments of the middle class; it's to prevent financing that group from strangling the economy that ultimately must support it.

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"My sight is failing," she said finally. "Even when I was young I could not have read what was written there. But it appears to me that that wall looks different. Are the Seven Commandments the same as they used to be, Benjamin?" For once Benjamin consented to break his rule, and he read out to her what was written on the wall. There was nothing there now except a single Commandment. It ran:
An uproar of voices was coming from the farmhouse. They rushed back and looked through the window again. Yes, a violent quarrel was in progress. There were shoutings, bangings on the table, sharp suspicious glances, furious denials. The source of the trouble appeared to be that Napoleon and Mr. Pilkington had each played an ace of spades simultaneously. Twelve voices were shouting in anger, and they were all alike. No question, now, what had happened to the faces of the pigs. The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.

Posted by: Dan at March 6, 2010 7:19 PM

There is nothing fair.......there is no justice. Those are two truisms of life and the sooner we all accept them, the better off our minds will be.

Self help dude Wayne Dwyer wrote about this as the Justice Trap.

As to the stimulus, my own eyes show me that vast numbers of jobs have ben created in road and bridge construction and alt energy as well as general contracting and other industries. Even the public sector stim has vast amounts of teachers, cops, etc. who were already hired and on the payroll - meaning that these were not new jobs.

Bottom line - one can spend their whole lives looking for what is imperfect - usually so because it does not fit their world view of current circumstances. Most things fall somewhere in between. One thing you can be certain of - spending 800 billion for stimulus, 350 of which are tax cuts and most of the rest creating actual projects and ends, is VASTLY superior to taking trillions we will NEVER see a penny of and throwing them away on the sands of Iraq.

So I guess "fair" is relative.

Posted by: Stuart at March 6, 2010 8:41 PM

Not withstanding,such wisdom as may be contained in the posts by Dan and Stuart, there is obviously something wrong when the servants of the producers have higher, and more secure, incomes than the producers.

Now that we are in an era of deficits, I am reminded of a book from, I think, the 60's, an era of surpluses. "The Report From Iron Mountain on the Possibility and Desireability of Peace" (Recently announced to be a satire, but no one is quite sure). In any case they make the point that to maintain control the government must spend/waste significant sums of money, be it by waging war or "Space Programs". Space Programs are preferred because the money is simply shot into outer space and provides no specific benefit. In distinction to school, or hospital, programs a Space Program can be halted at any time without undue outrage from the public. I note that NASA is being closed down by stages, I hear little complaint.

I am amused by the 800 Billion "Stimulus" with counts 350 Billion in tax cuts. They make it sound as if they are "spending" that 350 Billion, while in fact they are simply leaving it in the hands of its owners, their constituents. The language used makes it clear that "they" think of it as "their money".

Posted by: Warrington Faust at March 7, 2010 12:15 AM

"Servants of the producers?" That was pretty good.

"insider/outsider equilibrium?" More paranoia. I can attest, as a despised public sector worker, that I am not now, nor at any time was I ever an "insider."

I applied for a job. The employer happened to be the City of Providence. Stiffen your jaws and patiently let that sink into your thick skulls.

Posted by: michael at March 7, 2010 11:09 AM

Public employees are the ones who keep describing what they do as public "service," Michael. Believe me, I have other words for it. Needless to say I am not in the slightest bit interested in any "services" you have to offer me. I would cancel tomorrow if your gang would not use violence against me in retaliation or take my house away.

Make a list of all the ways government is different from organized crime, if you are brave enough to do a simple thought experiment and question the status quo into which you were born.

Posted by: Dan at March 7, 2010 11:46 AM

Two thoughts, Michael:

1. Still not willing to draw distinctions between your union and all of the others?

2. You (and your fellow union members) didn't just apply for a job and leave it at that. You continue to advocate, act, and vote in such a way as to benefit yourselves.

(Note that the personalization of #2 is largely contingent upon the answer to #1.)

Posted by: Justin Katz at March 7, 2010 11:51 AM

Michael, let me ask you a different question: Do you agree that ultimately individuals must take some responsibility for any organization with which they continue to willingly associate themselves?

