Back in August I wrote a piece about how government doesn't create jobs. It was my usual brilliant analysis and explanation of why government jobs kill private sector jobs. At least until the end when, I don't know, maybe I was tired, but I wrote:
Government doesn't create jobs. Oh, it can hire people, but always at a cost to the economy that will result in jobs being lost. It probably isn't a one-to-one correlation. Maybe ten government jobs to one private-sector job lost. But there is a causation. Shrink the government and watch the economy flourish.
Recently (okay, Thursday) I re-read that and realized I'd made a huge error. If my statement above is correct that you can hire 10 government workers and only kill one private sector job, then you're up nine jobs and we can tax and spend our way to prosperity. But the empirical evidence is that we cannot.
So where did I go wrong? I didn't do the math. Let's think about this. Let's say you are the city manager of a small town and you want to hire a new dog catcher. And you have to pay him a living wage or the newspaper will write articles about how mean spirited you are. So you have to pay him $50,000 a year plus benefits which comes to $75,000 total (based on my experience in business). Then you have to administer that job, i.e., hire someone to do the payroll, pay the payroll taxes, managed the health care benefits, etc. Maybe that takes one person per 100 city employees. And the dog catcher needs a supervisor so that's another person who can supervise maybe 10 people. And the supervisor needs a supervisor (this is government after all) who can supervise another 10 people. So we're up to 1/10th of a Full Time Equivalent (FTE) for the supervisor, and 2/100ths of an FTE for the payroll/benifit person and the supervisor's supervisor. That's 12/100ths of an FTE. Assuming all those people make $50,000 a year, too ($75,000 with benefits) that's $9,000. Add that to the $75,000 to hire the dog catcher and that's $84,000 to hire one dog catcher. And I ignored the benefits person's supervisor and their supervisor. But let's stick with that $84,000 number. Oh, and then there's the government money sausage factory that can't do anything cheap so you're probably up to $100,000 by the time all is said and done.
Now, let's say you're a small businessman in this town and you want to hire a laborer. That pays $25,000 plus benefits so about $33,000. And you have other expensises, too, like payroll clerk and supervisors so let's guess a total of $40,000.
But guess what, the city is taking $100,000 out of the local economy to pay for a dog catcher. That means there's at least two laborers or one supervisor who won't be getting a job (I forgot to mention, you're the only business in town).
Now, that's a vast over-simplification. But because government pays more than the private sector when benefits are included, works people less, and does less with the people they have, a government job might cost one and a half or two or maybe even more jobs in the private sector that have to be taxed to pay for them.
And that's why government job programs don't work!



