Wednesday, July 9, 2014

Why Does Wisconsin Have Such A Big Lag In Job Creation?

It is undeniable that Wisconsin is dead last in the Midwest and among the lowest in the nation when it comes to creating jobs.  The reason for this job lag has been subject to some discussion.

Teapublicans blame everyone and anyone but themselves, even though they have no bases for their accusations.  Needless to say, some of their accusations go to the point of being absurd.

M. Kevin McGee, an economics professor at the University of Wisconsin - Oshkosh, has a column in the paper that analyzes the situation and comes to the same conclusion that we knew it was all along - the devastation caused by Act 10:
The only explanation that fits the data involves consumer spending. Under Gov. Jim Doyle, state workers absorbed pay cuts in the form of temporary furloughs. According to Milton Friedman's permanent income hypothesis, those furloughs would reduce consumer spending only a little. Under Gov. Scott Walker, the furloughs were replaced by significant permanent pay cuts, in the form of higher pension and insurance contributions. By the permanent income hypothesis, those cuts would reduce spending nearly dollar for dollar.

In addition, fiscal limits on cities and counties spread those pay cuts to local public employees as well. And at the same time, there were significant permanent decreases in private-sector wages, often also in the form of wage and benefit concessions.

So well over 400,000 Wisconsin workers were forced to cut their spending significantly. Some of that reduced spending would have been on goods produced elsewhere — Detroit automobiles, foreign-made electronics, California wine — reducing job growth elsewhere.

But much of that reduced spending would have been on locally produced services — restaurant meals, trips to the Dells and hair salon appointments — reducing job growth in Wisconsin. That's where the job gap shows up — in about 30,000 fewer private service-sector jobs than expected, over the past three years.
This is the biggest factor in the gubernatorial race because Act 10 did more than heavily damage the economy and subsequently the job market. By weakening the unions, it made it easier for the Teapublicans to impose the ALEC-based laws that have diminished women's rights, increased voter suppression, left the environment vulnerable to exploitation and gutted consumer protection laws.

The biggest step to repairing our state would be the repeal of Act 10.  Sad to say, neither major party - the Teapublican or the Republicratic - candidate has expressed an interest in making this fix.


  1. It makes sense that when you cut the purchasing power of a group of employees it only follows that the economy will shrink. What people fail to consider is that the money from public employees that went for insurance premiums and pensions for the most part left Wisconsin in the form of corporate investments elsewhere or into pension portfolios. When Walker cut the teachers pay the school districts found little in long term savings as aid to schools was significantly cut. That meant that whatever savings they saw went into the operations of the schools. Thus the businesses at the local level got burned as a result. Research has shown that demand creates jobs not tax breaks and giveaways. If an employer has little or no demand for his products or services he's not going to hire and pay more workers no matter how much tax relief you give him. He will gladly put the money in his pocket.The amazing aspect of this entire Act 10 debate is that private sector employees gloat over what happened to public employees but they saw no improvement in their wages, benefits or well being and many saw things go backwards. In spite of this they declare Walker a hero when what he has down is taken us all backwards and has not made Wisconsin better except for his elite campaign donors!

  2. Eating out? Once in the past 4 months (birthday). Used to be once or twice a week.

    Trips to WI Dells? Last time was in 2010. Surprise, surprise.

    Hair Salon? Wife cuts whole family and drives to a relatives house for hers. Used to be about $700 per year at a salon the next door neighbor works at who trimmed the whole family. Her Walker support cost her dearly and she doesn't correlate the pay cut from just our family to him yet. Bright side is she seems to have a lot of days off now.

    House projects? Do it myself and only needs not wants.

    And on and on to where we have cut back our family budget. All told our modest cut of pay, benefits, healthcare increases comes out to about $9K each, $18 total when all is figured in as we were both public employees. Twenty seven years of work and my take home pay is about $38K with a Master's.

  3. We must not forget that in addition to Act10 Walker capped the amount school districts could raise through property taxes . Even though teachers had less take home pay as more insurance and pension payments were taken out the district didn't have any more money and they still had to operate their schools on their existing budgets with substantially less aid. They did have the future power to limit teacher salaries to 1% of inflation but administrators were still in a bind because they has less aid and little to no ability to tax to cover their shortfalls. The end result is the local communities took a direct hit because their teachers and government employees now had far less discretionary income to spend as document above. I know a veteran teacher whose take home pay now matches what she earned as a beginning teacher. Education will not be a career choice for the "Best and Brightest" in Wisconsin

  4. Wife and I are both teachers. $1100 bucks per month lost in take home pay.
    Cleaning Lady: $140 per month to single mom, gone.
    New Roof: $4,000 to local roofer, gone. DIYed for 2K, simply aweful, hope it holds. Would gladly pay someone else to do it, if I could afford it.
    New Kitchen and Family Room make-over: $30K to local contractor, not doing it. Maybe piecemeal some of the more absolutely necessary parts, like some cabinets that are literally falling off the wall.
    Dinner Out: was at least once a week, now, maybe once a month.
    Vacations: What??? I really wish school was year-round because I can't afford to go anywhere or do anything, I'd rather be working, and making more money.
    I could go on, but the response from many is that we're whining, which isn't the point. Public school teachers will never get this back, never. Even when WI's economy somehow miraculously picks up, public employees will not see the benefits. Everyone in my school, regardless of political affiliation, that I have talked to says the same thing; This is not a career with a future in this state. We all tell every student-teacher, and there are many, the same thing, "find a different line of work, there is no future". Starting teachers start at $35K, and if they get a masters can get to $40K. AND THAT IS IT. You will get what you pay for.
    So you take nearly a billion dollars out of the WI economy, it's going to hurt. There is no doubt that Act 10 has killed this state. I have a hard time seeing it ever come back.

  5. What is so disheartening about stories as those above is that Walker supporters take great pleasure in public employees misfortune. This is what "divide and conquer" has done by pitting one group of workers against another. Even though one group gained nothing while the other group of workers lost they consider it a victory. The sense of solidarity among not just workers but friends and neighbors has been lost because of the Walker administration. Instead of all of us pulling our oars in the same direction Walker has polarized the state so that we attack one another while he pursues policies that benefit his wealthy donors.

  6. "Divide and conquer" has pitted the big school districts against the small, rural districts too. West Bend is putting away money for a school building without a referendum (thanks to a six year (expereince) pay freeze for most teachers; meanwhile, Theresa is shutting down a school due to the reduction in state support for the district. Many small, rural districts are asking for money through referendum thanks to Act 10, putting the burdon on small town/ rural property owners v. spreading out the pain of inflation on all. Walker has sent WI education on a downward spiral and screwed the poor and middle class in small rural communities.

  7. Divide and conquer may be political red meat to Walker's supporters, but what rational business executive would choose to come to Wisconsin where the governor has demonized the labor force and cut school spending. What kind of governor brags about "dropping the bomb" on his constituents as Walker did on the eve of Act 10?