Employment has been both a casualty of – and a contributor to – the downturn in the economy. While private sector employment began its decline at the start of the recession, it has begun to show signs of recovery in recent months, according to Lucy Dadayan, a Senior Policy Analyst at the Rockefeller Institute of Government.
Such is not the case for public sector employment, she says. In the interview that follows, Dadayan discusses the impact of the recession on state and local government employment.
MuniNet: Have private sector and public sector employment experienced parallel declines?
Dadayan: Both private and public sector employment has experienced significant declines caused by the Great Recession. Yet the magnitude and timing of the declines in private versus public sector employment are not quite the same.
The declines in both private and public sector employment were unprecedented in the Great Recession than in any other recession. However, the declines in private sector employment were far steeper than in public sector employment. As of August 2011, for the nation as a whole, private sector employment is down 5.6 percent from the pre-recession levels. By contrast, public sector employment is down 2.4 percent.
Private sector employment has been recovering weakly in the last 18 months, while the decline in public sector employment became more widespread. This is broadly consistent with past recessions, in which state and local government employment changes tend to lag responses in the private sector.
MuniNet: Has this recession dealt a greater blow to public sector employment than previous economic downturns?
Dadayan: Absolutely! State and local government employment declines are significant by historical standards. With the exception of the double dip recession in the early 1980s, public sector employment has never experienced this type of sustained decline. State and local government employment remained relatively stable in past recessions, but the Great Recession has brought unprecedented change to the national economy, which has, in turn, significantly affected state and local economic conditions. During the first two years of the Great Recession, federal stimulus aid helped to delay cuts in state and local government jobs. However, the federal aid is now essentially exhausted and with the absence of federal aid, state and local governments are now forced to make hard choices. The result: state and local government job losses now surpass those of the early 1980s.
“Private sector employment has been recovering weakly in the last 18 months, while the decline in public sector employment became more widespread.”
MuniNet: Within the public sector, are we seeing greater declines in state or local sector employment?
Dadayan: Local government employment accounts for nearly 75 percent of state and local government employment, and its impact on the public sector employment is much more significant. Local government employment has experienced far greater declines – nearly twice as big – as state government employment. As of August 2011, local government employment is down 2.9 percent, while state government employment is down by 1.2 percent from the pre-recession levels.
Elementary and secondary education by and large dominates local government employment, and it has been hit harder in the Great Recession than in other recent recessions. The declines in local government education employment now are far steeper compared to the declines in the 1980 double-dip recession.
For the nation as a whole, local government education employment is down 3 percent from its pre-recession level, and local government non-education employment is down 2.8 percent, accounting for declines of somewhat over 400,000 jobs in the local government sector.
The state government employment response to the recession has been more varied and muted than the local government response. State government education employment, which accounts for some 45 percent of state government employment, has been relatively stable and remains above the pre-recession level. By contrast, the state government non-education employment has been declining nearly steadily since its August 2008 peak. Overall, the current declines in state government jobs are far larger compared to other economic downturns.
MuniNet: What would it take for the trend to reverse?
Dadayan: Before any discussion about the reversal trend, we need to be aware of the current trend and be alert about its consequences.
Most states continue facing harsh fiscal realities, which will likely lead to further declines in public sector employment, particularly in the local government education sector. This is particularly due to recent weakness in local property taxes. Local property taxes account for over 70 percent of the total local government tax revenues. The local property tax revenues, which generally respond to property value declines more slowly, have been continuously declining in the last three quarters. To make things even worse, many state governments have been cutting aid to local governments. This leaves no choice for local governments but to cut employment even further. Many school districts around the country have already reduced teaching positions by attrition and by laying off teachers.
MuniNet: In what ways does a declining public sector employment base affect citizens?
Dadayan: Public sector employment comprises roughly 15 percent of total employment, compared to somewhere around 10 percent in the 1950s. This increase can be attributed to governments providing more services. With the public sector employment experiencing unprecedented declines, state and local governments will face further challenges in providing services to their citizens in spite of the growing demand for government services.
About the Expert:
Lucy Dadayan is a senior policy analyst at the Rockefeller Institute of Government. She has conducted research and co-authored reports on state and local government fiscal policy issues; state spending on public policy programs and the effects of state fiscal capacity and economic changes; fiscal issues and organizational challenges of the K-12 education system in New York State; and state and local government administration of the Workforce Investment Act. Dadayan is a Ph.D. candidate in Informatics at the University at Albany.