Do Government Jobs Crowd Out Private-Sector Jobs?
Taxpayers and the unemployed hoped that Washington would enact policies that promoted economic growth, but much of the Obama “stimulus” spending has instead gone toward ensuring that state and local government workers don’t lose their jobs. Private employment fell by 5.6 million jobs since the recession began, but over the past year government employment has remained essentially constant at 22.5 million, according to Independent Institute Senior Fellow Robert Higgs. “This situation bears an eerie resemblance to the employment situation during the Great Depression,” writes Higgs. Millions of workers were added to government payrolls during the New Deal, but private nonfarm hours worked fell sharply from 1929 to 1932 and did not return to 1929 levels until 1941. “Keynesians like to suppose that whenever the government undertakes new spending to augment the ranks of its employees a multiplier effect will result, causing private economic activity and employment to follow the same upward co