Posted by: Dan at March 7, 2010 12:02 PM

Posted by michael at March 7, 2010 11:09 AM:
" I applied for a job. The employer happened to be the City of Providence. Stiffen your jaws and patiently let that sink into your thick skulls."

That seems fairly neutral, "the employer happened to be the City of Providence". That didn't just "happen". You made a choice. Why did you choose the City of Providence? What advantages did you percieve, other than being unemployed.

Posted by: Warrington Faust at March 7, 2010 1:31 PM

Strange as this may sound to public sector employees in RI, elsewhere in the world people facing the same situation have decided that reorganizing their business processes, hierarchies and staffing models to deliver more value to their customers is their best defense against suffering the consequences of an outgoing economic tide (that now resembles the Bay of Fundy). When taxpayers believe they are receiving superior value for their tax dollars, they won't begrudge you your pay and benefits package. When the opposite is true, your financial security is increasingly threatened.

Not that your union leaders get this. But I'm sure quite a few of the rank and file do.

Posted by: John at March 7, 2010 4:24 PM

Communism, fascism, socialism, progressivism. All are variations of the same thing: collectivism.

Collectivism, in turn, is diametrically opposite of the founding principles of the United States.

Whatever variation of collectivist that Barack Obama is, he and his fellow Democrats are fundamentally anti-American, and are working to finalize the deconstruction of this country that began with Wilson, and accelerated under FDR.

The end result will be that insider-outsider dichotomy. Yes, we'll have greater equality ... just like the Soviet Union and Mao's China. But through greater and widespread impoverishment, not through "spreading the wealth around."

There'll be relatively privileged party members (Democrat officials and public sector employees); a few "wealthy" folks (high ranking government / favored-industry officials), just as there were high-ranking Communist officials with their dachas and limousines and special stores for procuring foreign goods; and everyone else part of an increasingly impoverished populace (inevitable as economic vitality faces extinction).

That is our fate, unless we can first stop Comrade Obama and the Democrat Party, and then begin to reverse the damage.

Posted by: Ragin' Rhode Islander at March 7, 2010 4:52 PM

Every survey I have seen in years indicates government employees make at least 20% more than private sector workers. This does not count benefits. Why is there still a discussion? It is a fact.

I am thinking of a friend's wife who was previously the manager of a small credit union. She was responsible for 11-15 employees and had overall "management" responsibility, including answering alarms at 3 a.m..

She left that to take a job as a "clerk" in the local city hall. Now, she makes 10% more, has complete medical coverage and a pension. If she stays 10 years, she has medical coverage for life.

I am also thinking of a former girlfriend (I typically don't have much luck in the sighted community) she worked for the state of Mass. Basically she supervised two people and was paid 56K. She was well aware that her job existed in the private sector, and paid about 23K. Since the Mass payroll is online, I just looked her up. Same job, but now 63K.

Would all of the private sector people here who still have a pension please raise their hands. Granted, they do not have Social Security, unless they are "double dipping".

Posted by: Warrington Faust at March 7, 2010 4:59 PM

"Make a list of all the ways government is different from organized crime, if you are brave enough to do a simple thought experiment and question the status quo into which you were born."

The libertarian ideals you admire so blindly once appealed to me, then life got in the way of my arrogance. This isn't a sob story, just a story. My father died young. My mother had nothing. A year later she had a massive stroke. The same year my wife was diagnosed with MS. The government you so despise and ridicule provided my family with stability, not handouts. The Warwick Fire Department responded to my parents house three times during their downward spiral. Medicaid took care of my mothers nursing home bills. If not for the government my situation would have been impossible.

I grew up fast and opened my eyes.

Justin, I only speak what I experience and won't be prodded into discussing other unions or their policies.

Warrington, I wasn't unemployed. I wanted to be a fireman. I had a back-up plan all along. I'm very fortunate and know it.

Posted by: michael at March 7, 2010 5:31 PM
Justin, I only speak what I experience and won't be prodded into discussing other unions or their policies.

That's arguably not true, Michael, because you defend all unions without differentiating your own.

