Guest Host: Frank Sesno

The U.S. economy has added private-sector jobs for 29 consecutive months. But figures for the public sector have been dismal. Local, state and federal employment has declined in 10 of the past 12 months. Some see this as a positive sign of bloated bureaucracies getting leaner and of making progress on narrowing budget gaps. But others worry. The public-sector job losses mean fewer firefighters, police and — most of all — teachers. Guest host Frank Sesno talks with economists and an economics reporter about what the sharp drop in government jobs signals for the U.S. economy and the
American workforce.

Guests

  • Keith Hall senior research fellow at the Mercatus Center at George Mason University, former commissioner of the Bureau of Labor Statistics (2008-2012) and former chief economist at the White House Council of Economic Advisers (2005-2008).
  • Michael Greenstone economics professor at MIT, director of the Brookings Institution's Hamilton Project and former chief economist at the White House Council of Economic Advisers (2009-2010).
  • Jim Tankersley economic policy correspondent at The Washington Post.

Transcript

  • 10:06:56

    MR. FRANK SESNOAnd thanks for joining us. I'm Frank Sesno from the George Washington University and planetforeward.org sitting in for Diane Rehm today. The U.S. economy has added jobs in the private sector, but the public sector is another question. Public sector empowerment is at its lowest level in 30 years. As state and local governments face falling tax revenues and the need to balance their budgets, they've gotten and given tens of thousands of teachers, police and other public servants the pink slip.

  • 10:07:26

    MR. FRANK SESNOJoining me in the studio to talk about declining public sector employment, what it really means, stripped of some of its political rhetoric is Keith Hall of George Mason University and Jim Tankersley of The Washington Post. And by phone from Cambridge, Mass., Michael Greenstone of the Massachusetts Institute of Technology. Greeting to you all.

  • 10:07:45

    PROF. MICHAEL GREENSTONEGood morning.

  • 10:07:45

    MR. JIM TANKERSLEYGood morning.

  • 10:07:45

    MR. KEITH HALLGood morning.

  • 10:07:46

    SESNOWell, let's start, if I may, Jim Tankersley, with the overview of employment trends in the United States generally over the past year. Bring us up to speed on that.

  • 10:07:57

    TANKERSLEYWell, we're adding jobs, which is a good thing. We continue to add jobs, which we've done for the last few years, but we're not adding enough of them still. We used to have about an 11 and a half million unemployed Americans and many more who dropped out of even looking for work. Now, the trend has been in the first few years the recovery that we had a private sector that was adding jobs and a public sector that was sort of dragging on that, especially at the state and local level.

  • 10:08:23

    TANKERSLEYNow, that state and local has turned around. We don't have the kind of cuts as much cuts and in fact in some states they're starting to add them back of teachers and firefighters. But we had a lot of them during the first couple of years of the recovery. What's changed now is that we're starting to see federal job cuts, and that's largely because of the budget cuts queued up by the sequester.

  • 10:08:47

    SESNOAnd what impact is that having on the overall job picture and the economy?

  • 10:08:51

    TANKERSLEYI think it's dragging on growth. I mean the classic macro model would say it's dragging on job growth because you have a number of jobs that are being created in the private sector that would look a lot higher if they didn't have net subtractions from the public sector. So if you were adding -- if we were adding jobs in the public sector in this recovery in the same way we've added them in the recovery of 2001 we would have a much rosier-looking employment picture.

  • 10:09:19

    SESNOKeith Hall, give us an idea of what we're talking about here because when you hear the rhetoric and the politics and you hear government jobs, the suggestion is that's bureaucracy. Bureaucracy is bloated. Bureaucracy is bad. But when we peel the onion back a little bit, government jobs is a big, big thing with a lot of different kinds of jobs.

  • 10:09:41

    HALLWell, absolutely, absolutely. I think there are lots and lots of things that government workers do that people just sort of take for granted or they really don't know about and focus about. It can be everything from being a government economist to collecting data, which is what I've been involved with, to a wide range of things that people never see.

  • 10:10:03

    SESNONow, we'll come back to how we measure productivity and how we know we're getting bang for the buck in a minute. But I do wanna dwell on this for just a second so we can establish what we're talking about. Michael Greenstone, a couple of years ago, several years ago, I did a program for Public Broadcasting called "Desperate for Dollars." So some things don't change, I suppose.

  • 10:10:23

    SESNOAnd I went, and I stood on a street corner. And I looked at a stop sign, and I looked at the road. And I looked at the storm sewer, and I looked at the water treatment plant down the street. And I looked at the school a few blocks away, and I thought and said all of these are government dollars. These are all things we need. So what when we talk about these government jobs, federal, state, local, are we talking about in terms of American life?

  • 10:10:49

    GREENSTONEExcellent question. Thank you for having me, Frank. So let me just provide a little context of where we are and building on something Jim said. It would -- to get back to full employment at a level we had before the recession, it would take the overnight creation of 10 million jobs.

  • 10:11:04

    SESNOTen million jobs?

  • 10:11:06

    GREENSTONETen million jobs overnight. And at least a quarter of that is due to dramatic shift in policy, at least compared to previous recessions. And in all previous recessions at least since World War II the government has increased employment as a way to kind of buffer the economy through the hard times of the recession. We're here in kind of uncharted territory. And a consequence of that is we have about two and a half million too few jobs, government jobs, compared to all if we pursued policies so much of those after all the recessions.

  • 10:11:38

    GREENSTONESo we're now at our lowest level of government employment since the mid-1960s. And to your question, what that means is that we have fewer teachers. We have fewer firefighters and, as Keith was mentioning, fewer economists, which certainly is dear to my heart.

