TCS Daily


The United States Is the New Europe

By Diana Furchtgott-Roth - April 15, 2010 12:00 AM

Many of President Obama's advisers want America to emulate Europe. That is, after all, where health care is free, where taxes are high but no one seems to complain, and where the brightest students go to work for the government because the private sector is simply disappearing.

The president's advisers are seeing their wishes come true. While the government is hiring, the private sector is losing millions of jobs rather than creating them.

Nowhere is this more true than in the hard-hit construction industry. Its 25% unemployment rate could rise even higher given this week's news. On Tuesday, the administration issued final regulations for an executive order issued by Mr. Obama on project labor agreements. The executive order favors union labor over nonunion shops on large federal construction projects-those worth over $25 million each. The order will take effect on May 13.

According to the new rule, "every contractor and subcontractor engaged in construction on a construction project agrees, for that project, to negotiate or become a party to a project labor agreement with one or more labor organizations."

The language might make more sense when translated into German or French. Under project labor agreements, all employees have to receive union-approved wages and benefits, even if they do not belong to unions. This drives out small businesses from competing for these projects; raises their cost to the taxpayers; and funnels a larger stream of union dues from taxpayers' pockets to union treasuries.

With a nationwide unemployment rate of 9.7%, this executive order makes job growth in the private sector harder to come by. Taxpayer dollars don't go as far because projects are more expensive, and small businesses, the engine of job growth, hire fewer workers.

Private sector employment peaked at 115 million in 2007, and now stands at 107 million. In contrast, the share of public employment has been rising over the past decade. In 2000 15.7% of civilian employment was government jobs, and now the share stands at 17.3%. So it might be more realistic for the unemployed to seek government jobs, with higher compensation-pay and benefits-and better security. Just like Europe.

The rising share of government employment is due to two factors. First, as has been widely reported, employment in private-sector America is shrinking, perhaps for reasons larger than the recession that began in 2008.

At the same time, employment in federal, state, and local government has been growing. There were 21 million government workers in 2000, and the number increased steadily throughout the recession, peaking at 22.6 million in May, 2009. Now the level is a few thousand lower, at 22.5 million. The growth is primarily due to state and local government employment, which has increased from 77% of all government jobs in 1970 to 87% today.

Not only did most government workers not suffer job losses during the recession, their levels of compensation are higher than those of private sector workers. It used to be that government workers were paid less than private sector workers, on the grounds that government work was more secure.

No longer. According to the Commerce Department's Bureau of Economic Analysis, average full-time wage and salary earnings in the private sector in 2008, the latest available, were $50,000, while for civilian federal government workers they were $79,000.

When benefits such as vacation, pensions, sick leave, and health insurance were taken into account, the gap widened. Compensation per full-time employee in the private sector was $60,000, and in the civilian federal government it was $120,000. And there is a lower risk of losing a government job.

Between 2001 and 2008 the amount of work performed under private contracts with the government more than doubled, as the Bush administration tried to cut costs. But Mr. Obama wants to reverse the trend of contracting out federal government work to the private sector-except when it favors unions.

In March, the administration issued draft regulations to specify which government jobs could be contracted out and which ones had to be performed by government workers. Comments are due by the end of May, and the administration hopes to publish the guidelines in final form by the fall.

Naturally, this effort to reduce contracting out has the full support of the largest union of public-sector workers, the American Federation of State, County, and Municipal Employees, one of the fastest-growing labor organizations. AFSCME has multiple sections on its Web site (afscme.org) attacking contracting out of government jobs.

Contracting out results in fewer union workers and fewer dues payments the union treasury, whence union officers' salaries are paid. In 2006 AFSCME spent 44% of its budget, almost $70 million dollars, on representational activities, political activities, and lobbying.

According to the Center for Responsive Politics, AFSCME contributed $45,000 and $44,000 respectively to the election campaigns of then-Senators Barack Obama and Hillary Clinton in the 2007-2008 election cycle, and $12,000 to the campaign of then-Representative Hilda Solis, now Secretary of Labor.

When the government does contract out jobs, private-sector employers are increasingly subject to scrutiny and regulations that work against small business and help larger unionized firms. The Davis-Bacon and Service Contract Acts and their associated regulations require contractors to pay "prevailing wage rates." The new project labor agreements will ensure that workers in the construction sector are paid wages even higher than Davis-Bacon rates.

It's not easy to destroy incentives to hire in the largest economy in America. But Mr. Obama's advisers are mastering the art. You can thank them the next time you wonder why it is hard to find a job in the private sector.


This article first appeared on RealClearMarkets.

Diana Furchtgott-Roth is a contributing editor of RealClearMarkets and an adjunct fellow at the Manhattan Institute.

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4 Comments

Messing with our minds
This one's more like the articles TCS used to put out. Totally unsourced, relying on innuendo, Ms Furchtgott-Roth is nearly entirely off base when it comes to comparing her smears with facts.

"Many of President Obama's advisers want America to emulate Europe. That is, after all, where health care is free, where taxes are high but no one seems to complain, and where the brightest students go to work for the government because the private sector is simply disappearing."

No one thinks HC will be free. In fact it's commonly known that the HC bill was co-written by the insurance and pharmaceutical industries. Not coincidentally, these -- among Obama's top financial backers-- expertly tilted the table until their own ball fell into the corner pocket.

Here's how they did it:

http://www.pbs.org/wgbh/pages/frontline/obamasdeal/

Also, in light of our immense and growing national debt, only a fool would think taxes did not have to go back to prior levels. They need to go back at least to where they were in 1997-2000, when we were paying our debt down responsibly and not uncomfortably.

