Arnold Kling  

The Sector with the Sticky-Wage Problem

Executive Nullification... David Stockman's Time Horizon...

As Josh Barro points out, it is the public sector.

San Jose spends $142,000 per FTE on wages and benefits, up 85 percent from 10 years ago. As a result, the city shed 28 percent of its workforce over that period, even as its population was rising.

Read the whole thing. I have been arguing for cuts in public-sector pay as a recession-fighting tool for quite some time now.

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COMMENTS (3 to date)
Joe Cushing writes:

Part of me likes the idea of having fewer bureaucrats even if they cost me but I know this can't last for ever.

Greg G writes:

I certainly agree that the long term trend in public sector compensation needs to be reversed. Even so, the downward trend in public sector hiring really is something that is at least a short term drag on this recovery, especially as compared with other recoveries from recessions. Those two things are not mutually exclusive.

And I can't help but wonder if San Jose was chosen because its compensation and staffing levels are typical.....or was it chosen because it is an outlier.

Foobarista writes:

Part of the problem with the whole "Keynesian" stimulus tricks is they emphasize permanent hires. I thought the whole point of actual Keynes was that you'd reduce government expenditures when times were good.

Part of the problem is that it was a much simpler time: government could hire and fire people more easily, infrastructure could just "get built" without court fights, long environmental reviews, etc, and many government jobs were more "blue collar" and could be done by men with strong backs.

If you really "believe in" Keynes (which I generally don't, at least partially due to the public-choice issues), you need to come up with at least some sort of government hiring model that allows rapid up-spend and rapid down-spend. Note: if lawyers are involved, the model breaks.

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