  • 10:11:54

    SESNOWell, you're an economics professor, and you're at MIT, so I'm gonna assume that you can do data and number really -- numbers really well. Talk for a moment and we'll come back to some of these, but talk for a moment about return on investment. I mean bureaucracies do bloat. Government is often seen as too big. The conversation was going into sequestration that the sky would fall and the world would end, and that hasn't happened. So how do you have reasonable conversation about adding or subtracting government jobs and be able to know where you're coming from?

  • 10:12:27

    GREENSTONEExcellent question. So I mean the first thing is let's just is to put a marker down of where we are in terms of government employment relative to the population, which is one measure. And as was mentioned a moment ago, we're at the lowest level since the 1960s. Now, that might be good. That might be bad. One way to measure that is to look at what is the return on government investment.

  • 10:12:51

    GREENSTONEAnd it's -- some things are really hard to measure. One thing that is very easy to measure is teachers. There's been really some path breaking economic research showing that as you reduce class sizes, the students who are in those smaller classes actually benefit not just through higher tests scores on their students but later in life by earning more. And so what we did in some work at the Hamilton project which is I direct this work with Adam Looney.

  • 10:13:17

    GREENSTONEWe took a look at the fact that there are 200,000 fewer teachers than there were before the recession and found that's saving about $12 billion. But the cost of that in terms of the reduced earnings of today's students is about $48 billion. So there it's, you know, I guess we would call it penny wise, pound foolish.

  • 10:13:38

    SESNOIt's interesting you raised that because one sort of case study that I was looking into and I'm familiar with because I'm familiar with -- the city is Philadelphia where they've had a gigantic budget crunch, and they came up $300 million short in the spring. They laid off nearly 4,000 employees from the school district. And they've had this emergency cash infusion, but they've only been able to hire about 1,000 back, as I understand it there. Student and teacher ratio district-wide will now be 33 to one in grades four through 12. That's what you're talking about, right?

  • 10:14:17

    GREENSTONEThat's exactly what I'm talking about. My sister-in-law is a high school teacher outside Chicago, and she has seen her class size go from the low 20s to 28 or 29 to one.

  • 10:14:28

    SESNOKeith Hall, talk to us about where we've seen the most public sector job losses.

  • 10:14:33

    HALLWell, sure, and actually, I'm gonna swim against the stream a little bit here. I'm not so concerned about the level of public employment at the moment. And the reason is that is really two things. One, the stimulus spending really supported government jobs for a while. So, for example, in 2009 while the private sector was losing about five million jobs, we were adding public sector jobs. So part of what you're seeing with the decline is we're coming down from relatively high levels of employment during the recession.

  • 10:15:03

    SESNOComing back to where we were in a sense?

  • 10:15:05

    HALLWell, that's right. With the federal government, we actually have about the same number of federal workers as we did before the recession. It's only about a 10,000 person difference. State government, we're also about the same. Where we're down significantly is local government. We're down about 400,000 jobs. But to understand that, you have to look at -- back -- a little bit further back in history and you need to look back at the big buildup in real estate values.

  • 10:15:31

    HALLWhat happened is when housing prices were getting very, very high, there's this real windfall for local governments. And in fact if you look at the level of local government employment right now, it's about a million more people than in 2000. What happened in the intervening period? We just saw local government jobs grow by over twice as fast as private sector jobs since 2000 to the end of the recession. So a lot of what we're seeing now is that loss of real estate revenue, which I think was really a windfall.

  • 10:16:01

    SESNOKeith, I know you've looked at this sector by sector. Where are the big job losses in the public sector?

  • 10:16:06

    GREENSTONEWell, I think Keith is absolutely correct, and, you know, far be it for me to argue with a former commissioner of the BLS statistics.

  • 10:16:15

    SESNOWell, go ahead.

  • 10:16:16

    GREENSTONELet me just make one point. I think the right thing to do is not to focus just on local employees but rather to look at the whole of government activity, which is the sum of federal, state and local. And there, you know, the data speaks very loudly. We're at the lowest level in -- from one BLS data set, the lowest level since it was recorded in 1980. And then if you use a different data set, it looks like we're as low as we've been since the mid-1960s, which is when we had an extraordinarily different economy without Medicare, Medicaid and millions of other changes.

  • 10:16:51

    SESNOJim Tankersley.

  • 10:16:52

    TANKERSLEYI think we're in uncharted territory here.

  • 10:16:55

    SESNOUncharted territory.

  • 10:16:55

    TANKERSLEYWell, but I think also we've had some structural changes in the way that we do government in time. And so it's one of the things that makes it difficult to compare here is the fact that we did a whole bunch of outsourcing of core government functions, particularly information technology functions as part of the entire Clinton-Gore reinventing government. And in the last 10 years, we have seen an enormous increase in the amount of government contracting in this country.

  • 10:17:21

    TANKERSLEYAnd that's not government employment, but that's still government function. So one of the things that's nice about state and local is that you have a lot -- it's a lot easier to tie outcomes directly to levels of employment. You can say student-teacher ratios are affected because of layoffs of teachers. Whereas it's harder to say in macro ways exactly what the federal government isn't doing as well now because it has fewer actual federal employees compared to contracting employees or whatever.

  • 10:17:51

    SESNOIt's such a difficult conversation to get your brain around because it's -- we're talking about everything from aircraft carriers -- that's a government worker, you know, defending the country, in the military to the Department of Motor Vehicles, right? And some of these things are driven and much more productive now because of technology. Other than the District of Columbia, believe it or not, doing business with the DMV here has gotten quite efficient because you can do so much of it online, and it actually works. I have to think that there are fewer people doing that job doing it better.

