The Public Sector Recession

Most regular folks and media pundits seem to assume that the public sector is recession-proof – hence all those nasty calls for wage freezes, cuts and pension rollbacks on the part of supposedly cosseted government workers from the CFIB and other right-wingers.

In point of fact, it’s a myth.

Since October, 2008 – when employment began to fall – through February, 2009, we have lost 295,000 jobs, of which 290,000 were employee jobs. Of those lost employee jobs, 82,000 or 28% were in the public sector. That’s a disproportionate hit. In fact, we lost 2.4% of public sector employee jobs, compared to 1.9% of private sector employee jobs.

What’s going on? It’s a bit hard to tell since public sector jobs are scattered through many industries, including transportation and utilities, for example, where the private sector dominates. But the industry data do show a large job loss in (mainly public sector) educational services of 44,000 or 3.7% of the October, 2008 jobs, on top of a 23,000 or 2.5% job loss in public administration which represents direct government employment.

The local papers I read report major layoffs by the City of Ottawa, and I hear of job cuts at local universities in response to pension shortfalls and collapsed endowment funds. The national papers I read report big job cuts in New Brunswick because of spending cuts in the provincial Budget to fund tax cuts.

So, it looks like, myths aside, public and private sector workers are in pretty much the same foundering boat.

(Data above are from the Labour Force Survey, seasonally adjusted)

One comment

  • At the universities this is heavily driven by the collapse in the stock market. There are the pensions, which need to restore funds as they are often defined benefit plans. There are the endowments, which can protect their principal by simply reducing their percentage payout (either in half or down to almost nothing). And lets not forget the private research foundations scattered throughout the world, which often have their money parked in some kind of a well-balanced stock portfolio. By well-balanced I mean that they are as broke as everyone else. Add it all together, and you see a wide range of scholarships and research projects being gutted.

    The interesting thing is that it turns primarily on the stock market, rather than the economy as a whole. If there were a bear market while the economy were otherwise doing fine, the same problem would exist.

    Of course, this is very unfortunate. Universities are in an ideal position to serve as a “buffer” of economic activity that is unaffected by the swings of the market. Better yet, universities could be ideally counter-cyclical, as the hardest hurt during the recession are actually the young workers aged 17-25 who could easily wait out a recession by filling university seats.

    I blame the adoption of the American model of university financing which encourages getting funds increasingly from the private sector. So yes, in this case we can blame neoconservative ideology.

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