Here’s the counterargument on Wisconsin’s poor jobs growth

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The Daily Herald Media Editorial Board recently weighed in on Wisconsin’s lousy jobs record with a fairly strongly stated editorial. In some ways this is the political question these days, and will become more so as Gov. Scott Walker’s re-election campaign ramps up.

Christian Schneider is a specialist in Walker apologia so his column in Sunday’s Milwaukee Journal Sentinel is probably as good a guide as any to the officially sanctioned Republican argument. He has one line of argument that I find pretty persuasive, and he also commits a colossal act of sophistry, here:

Walker’s critics believe the governor’s collective bargaining reforms are to blame for the state only picking up 20,479 jobs between September 2011 and September 2012. Public workers, now forced to pay into their pension accounts and kick in more for health benefits, have less money to spend, creating less economic activity, they say. But the numbers belie this claim: According to the state Department of Revenue, state income and sales taxes are up 5% in 2013, and new business start-ups were up 8.4% in 2012, compared with 2011. People are spending and making money, but the jobs continue to lag behind other states.

Those numbers do not belie that claim. This would only be the case if public employees comprised 100% of the state’s economy, and public employees do not comprise 100% of the state’s economy.

It is entirely possible — a less charitable writer than me could say it is pretty obviously the case — that the loss of income by public workers can be serving as a drag on spending while also, at the same time, the economic recovery across other sectors (manufacturing has bounced back nicely; health care never really recessed) is strong enough to drive total state sales and income taxes up. Missing this is a pretty basic analytical error.

(And by the way, what do new business startups have to do with it? I mean it’s great that entrepreneurship is up, but surely this is not the best available metric for determining whether or not public employees’ lost income is affecting the economy. Obviously most public employees are not likely to be starting small businesses in any climate; they have full-time jobs in well-established fields. It is almost as if Schneider is casting about for a data point to cite, any data point will do.)

But the rest of the column is better. Here’s the part of the argument that I find persuasive:

[T]he bad economy didn’t damage Wisconsin as much as it did other states. The crash of 2008 eviscerated some states, while Wisconsin was able to hold fairly steady; since Wisconsin didn’t fall as far, it doesn’t have as far to snap back. (…)

Take, for example, Wisconsin’s neighbors, Michigan and Illinois – both of which were eviscerated by the recession. In January 2010, Michigan’s unemployment ballooned to 13.8%, while Illinois’ was 11.3%. As of September 2012 – the date of the most recent reliable numbers – Michigan’s unemployment rate was still at 9.2%, Illinois’ rate was 8.9% and Wisconsin’s was 6.9%.

Yet according to the jobs numbers just released, Michigan’s private-sector job growth in the last year was 2%, Illinois’ was 1.4% and Wisconsin’s was 0.9%. So Wisconsin lagged behind those two, but is still in total, in much better shape. Without question, the states hardest hit by the recession have to come back from much farther behind.

On the other hand, take a low-unemployment state such as Minnesota. The unemployment rate in Wisconsin’s neighbor to the west is 5.6% – and its recent private-sector job creation numbers only barely beat Wisconsin’s, 1% to 0.9%. Iowa’s unemployment rate is 5%, and its gained jobs at a pedestrian rate of 1.3%. It appears that states that didn’t lose a lot of jobs during the bad times tend to gain them back at a slower rate during the good times.

I don’t think this is a full explanation. I’m also not sure how this argument will play politically, because no one who lived in Wisconsin is going to accept that 2009 and 2010 were not terrible, brutal recessionary years. Hard to argue (and Schneider acknowledges this) that Wisconsin’s bottom was not as low as other states’. But I think it is probably true.

About Robert Mentzer

I am the opinion editor at Daily Herald Media.
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