  • 10:18:24

    TANKERSLEYYeah. And that's a productivity gain. Obviously, the government sector is notoriously difficult to measure productivity in, but that is a gain when you can automate certain core functions of government. But that's -- and that's a way where people interface with government. But that's not the only way that government works and not the only reason we should be thinking about these issues.

  • 10:18:44

    SESNOComing up, more on government jobs, government workers and the impact on the economy.

  • 10:20:04

    SESNOWelcome back to "The Diane Rehm Show." I'm Frank Sesno, sitting in for Diane today. Our conversation: government jobs in decline and what that means for productivity and for the larger economy. Discussing this with us today: Keith Hall, he's senior research fellow at the Mercatus Center at George Mason University, served as commissioner of the Bureau of Labor Statistics from 2008 to '12 and as the chief economist at the White House Council of Economic Advisers from 2005 to 2008, Jim Tankersley, economic policy correspondent with The Washington Post.

  • 10:20:35

    SESNOAnd joining us by telephone from Cambridge, Mass., Michael Greenstone. He's an economics professor at MIT and director of the Brookings Institution's Hamilton Project. He's a former chief economist at the White House Council of Economic Advisers as well. So we're having a sort of reunion here today.

  • 10:20:52

    SESNOWe're already hearing from a number of listeners who have very interesting questions and comments about this, as one might expect, because at the core of this topic are two very important things, one, jobs, our own economic well-being, individually and as a society and also politically because we feel strongly about whether the government is efficient or inefficient or whether it's too big or too small.

  • 10:21:13

    SESNOSo let me go to some of these. Here's a -- some of these are, you know, fill-in-the-blank questions, and let's get these out of the way. Kirk Peters writes to us via Facebook. "How many jobs are below 30 hours a week? Are there current job data that show the sort of part time -- that kind of information," he writes. Jim?

  • 10:21:34

    TANKERSLEYI really feel like Keith is gonna have those numbers better off the tip of his tongue since he used to run the agency that collects them.

  • 10:21:42

    HALLYeah. I'm trying to pull that up. I think it's around 20 percent right now, our part-time jobs. That's actually a very high level, and it's been that way for two, three years now. I think before the recession, it was something like 16 percent, our part-time jobs.

  • 10:21:55

    SESNOAnother question, another observation from one via Facebook. "Ninety percent of job growth," this person says, "has been in part-time jobs. Is most of the job growth been in part time?"

  • 10:22:06

    TANKERSLEYAre we talking -- I think this is a question that's about the broader economy and that's...

  • 10:22:10

    SESNOIt is about the broader economy, yes.

  • 10:22:11

    TANKERSLEYAnd there's -- and that's tricky. And I've written about this a little bit. The household survey which collects that information is notoriously noisy. Keith you could just correct me if I'm wrong about any of this, but it's notoriously up and down. And it has shown a rise in part-time job creation over the last few months. But in the last couple of months, there's been a surge in full-time job creation. It's probably just the statistics.

  • 10:22:37

    TANKERSLEYAnd what we see when we kind of pull the numbers apart is that there has been an increase in jobs fewer than 30 hours a week, and there's also been an increase in jobs in more than 35 hours a week.

  • 10:22:48

    SESNOPulling from the BLS data that I have in front of me, for example, there are a couple of things that I would throw in here. And, Michael, feel free to jump in on this. Long-term unemployed, those who have been without a job for 27 weeks or more, was unchanged last month. And we're seeing about 4.2 million people. That's about 37 percent of the unemployed who are considered long-term unemployed. Now that number is down. It's down over 900,000 over the past year.

  • 10:23:14

    SESNOSo that's improved, but it's still a very serious issue. Involuntary part-time workers, these are people who are working part time not because they want to be but because that's the situation they find themselves in, they are -- that number is roughly unchanged at 8.2 million in July. So, Michael, this is still an economy that's got a long way to go.

  • 10:23:36

    GREENSTONEYeah. I think one thing I would like to add is there's as much as -- it sounds like we have an excellent group here of people who love looking at BLS statistics, but there are people behind those numbers. And one thing that has come across in some economic research is that the long-term unemployed really have very different lives than they used to have. And so there's very compelling evidence that once you become unemployed for a relatively long period of time, it becomes harder to become employed again.

  • 10:24:06

    GREENSTONEYou get -- if you do get employed, you get employed at lower wages. There's even evidence that those folks have elevated mortality rates and that their children have harder lives. And so I think there's a human element to this that sometimes as much as -- I join Keith in feeling comfort in statistics. It's important to keep in mind.

  • 10:24:29

    SESNOI think that's a very important point. We talked some about teachers here. But let's look at some of these other sectors that have been affected by this. We're hearing stories about preparing potentially for military action against Syria. Jim, you've written about sequestration. What is the -- what are the pressures that the military is facing?

  • 10:24:51

    TANKERSLEYWell, he military has taken a hard budget reduction in the last couple of years, and it has dealt with it in several ways. In particular with sequestration, it has had some readiness issues. They've grounded some training flights. They -- there are some activity problems on bases. But they also have made sure not so far to cut big programs.

  • 10:25:14

    TANKERSLEYSo they're trying -- they're hopeful still that that sequestration is going to be reversed, and so they're not cutting into big fighter jet orders or big contracts for new other weapon systems. So in that degree, it probably won't have affected the readiness at all for a serious strike, but the bigger questions, the concerns people are raising are for readiness down the road.