Posted by: Justin Katz at March 7, 2010 6:04 PM

Really, Michael? "The government" did all that? How benevolent this government must be, to use its own money to pay for all of the services your family has needed over time. Oh wait, government doesn't have any money, that money all came from other people, obtained through the threat of violence against those people just because they wanted to earn a living or buy something. You robbed them in a socially acceptable way. How would you feel if a homeless person stole your wallet or a family member's purse on the street while you were going to the grocery store? Are you denying that the homeless person needs the money more than you do? You, who have a home and a job and a family. But since there is this magical mechanism called "the government" in place as a middleman, that makes it okay?

Have you ever even stopped for a moment to question the philosophical underpinnings of your worldview? At least utilitarians are consistent. My best friend acknowledges that the government is force and that people are being robbed through taxation, he just feels it is necessary to prevent a greater amount of violence and disorder in aggregate. At least he is intellectually honest, I can respect his views while disagreeing with them. You are just the poster child of cognitive dissonance. You got yours through this big detached bureaucratic process and made out like a bandit, with other people do your violence and theft for you out of sight and out of mind, so everything is fine in your eyes.

Nobody is saying your family shouldn't have gotten aid, the difference is that you should have had to ask people (friends, family, businesses, charities) to give it to you voluntarily. In other words, taken responsibility for your own needs, and engaged in a social process rather than an antisocial one (having a hired gang take it from people against their will). People will always be better at judging genuine need on the individual level than a bureaucracy will be, that's why we have such massive fraud and waste in our current system.

You never answered my question. I must assume that you are afraid to do so. I am not persuaded by the fact that you supposedly used to be a libertarian and "saw the light," since you obviously never understood the non-aggression principle upon which real philosophical libertarianism is founded. By the way, I used to be a big-government statist, and I "saw the light" as well.

And nothing is impossible. Where there is a will, there is a way.

Posted by: Dan at March 7, 2010 6:10 PM

I guess government of the people has perished from the earth then.........
No, when there is a will there often is NOT a way. That is a talking point.

As to government employees making more than private sector, my guess is that this is the case now but has not been the case throughout history. After all, the average worker has seen his wages stagnate or go down, while his productivity has DOUBLED.......

Perhaps the government, unlike the corporate bosses (the REAL definition of organized crime) actually thinks more productivity and more inflation should result in higher pay.

Some of you live in backwards bizzarro world. Reality is SO MUCH different than your narrow views of it.

Posted by: Stuart at March 7, 2010 6:14 PM

Stuart writes, "As to government employees making more than private sector, my guess is that this is the case now but has not been the case throughout history. After all, the average worker has seen his wages stagnate or go down, while his productivity has DOUBLED.......Perhaps the government, unlike the corporate bosses (the REAL definition of organized crime) actually thinks more productivity and more inflation should result in higher pay."

Stuart, your knowledge of economics is frighteningly bad, and it has led you to even worse politics. Only the last three recessions have had an increase in worker productivity, before that the opposite was true - productivity decreased as unemployment increased. This is due to the fundamental change in the nature of the workforce that occurred over that time period. Most of the production process in the private sector is in planning now, rather than in actual physical production of goods and services. In other words, more people have "cubicle" jobs than "floor" jobs. When a recession hits, the few "floor" jobs are indispensable to the company, so they cut R&D, planning, management, and other "cubicle" jobs because of the uncertainty of the future. This is why productivity rises, not because of greedy bosses or worker oppression or other ridiculous progressive (Marxist) lore.

Government doesn't actually produce much, and it can arbitrarily increase revenue to make up shortfalls, so it doesn't have to go through this process. That is the distinction.

By the way, Stuart, no business has ever taken a dime from me without my consent. Not one. Every interaction I have ever had with the private sector has taken place with the full consent of both parties, and if I wanted to walk away, I was allowed to do so. Doesn't quite jive with your "organized crime" model. Compare that with government.

Posted by: Dan at March 7, 2010 6:34 PM

I suppose, Justin, that you speak for every conservative with every post.

Dan, you really need to get over yourself. You sound more and more like the guy on the roof during the flood that refuses the raft, the boat and the helecopter because he can take care of himself. That guy dies, every time.

Posted by: michael at March 7, 2010 7:20 PM

No, but when somebody has a complaint against conservatives that doesn't apply to me, I explain why and will readily criticize those to whom it applies.