Finally, I've heard no one say the private sector was collapsing, so all our new grads should be getting into government work. Exactly no one. In fact "Economists took heart that even aside from the population count (census jobs), the private sector added 123,000 jobs for the month (March, 2010), the most since May 2007."

Or, in a consensus opinion: "The economy is moving in the right direction, albeit at a torturously slow pace," said Paul Ashworth of Capital Economics."

http://news.yahoo.com/s/ap/20100402/ap_on_bi_go_ec_fi/us_economy

So the next paragraph is plainly not true: "The president's advisers are seeing their wishes come true. While the government is hiring, the private sector is losing millions of jobs rather than creating them."

See what she did? She inserted into your brain that the government WANTS millions of jobs to be lost. It sounds stupid, but this kind of thing works well on the under-100 IQ set. And they vote.

Next she tries to convince us that the construction industry collapsed because of some obscure new rule purporting to give union labor preferential treatment. Nothing there about the collapse of the mortgage industry, and the retrenchment of the entire RE market into a new form. Construction is just awaiting a fresh set of circumstances before it begins work again. Banks and builders wouldn't, in fact couldn't, have it any other way.

It's that "German and French" influence. This approach makes a lot of sense to nativist, chauvinist types who love America and think everyone they don't like ought to go home and keep quiet. While they scream and shout. Obama's not even American, you know. That sort of thing.

Employment in private-sector America is not shrinking. It's starting to grow again. Once more, "the private sector added 123,000 jobs for the month (March, 2010), the most since May 2007." And Obama is not a secret European. Please folks, grow up. This is getting ridiculous.

Poor Roy
"No one thinks HC will be free."

Really? The average Obamaphile on the street seems to think so.

"So the next paragraph is plainly not true: "The president's advisers are seeing their wishes come true. While the government is hiring, the private sector is losing millions of jobs rather than creating them."

"Finally, I've heard no one say the private sector was collapsing, so all our new grads should be getting into government work"

Uh...she didn't either. She said that the Obamunists WANT us to be that way -- which is how it is in Europe. Pay attention.
Uh...the job numbers look 'better' precisely because the government is hiring ONE MILLION government census workers, Roy. So....care to revise your statement that trashes her FACT?

"Employment in private-sector America is not shrinking. It's starting to grow again."

Talk about pushing FALSE facts, Roy. While here on Planet Reality...

"WASHINGTON — The number of newly laid off people signing up for unemployment benefits climbed for the second straight week, and industrial production edged up just 0.1% in March, lagging expectations despite growth in the key manufacturing sector.

The Labor Department reported Thursday that first-time requests for jobless benefits rose 24,000 last week to a seasonally adjusted 484,000, the highest level since late February. Economists were predicting claims would fall."

http://www.usatoday.com/money/economy/2010-04-15-jobless-claims_N.htm

"And Obama is not a secret European"
Correct. He's a radical marxist.

Pushing false facts
1. "The average Obamaphile on the street seems to think so."

No one thinks health care will be free. In fact everyone thinks it will cost more. That's a fact.

2. "The president's advisers are seeing their wishes come true. While the government is hiring, the private sector is losing millions of jobs rather than creating them."

The private sector is creating jobs-- as I showed you in my reference-- and neither of you are disputing that fact.

Nor is there a shred of evidence that Obama WANTS "the private sector to lose millions of jobs". That's just plain insane.

3. "Uh...the job numbers look 'better' precisely because the government is hiring ONE MILLION government census workers, Roy. So....care to revise your statement that trashes her FACT?"

You utter moron, you can't even read. Go back to the quote in my comment. It went toward jobs created in the private sector, and specifically excluded temporary jobs with the Census.

Employment in private-sector America is not shrinking. It's starting to grow again. It's all in the article I referenced.

BTW you're pretending you don't know that "job growth" measures the net difference between jobs lost and new jobs gained. So if there's been an uptick this past week in job losses it's obviously being compensated for by healthy gains... in the private sector.

You are a complete and blatant liar. No one could be as stupid as you pretend to be.

Poor Roy
"No one thinks health care will be free. In fact everyone thinks it will cost more. That's a fact."

That doesn't stop your typical Obama propagandist from telling the informed otherwise, does it?

Nice to know that you're finally coming on board with regards to the main reason why it will be repealed, though.

"The private sector is creating jobs-- as I showed you in my reference-- and neither of you are disputing that fact."

Uh...no, you showed references for bogus unemployment data in total. I had to point out to you that when you take out the government jobs you'll see that the private sector isn't producing much...as April's unemployment numbers are showing.

"You utter moron, you can't even read. Go back to the quote in my comment. It went toward jobs created in the private sector, and specifically excluded temporary jobs with the Census."

yes, your COMMENTS said so. But here on Planet Reality, your comments and actual facts don't jive well.

"Employment in private-sector America is not shrinking. It's starting to grow again. It's all in the article I referenced."

Hahahahahahah....sorry. But I can find TEN articles that say otherwise. BUT I DON'T have to, since the April jobless claims are 'unexpectedly' soaring. You know what 'unexpectedly' means when it is said by 'experts'? It means: "We can't falsify the numbers enough to hide that we outright lied/or didn't know what we were talking about in the first place". Lots of global warming 'scientists' have been forced to say the same thing lately, too. Hmmmmmm.

"BTW you're pretending you don't know that "job growth" measures the net difference between jobs lost and new jobs gained"

Uh...no. In fact, I'm am the one who has to repeatedly explain to you what NET difference means, Roy. Nice try.

"So if there's been an uptick this past week in job losses it's obviously being compensated for by healthy gains... in the private sector."

No, because the job figures are describing just the losses so far from what I can tell. They usually have to wait a month or two to collect data on jobs created and then revise the NET difference then.

"You are a complete and blatant liar"

If that is what you must tell yourself to maintain your Denial.

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