  • 10:25:38

    SESNOKeith Hall?

  • 10:25:39

    HALLYeah. And this brings up one of the issues that the short-term effect of something like this isn't necessarily that noticeable. You know, agencies can cut back and they can do some things. But over the long-run time period, they really will have a much greater effect over time. Now, the military, I think, has been a little different than the rest of the government. You know, they've -- if they've been reluctant to release employment. A lot of the rest of government has gone ahead with a long-run planning notion.

  • 10:26:09

    HALLThey've sort of been directed to go ahead and cut back on staffing as if this is a permanent change. So you have seen declines in federal jobs because of sequestration. They haven't held back on that.

  • 10:26:25

    SESNOWe're talking about federal, local, state jobs and their impact on the unemployment picture and the overall economy. If you'd like to join the conversation or you have a question for us, please call us at 1-800-433-8850, or send a question to drshow@wamu.org, and we'll incorporate as much of your commentary and questioning into the conversation as we can in just a few minutes.

  • 10:26:49

    SESNOWe've been talking about the military in the federal picture. Which state have had the largest decline in government jobs as we look state to state? Michael?

  • 10:27:02

    GREENSTONEYou know, I don't have that data right in front of me. I would have to assume that it's the states that have had the largest housing bust?

  • 10:27:09

    SESNORight. So my understanding is California, New York, Florida, Ohio, are the leading states here, and the impact has been substantially felt there.

  • 10:27:20

    TANKERSLEYThe Columbus Dispatch actually had a very smart story this week in the last few days about the cuts to government jobs and how that has affected the employment picture overall in Ohio. And that's a real concern on the local level in these states that where -- and particularly in Ohio where the private sector is sort of notoriously struggling to find that next big thing, that next big innovation to boost job creation.

  • 10:27:48

    TANKERSLEYI'll say this, though, if you're thinking about federal job cuts, the place that you are worried about is right here where we are, D.C., Virginia, Maryland. They are -- the D.C. metro area is more dependent on the federal government as a source of economic activity than any other metro area is on anything in the rest of the country.

  • 10:28:07

    SESNOKeith Hall, you're worried about federal job cuts?

  • 10:28:10

    HALLWell, sure. I think federal job cuts will have some impacts, especially on places like locally. I happen to have looked at Virginia a little bit, for example. And if you look at Virginia, they probably have a little under 20 percent of their employment being from the federal government. But if you look at government contracts, how many government contracts are awarded in Virginia, you're probably adding another 10 and 10.5 percent of employment in Virginia reliant on government spending. So I say about 30 percent of the economy. And then...

  • 10:28:40

    SESNOThirty percent of the economy.

  • 10:28:42

    HALLAbout the 30 percent of Virginia economy. And then if you start of look at Virginia, they fared a lot better than the rest of the country. Unemployment rate in Virginia is much lower. It's at about 5.7 percent versus a 7.4 percent nationally. But if you strip out the government portion, Virginia looks a lot like the rest of the country.

  • 10:29:03

    SESNOI wanna take this conversation to a slightly different place for just a moment. And, Keith and Michael, you guys are economists, all right? And you were at the White House Council of Economic Advisers. You come at this from at an economist point of view, but you know what people are saying. People are saying, my taxes keep going up. There are, you know, we've got to cut back. We've, you know, if this is happening to a family, you make some cuts. You make some adjustments. How are people supposed to make sense of all of this and make the distinction between the politics and the economics of it?

  • 10:29:36

    GREENSTONESo, Frank, I think that's -- I'm glad you steered the conversation distraction. I think it's worth stepping back and even asking ourselves why we're talking about a reduction in government employees. And it's been largely driven by this kind of dramatic change in a way we're doing policy in response to a recession. And the way we're doing -- and so two things have kind of collided here.

  • 10:29:58

    GREENSTONEOne, we're in a -- we're coming out of a recession, and that has naturally put pressures on the short-term budget. But that has been conflated, I think, in people's minds with the long-term budget problem. And the way we're attacking that is a way you would attack -- we're not attacking the long-run budget problem by going after discretionary spending. We -- it might be sensible to reduce government employment sum.

  • 10:30:24

    GREENSTONEBut the real source of the long-term budget problem is entitlements, and we have not seen -- and probably too little revenue -- and we haven't seen great efforts to make progress on those. And instead, we're doing the politically easy thing.

  • 10:30:39

    SESNOThe politically easy thing. Keith Hall.

  • 10:30:41

    HALLYeah. This is getting into one of my favorite topics right now because I really do think economic policy uncertainty is contributing significantly to the slow -- very slow recovery. And in concern over no plan for the long-term budget problem, I think, contributes concern over regulation, Obamacare, that sort of thing. If you talk to small business owners, this is the sort of thing that they point to as to why they're concerned more so actually than weak demand for their product. So think at the moment, this sort of government indecision is really contributing to the slow recovery.

  • 10:31:15

    SESNOJim, you have to write the story. What do you say?

  • 10:31:17

    TANKERSLEYYeah. I'm not an economist, but I like to think that I speak economist. And what -- one of the things that I think is interesting about the story here -- the uncertainty story, in particular, that Keith is mentioning is that we have very difficult ways of measuring and empirically. We can talk to people like the Fed does and like small business groups do. But there are only a couple of indices that actually measure it, and the one that everybody likes to cite the -- from Stanford in the University of Chicago is falling.