By the way, the way I heard the joke about the man on the roof, he was waiting for God to save him. In the end, God says, "What do you mean I didn't help? I sent a raft, a boat, and a helicopter." No one's faulting you for taking the assistance from whence it came, in your time of need... except inasmuch as doing so roping you into supporting the system. If there weren't a boat, though, there might still have been rafts and helicopters.

Posted by: Justin Katz at March 7, 2010 7:37 PM

I've often critisized labor, mostly where it counts, in the union hall, not as a grandstanding stunt to get attention and look like the good guy to all my conservative friends.

Oh, I heard the joke the same way, it just popped into my head when I envisioned Dan standing on a rooftop, alone, with his rifle and bottle of Poland Springs, angry at the world that left him.

Posted by: michael at March 7, 2010 8:18 PM

What the heck are you talking about Michael? You haven't addressed any of my points. I never said that people should be irrational and refuse aid. I just said from a philosophical standpoint, coercing people to help others against their will is morally wrong, economically inefficient, and socially destructive. I'm not knocking aid, I'm a strong believer in charity. I just think aid should be voluntary and done on an individual basis, because stealing and using force against other people is wrong whether you need the money or not (unless you somehow makee the owner whole later on when you are able). You are either ignoring what I am saying or you are completely missing the distinctions here, which is it?

Posted by: Dan at March 7, 2010 8:49 PM

If all public sector workers are evil, let's live without firefighters for awhile, just to see what happens.

Posted by: rhody at March 8, 2010 12:07 AM

Absolutely right Rhody. Dan can hang onto his libertarian teddy bear as the house is burning down around him, but I would welcome the arrival of micheal and his union firefighters. I would gladly pay along with my neighbors for the services that firefighters provide. Because it is not just for me but the protection of those who I could not be in the position of helping or leading to safety such as an elderly parent who has fallen at their home or a teenage son or daughter involved in an automobile accident. I would rather have the outcome of those kind of incidents be affected by the swift arrival of skilled professionals with properly staffed apparatus and livesaving equipment than to have the only option of recieving charity from someone like Dan.

Posted by: Phil at March 8, 2010 5:56 AM

the whole issue of who's "better",public or private sector workers is ridiculous.It's like asking if a clergyman is more ethical than a used car salesman.if the clergyman is shagging kids on the side and the used car guy is selling good vehicles at reasonable prices,who's more ethical?
The point being that if a person does their job well and honestly they have nothing to apologize for and if not,well,maybe they shouldn't be working at that job.
The idea of putting law enforcement/public safety into the private sector is a recipe for trouble.
Privatized corrections is a great example of that.Stupidest idea I've seen in years.
This is America-the land where the individual proves their own qorth regardless of the sector they work in.
It should be that way,anyhow.Nothing but the Creator is perfect.

Posted by: joe bernstein at March 8, 2010 8:08 AM

Thanks, Joe, Phil and Rhody, I knew the cavalry was coming, but things were getting grim..

Dan, I'm ignoring your questions because I've been through this before. You obviously have studied economics and the fundamentals of libertarianism or whatever it is you want me to engage in and have a pre conceived, well thought out response to anything I might offer. I'm commenting on a blog, doing zero research and offering my opinions and life experience, nothing more.

Posted by: at March 8, 2010 9:25 AM

"If all public sector workers are evil, let's live without firefighters for awhile, just to see what happens."

It's a good thing we have government to make pencils for us... we wouldn't be able to write anything! It's not like a highly sought after and valuable service like fire protection could possibly be provided privately. There are no private ambulances, after all. None whatsoever...

Ok, /sarcasm off.

"You obviously have studied economics and the fundamentals of libertarianism or whatever it is you want me to engage in and have a pre conceived, well thought out response to anything I might offer. I'm commenting on a blog, doing zero research and offering my opinions and life experience, nothing more."

