Long-Term Unemployment, Private Sector Only
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.