  • 10:31:46

    TANKERSLEYIt's falling quite dramatically. So uncertainty is down in America, and we're not seeing the hiring boom that we would expect based on the model to come about yet. So that either suggests there's a different kind of uncertainty that they're not measuring, or that something more fundamental is going on the economy that's holding all this back. And I'd be curious what Keith thinks about that.

  • 10:32:08

    HALLWell, sure. It is hard to quantify. I've seen a San Francisco Federal Reserve study which I rather like because it is an attempt to actually quantify the effect of economic policy uncertainty. And they estimated at the end of 2012, economic policy uncertainty had cost us about two million jobs. So this is not trivial, and this is actually a quantification, and it does match what surveys the small business owners say, that they're generally concerned about economic policy going forward.

  • 10:32:38

    GREENSTONECan I jump in here?

  • 10:32:39

    SESNOPlease do.

  • 10:32:39

    GREENSTONEI think this question about economic uncertainty and economic policy uncertainty is a very important one. And there seems to be -- I think probably everyone could agree that budget fights and the showdowns and the defunding amendments and the continuing resolutions, none of those things are helpful. But this theory about policy uncertainty, I think, is a very attractive theory when you talk to people. My brother-in-law runs a small business, you talk to him.

  • 10:33:11

    GREENSTONEBut I -- it's at the very early stages of evidence. I would -- I think it's something that's gonna be debated in seminar rooms here at MIT and Harvard and other places for years and years to come. And I kind of think we're probably in about the third inning out of nine in terms of understanding what its role is, and it certainly has some appeal. But I don't think there's a lot of definitive evidence yet.

  • 10:33:36

    SESNOWell, there's no uncertainty about this. You're listening to "The Diane Rehm Show," and I'm Frank Sesno. And if you'd like to join us, call us at 1-800-433-8850, or send an email to drshow@wamu.org. And with that, I will go to the phones and call on Jeff, who's been waiting patiently from St. Augustine, Fla. Hi, Jeff.

  • 10:33:56

    JEFFHey, good morning. Thanks for having me on.

  • 10:33:59

    SESNOThanks for joining us.

  • 10:33:59

    JEFFI kind of had mostly a comment about, you know, kind of the hypocrisy of -- and it's kind of -- I see it as a kind of a generational thing, and, you know, perhaps it's because of where I live. You know, we've got a lot of retirees, and then also a lot of, you know, really low-wage workers. You know, you seem to have a lot of people that are happy to get their federal checks, whether it be Social Security, or we have a lot of retired military in this area.

  • 10:34:28

    JEFFBut then a lot of them are Tea Party voters. So as a younger person, I see them as basically happy to get their government checks, but refusing to invest in a future sustainable economy for the people that are working today to send them those checks. And, you know, I just don't see where we're gonna go from here when we have this -- such an electorate that's so kind of single-minded, in a way.

  • 10:34:59

    JEFFI mean, you know, you look at the last election, they said, oh, well, there's huge problems with Social Security, Medicare, Medicaid and Medicare. But don't worry. If you're over 55, we won't change a thing for you.

  • 10:35:11

    SESNOSure. Well, Jim Tankersley, interesting, interesting collision, if you will, at the intersection of politics and economics and perception.

  • 10:35:21

    TANKERSLEYYeah. I actually wrote a 5,000-word magazine piece on this last year where I debated my father as to whether baby boomers had broken the American economy for the rest of us and sucked up all the good things and left nothing behind. He...

  • 10:35:34

    SESNOAnd what was his position?

  • 10:35:36

    TANKERSLEYHe made a persuasive argument against.

  • 10:35:37

    SESNOAnd you said?

  • 10:35:38

    TANKERSLEYAnd I concluded that I won, but he still disputes that. Anyway, I think -- but I think the caller makes a very smart observation about the pressures that we are -- that are unfolding around us as this budget environment takes shape, and that is we have this sort of demographic train wreck happening where the baby boomers are retiring, where that's putting huge pressure on the federal government through spending programs that don't have a lot to do with federal employment, don't have a lot to do with transferring money through social insurance programs out to people.

  • 10:36:09

    TANKERSLEYAnd that is driving future budget deficits, and it's the big thing that we should be worried about. But the other problem is we've had 10 years now of really low growth and including a huge recession. And so if you're a young person trying to get started in this economy, you just haven't had a lot of good opportunity. So those two things combined do have a -- they add up to a not very good deal for young people in this country.

  • 10:36:29

    SESNOAnd there's more. There's the budget squeeze, especially at the federal level. It doesn't support state and local spending. There are falling tax revenues in many communities. But meanwhile there's greater demand from public services for many citizens who want better schools, better roads, cleaner water, cleaner air. You can't have it all.

  • 10:36:51

    HALLCertainly you need to pay for it. And I think one of the things that we've seen, what's different about this recession, one of the things that's different -- and Michael really mentioned this -- this is really the first -- maybe the first time that government has fully participated in the recession, like the private sector has. You look at past recessions, you just see government spending doesn't go -- government employment in particular doesn't go down. It's completely unaffected by a recession. This time it's gone down.

  • 10:37:15

    SESNOYou're listening to "The Diane Rehm Show." More with your calls and questions on the state of federal, state, government jobs. Stay with us.

  • 10:40:04

    SESNOWelcome back to "The Diane Rehm Show." I'm Frank Sesno, sitting in for Diane today, and we're talking about government jobs and decline, their impact, whether it's a good thing or bad thing. Keith Hall joins us. He's a senior research fellow at the Mercatus Center at George Mason University. He served as commissioner of the Bureau of Labor Statistics from 2008 to 2012 and is a chief economist at the White House Council of Economic Advisers, 2005 to 2008.