Michael, I'm not asking you to do research or engage in formal debate with me. What I'm asking you to do is question some of your fundamental assumptions. If I have a "good answer" for all of the objections you bring up, maybe that means your worldview is in need of some revisions, that's how a scientist would approach it. If you think I just randomly picked a economic model and philosophy to live by to argue about with people on the internet, you couldn't be more wrong. I reached where I am now after asking myself lots of hard questions, living through lots of hard experiences, and engaging in honest and open dialog with thousands of different people. It's not troubling in the slightest that you disagree with me, reasonable people can disagree. It's troubling that you are totally unwilling to question these beliefs you cling to like a religion - that schools MUST be provided by a strong central government, that fire protection MUST be provided by a strong central government, that there MUST be a welfare system in place or people will die in the streets. If you can't even question this largely arbitrary (and to some people, extremely self-serving) societal model you were born into and have simply adopted whatever was laid at your feet, that is a problem. It's this "everything is the way it is for a reason, therefore it must be good" mindset of many of this blog's viewers that I am finding fault with, nothing more.

Posted by: Dan at March 8, 2010 9:37 AM

Dan, (sarcasm off) Do you think you are the only person with a mind able to find his or her own world view, and if that view differs from your own it must be wrong? What makes you so sure I was born with my present values? Did it occur to you, even for an instant that my beliefs were formed through similar circumstances, reading, learning, discussing, living and experimenting, only to develop a different philosophy?

(sarcasm on) The sum of who I am just appeared one day from the womb, blindly led by the world he was born into, never questioning, blindly following, fat, happy and content to live off other's generosity, be it government taxation or private charity.

People learn life's lessons differently. I'm quite content with my present world view, which I'm certain is far different from the one you have envisioned for me.

Posted by: michael at March 8, 2010 9:56 AM

I'm glad to hear it, Michael. If you really are secure in your worldview then you'll have no problem answering my simple question: list all the ways in which government is different from organized crime.

I have no problem with your conclusions, the premises are what I am attacking. The bare assertions you and other people are making here, such as that education or fire protection could not be privately provided by a free market economy are nonsense, totally unsupported by theory or practice. I have to assume that you have blindly adopted these positions out of the status quo into which you were born, because you have given no support for them whatsoever and they make no economic or philosophical sense. Please, prove me wrong, I hope you do.

Posted by: Dan at March 8, 2010 11:16 AM

Dan, there is always a better way. My opinion is that education could be done better in a private school system. But that is just my opinion, I'm not immersed in that world.

Fire departments as part of a public safety organization with accountability, command structure, incident command systems in place is simply more efficient as a para-military model. EMS is an integral part of that system.

As for your organized crime comparison, I'm sure you have developed some clever way to prove your point, I have no interest playing that game.

Posted by: michael at March 8, 2010 12:27 PM

How can asking a simple question be a game? It's just a thought experiment for your own benefit. Tell you what, I won't even respond to your answer if you post it here.

The only difference between government and organized crime that I have been able to come up with is that regular elections are held for government. If you can think of other differences, I'd be genuinely interested in hearing them, but I have been unable.

Posted by: Dan at March 8, 2010 12:39 PM

I do appreciate you posting your reason for supporting public fire departments, although I find it a bit confusing because there is nothing inherent in fighting fires that requires a "para-military" model. I don't see any reason why the normal management-worker hierarchy wouldn't work, or why a "para-military" model couldn't be used privately if it lent itself so well to the nature of the work. There are plenty of examples of private security or emergency services that work just fine.

"Courts, cops, and roads" is the usual minarchist line of what government should legitimately operate. They exempt these three services precisely because they are such special and arguably inherently collectivized work. There is a good reason why they don't include fire protection in there, it is just a service like any other that people could easily contract for privately. As previously mentioned, there are private EMS services that do a fine job.

Posted by: Dan at March 8, 2010 12:47 PM

People could do anything privately. More people than not are happy with fire departments funded through taxation. Fire based EMS is part of an emergency response. Again, more people than not are happy with the results. Because you and some others think yours is a better way does not make it so. Prove that your model will work more efficiently, at less cost and you might have some takers.

As for your organized crime vs. Government comparison, I just don't see the sense in getting into that. It might be fun some other time, I h=just don't have the energy to toy around with it at present.

Posted by: michael at March 8, 2010 4:54 PM

Sorry Michael, 51% of the population voting for something does not make it right either. I know this is counter to everything they teach in public schools, but putting in a democratic process doesn't magically solve everything and absolve everyone of their ethical responsibility to not harm others or steal from them.

Posted by: Dan at March 8, 2010 9:06 PM
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