“Right-sizing” through public sector layoffs downsizes NC economy

The following is a statement from the NC Budget & Tax Center about the flawed notion that slashing public jobs leads to private sector employment growth

RALEIGH (July 25, 2011) – North Carolina’s unemployment rate increased to 9.9 percent in June, largely driven by job losses in the public sector. Yet North Carolina GOP Chairman Robin Hayes made a remarkable statement on Friday. Chairman Hayes said that he hopes to see an increase in layoffs from state government. 
Public sector layoffs don’t “rightsize” state government, they downsize the state’s economy. The idea that public sector layoffs somehow help the economy is pure ideology. It is not supported by the economic evidence, and is proven flatly false by years of recent experience.
One reason why: Public sector employees spend their income in private sector businesses, and cutting off this spending hurts private business. Witness how public sector layoffs have killed total job growth and impeded private sector job growth.
In the last month alone, the state has laid off over 7,600 public employees, the single largest factor in Friday’s disappointing job report showing that the state shed a total of 9,500 workers in overall employment in June.
Cutting state employment in the midst of a difficult recovery doesn’t just gut key public investments, it also damages the state’s economy.  Public sector jobs are just as real as private sector jobs—they pay real wages that these public employees spend at private-sector businesses; and that without this spending, those private businesses earn less money, make lower profits, and hire fewer workers. 
We’ve seen the same pattern played out over the last year—public sector layoffs are repeatedly holding down the state’s total job growth.  Since June 2010, the state has laid off 20,000 public employees, almost entirely wiping out the anemic 28,900 gains in private sector job creation.   
North Carolina could have almost doubled its job creation numbers if the state hadn’t laid off so many workers in a misguided effort to gut core public investments.
Instead, newly unemployed former government workers create more intense competition for shrinking private sector job opportunities, which are increasingly low-wage jobs. 
Furthermore, Chairman Hayes ignores the importance of a strong, effective partnership between the public and private sectors. A vibrant economy depends on public-sector workers directly supporting private-sector employment and production.
Teachers in public schools, community colleges, and universities ensure that businesses can hire from a pool of skilled and productive potential employees. Employees at small business development centers work to ensure that entrepreneurs have the tools and knowledge they need to open or expand a small business.
Chairman Hayes’ call for more massive public sector job losses would have devastating effects on North Carolina’s jobs picture. The proper economic medicine is to support vital public investments, not to downsize the state’s economy.
FOR MORE INFORMATION, CONTACT: Alexandra Forter Sirota, director, NC Budget & Tax Center,alexandra@ncjustice.org, 919.861.1468; Allan Freyer, BTC policy analyst, 919.856.2151,allan@ncjustice.org; Edwin McLenaghan, 919.856.3192, Edwin@ncjustice.org; Jeff Shaw, director of communications, NC Justice Center, jeff@ncjustice.org, 503.551.3615 (mobile).
The N.C. Budget and Tax Center--a project of the N.C. Justice Center-- seeks to create economic opportunity and shared prosperity for all North Carolinians through non-partisan research, education and advocacy on budget, tax and economic issues.