  • 10:40:27

    SESNOJim Tankersley joins us. He's an economic policy correspondent at The Washington Post. And by phone from Cambridge, Mass., Michael Greenstone, economics professor at MIT, director of the Brookings Institution's Hamilton Project. He is a former chief economist with the White House Council of Economic Advisers though from 2009 to 2010. I wanna go back to the phones now because we're taking your calls at 1-800-433-8850. And Carl joins us from St. Louis. Hi, Carl.

  • 10:40:55

    CARLHey there, good morning.

  • 10:40:56

    SESNOGood morning.

  • 10:40:57

    CARLSo I actually would love to comment in addition to my question...

  • 10:41:00

    SESNOAll right.

  • 10:41:01

    CARL...and that is that you were talking about uncertainty a little while ago. And it occurred to me -- I'll be more interested to know what impact irrationality takes on the actions of people. I've heard some conversations about people making the decision to hire not based on whether or not policy changes but simply on the results of the election themselves and delaying hiring practice until that point. And those kind of actions don't seem to be helping anyone.

  • 10:41:30

    SESNOAnd you think that's irrational?

  • 10:41:31

    CARLI do think that's irrational…

  • 10:41:33

    SESNOOK.

  • 10:41:33

    CARL...because these are businesses which need those employees but are holding off.

  • 10:41:37

    SESNOWe'll see if our economists have an irrationality index. But before that, I know you also have a question?

  • 10:41:43

    CARLI do, and that is that I heard some time ago on NPR that there was -- one of the states was actually using big data to analyze some of their spending programs. For instance, I remember it was a prison program determining whether training in prisons has a return for the money. And they found that most of the programs were. And I was just wondering if anyone had applied big data to the private contractor versus public employee to determine whether we are actually getting our money's worth when we pay for private contractors as opposed to public employees.

  • 10:42:17

    SESNOWell, good question and interesting comment. Who wants to jump in on that? Keith.

  • 10:42:20

    GREENSTONEI'd be happy to...

  • 10:42:21

    SESNOOK, Michael, you lead it off.

  • 10:42:23

    GREENSTONESo I think the caller really raises a super important issue which is for too many government activities, we don't know how well they're functioning, and we don't know which offices are doing better than others. And there's just incredible opportunities to use the advances and big data to improve the function of government. And I think that should be something that -- at all levels of government, there's really great opportunities to take advantage of.

  • 10:42:51

    GREENSTONEWith effect to specific question about private contractors versus public employees, I don't know of any good work on that, but, again, that's something that could be investigated.

  • 10:43:00

    SESNOAnd, Keith, what about irrationality in deciding when to hire?

  • 10:43:04

    HALLOne of the things I've learned is not to second guess small business owners in particular. Small business owners are the big job creators. Most of the job creation does actually come from small businesses. And there are people who really know their business, really know their things, that they maybe not be correct about the effects of things, but they also might be. They really -- they're really in touch, I think, with their markets.

  • 10:43:27

    SESNOAnother question about whether we're getting bang for the buck. From Matt, who joins us from Grand Rapids, Mich. Hi, Matt.

  • 10:43:32

    MATTHi. Thanks for taking my call.

  • 10:43:34

    SESNOYou bet.

  • 10:43:35

    MATTI'm a state worker, and I was just wondering if any work had been done to check and see for the efficiency of state government in terms of their frontline workers such as teachers or people who work at roads, people like me who are in IT, versus management. It seems to me that management, in my circumstance, I see it getting bigger and bigger all the time while the kind of the frontline workers are gradually being reduced and (unintelligible)

  • 10:44:07

    SESNOWell, I'll turn to the panelists in a minute. But before I let you go, Matt, so you're a state worker for the state of Michigan?

  • 10:44:13

    MATTThat's correct.

  • 10:44:14

    SESNOAnd at the risk of your boss listening to the program, you think you work in a pretty efficient operation?

  • 10:44:21

    MATTI think that the frontline workers that I work with are very efficient, and I'm proud to be part of them.

  • 10:44:26

    SESNOAll right. Thanks for your call. Let's turn to our panel. What about measuring the efficiency of these frontline workers, as Matt refers to it?

  • 10:44:33

    HALLWell, this is always an issue with working for the government. It's very hard to measure outcomes from the government. It's easy sometimes. The best you can do is sometimes measure output but not really outcomes because sometimes, the impact of government workers is so indirect. It can be very, very large, but it can be very indirect. It's very, very hard to measure. You don't have the discipline of markets, really, like you do in the private sector.

  • 10:45:03

    SESNOGail joins us from Portsmouth, N.H. Hi, Gail.

  • 10:45:05

    GAILHi. How are you?

  • 10:45:06

    SESNOGreat. Go ahead with your question.

  • 10:45:08

    GAILThank you. He did just asked about the privatization we're seeing. Over the last few years, it's been so frustrating to see the prisons, the educational systems, the -- all the military, these huge amounts of money going to private companies. And I agree that small business owners are probably a great thing at some level but not really measuring that to put, I guess, as far as donations to political, you know, is it really controlling our legislature? Is it controlling our, you know, political system in a great big way? And it's been -- it doesn't seem to be working very well.

  • 10:45:48

    SESNOLet me put that question to Jim Tankersley of The Washington Post.

  • 10:45:51

    TANKERSLEYWell, we are working at The Washington Post on a large series that includes many of the answers to this question. And without giving away all of it or even most of it, I can tell you that it's very clear that the business of government contracting is not 100 percent efficient by any means, that there are enormous barriers to entry, as economists call them, for bidders on contracts that come down in a lot of ways to who you know. And...

  • 10:46:15

    SESNOTo who you know.

  • 10:46:15

    TANKERSLEYTo who you know and what you know about the way that contracts are bid. And this -- there are absolutely quantifiable ways in which this translates into higher costs for taxpayers. And we'll have a lot more on this in the next month or so. But it's -- it should be a concern for the government, and I think it always has been when you're looking at bidding for government services.

  • 10:46:38

    SESNOMichael, you wanna weigh in on this?

  • 10:46:40

    GREENSTONEI'm anxious to read Jim's story.

  • 10:46:42

    SESNOSo is Jeff Bezos, I think. We'll see if this is good for everybody. Here's an email, "I'm a midlevel manager with several openings for highly skilled technology, I guess, or technologists, four openings for over 90 days. Why?" In other words, he's saying he's got jobs. He is sitting there on jobs and has not been able to fill it. Keith.

  • 10:47:05

    HALLI don't know what the answer is. One of the things that is showing up in economic data that is a little bit puzzling is usually there's a pretty good relationship between the number of job openings and something like the unemployment rate, how many people actually get work. And it's usually a pretty tight relationship.

  • 10:47:21

    HALLAnd one of the things that's happened since 2009 is this relationship has been broken. There have been a lot more job openings than you would normally expect. You'd think the unemployment rate should be a lot lower, given the job openings. In fact, that's -- one of the things that this research on economic uncertainty focused on was this data in particular, in trying to explain what's happening with the openings to employment ratio.

  • 10:47:46

    SESNOChris joins us from Cincinnati, Ohio. Hi...

  • 10:47:47

    GREENSTONECan I -- oh, sorry. Could I jump in, Frank, before we...

  • 10:47:49

    SESNOOK. Chris, stand by just a second. Let me let Michael weigh in on this. Go ahead, Michael.

  • 10:47:53

    GREENSTONEYeah. I think the one thing I would point out is that we're also experiencing some larger trends that are going on here. And it sounds like those are pretty highly skilled jobs. And one thing that's really clear in the data is that the unemployment rate for the highly skilled is much lower than it is for people with, say, just a high school degree. And I think it underscores the value of getting, you know, a lot of the recent talk about making college more affordable for more people.

  • 10:48:20

    SESNOBut what it really gets to as well, Michael, is the -- making sure that the skilled people are in the right places so that those jobs can be filled. That gets to the mobility of the workforce which has been hampered by the housing crisis and a number of other things. So these are intertwined.

  • 10:48:35

    GREENSTONEAbsolutely.

  • 10:48:36

    SESNOTo Chris now in Cincinnati, Ohio. Go ahead.

  • 10:48:39

    CHRISThank you for taking my call. Actually, I like the whole -- the intertwining, how the schools systems are being hit now by sequestrations and how we're not hitting those mega big contractors like Lockheed with the F-35, especially how they're dumping billions of dollars into those and not getting anything out of it, where they should be dumping billions of dollars into school -- schools and easier access to college and cheaper textbooks especially because that's -- me, being in college, that's one of the really hindrances of being able to work and pay for school and, you know, pay for the books after that.

  • 10:49:21

    CHRISI can get federal loans or whatnot but, you know, that starts to get hit and hit and hit, and it just seems to me that it gets -- it's getting harder and harder for people to continue on with a better education the more and more they actually reduce the amount of spending.

  • 10:49:41

    SESNOWhat line of work are you hoping to go into?

  • 10:49:44

    CHRISActually, I initially started in culinary and I'm switching into the medical field because the hospitality industry, as driving as it is now, is a rather low-paying job, unfortunately. They're -- I have a lot of experience, but I can't seem to find companies that wanna pay for that experience.

  • 10:50:05

    SESNOOK. Let me ask Michael and Keith. Any advice for Chris and other young people who are thinking about where the growth opportunities are, where the good wages are going to be?

  • 10:50:16

    GREENSTONEYou know, I think one thing that has really been -- the labor market has been kind of screaming as loudly as possible for the last several decades is the returns to higher ed are very high. And even with the justified discussion about college costs, there -- these are really about as good an investment as you can make, that is going to college. And it's hard to predict exactly what occupation or what skill is gonna be necessary, but the data are really clear that getting a college degree is the way to go.

  • 10:50:51

    HALLAbsolutely. I, in fact, have a sort of a standard graph that I show when I give talks is my stay-in-school graph where you can just look at something like unemployment rates by education, labor force participation by education makes a huge difference. And interestingly, the biggest jump you get is actually completing a college degree. It makes a big, big difference.

  • 10:51:11

    SESNOAll right. Back to the phones. And William now calls and joins us from Boydton, Va. Hi, William.

  • 10:51:16

    WILLIAMYes, good morning. I've got a question in for your group.

  • 10:51:20

    SESNOSure.

  • 10:51:20

    WILLIAMWhy is it and it doesn't matter whether it's the FAA or the Corps of Engineers who are paid a regular salary, whenever you go to ask them to do something, there is always a fee attached to it? We had to cut some trees down here on Corps of Engineer property, just cutting down the trees. Eventually after five years, it cost $7,000 to get those trees cut down. And I'd like to know what those people are doing when they're not working on the application. And the FAA is now trying to charge the Experimental Aircraft Association for providing controllers for flying in and out at Oshkosh every year.

  • 10:52:01

    WILLIAMWhat are those controllers doing when they're not at Oshkosh? In other words, they get paid a salary, and then you have to pay them like contractors to get something else done. And one more thing.

  • 10:52:15

    SESNOOK.

  • 10:52:15

    WILLIAMWhen they go to cut back on the Fed or the state government level in most cases, they get rid of the cops and they get rid of the EMS. They don't get rid of the $90,000-a-year child development personal esteem tax bibbidi-bobbidi-boo self -- in other words, the policy wonks sit around all day checking their email and playing "Donkey Kong" on their computers.

  • 10:52:40

    SESNOOh, wow.

  • 10:52:40

    WILLIAMI'd like to hear your response to that.

  • 10:52:42

    SESNOAll right. There is something to respond to there. Jim? Keith?

  • 10:52:45

    TANKERSLEYI'm generally pro-"Donkey Kong" but not in the public sector. But I think that what we're looking at -- what the caller is getting at is a very, I think, frequent critique that I hear of government workers, which is what are they actually doing? How are they actually providing services? And a lot of what government does you can't see. Specifically with what he's saying about fee-for-service though, this has been a big trend with state governments in particular but I guess also with the federal government, where you try to make the users of a product pay more for it.

  • 10:53:16

    TANKERSLEYAnd it's way to raise taxes essentially without making everybody pay them. You put -- focus them on the users. And also without having to get a tax increase through a legislative body, which is gotten harder and harder basically at all levels of government.

  • 10:53:29

    SESNOI'm Frank Sesno, and you're listening to "The Diane Rehm Show." Keith, you wanna weigh in on this?

  • 10:53:34

    HALLWell, sure. Part of what you're talking about, it's an effort to make the benefits match the cost. And actually, I think that's a good thing. I think with the FAA in particular, I wanna mention one thing. You know, it cost about the same to land an airplane -- a small airplane as it does a large passenger plane, but they get charged very, very different amounts. So essentially what's happening is the very large passenger planes are subsidizing little small planes.

  • 10:54:00

    HALLAnd I actually absolutely support the idea that the FAA would make the cost reflect the benefit a little bit more closely with -- especially with respect to small planes.

  • 10:54:09

    SESNOI wanna, in the few minutes that we have remaining here, stir this conversation to how we have a knowledgeable conversation to move the public discourse about this forward because at the end of the day, a lot of this discussion is gonna be driven by public perception, and public opinion, and political will. A very strong and, I think, thought-provoking email from Maryanne, who's listening to our conversation, and she wrote the following.

  • 10:54:34

    SESNO"You said the forecast for sequestration was that the sky would fall but that it isn't falling." But she says, "The sky is slowly falling. Consider what your guest just said about the impact on students of larger class size. Consider the family whose house is not safe because of a cut in firefighters. Consider the children who are hungry. Consider the impact on their brains and attention spans and how that affects their futures. Consider jobs lost. Consider work not being done by furloughed workers. Consider infrastructure needs not being met."

  • 10:55:02

    SESNOMaryanne really captures a lot of the nuance of this discussion because you can talk at the economic level, you can talk at the political level, but there are jobs that need to be done, whether they're done productively or nonproductively, whether we're paying too much or too little, whether contractors are doing them or not. There are real lives here, Keith, as you observed earlier.

  • 10:55:21

    SESNOHow -- I ask the three of you. How do we have this very complicated conversation at a time of immense division politically in this country so that we can come to some kind of rational, data-driven conclusion about all of this? Keith.

  • 10:55:37

    HALLWell, sure. One of the things that's very frustrating -- I've had a career on the federal government. And lots of times when budget issues come up, decision aren't made and budgets are just sort of trimly haircut. All right. That's about the least intelligent way to cut back on government spending. Nobody is really looking at it carefully, looking at things that are and aren't needed and making a sort of big business decision on that. That's a lot of what we need with government.

  • 10:56:03

    SESNOMichael.

  • 10:56:05

    GREENSTONEI think what I would add is in, I think, some of the gloom of the recession and coming out of the recession and now the budget problems is a little bit has been lost, which is -- it's kind of like the Churchill quote, like, Americans, you can count on them to do the right thing after they've tried everything else. And there's a tremendous opportunities in front of us.

  • 10:56:26

    GREENSTONEYou know, it'd be very hard to find Americans who don't want their children to do better than them, be hard to find Americans who at some level, you know, wouldn't wanna be involved in saving the planet from climate change or finding the new technology that changes the world. And I think there are lots of opportunities for government to facilitate those changes. And I think continuing in trying to provide a picture of what that could look like is a good path to follow.

  • 10:56:52

    SESNOJim, you get the last word. Jim Tankersley.

  • 10:56:54

    TANKERSLEYThe thing that's gonna make this easier is more economic growth. If we have a growing economy, we'll have more jobs for everyone, people will feel better, and we'll have more revenues to figure out what to do with smartly at government.

  • 10:57:06

    SESNOAnd we'll look forward to your series in The Post. When is that publishing?

  • 10:57:09

    TANKERSLEYSometime this fall.

  • 10:57:10

    SESNOSometime this fall. Look forward to that. To all of you, thanks for a stimulating conversation. You've been listening to "The Diane Rehm Show." I'm Frank Sesno.

  • 10:57:18

    ANNOUNCER"The Diane Rehm Show" is produced by Sandra Pinkard, Nancy Robertson, Denise Couture, Susan Casey Nabors, Rebecca Kaufman, Lisa Dunn and Danielle Knight. The engineer is Erin Stamper. Natalie Yuravlivker answers the phones.

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