Data Wonk

Is Walker to Blame for Poor Job Growth?

Liberal and conservatives adamantly disagree. What does the data show?

By - Jul 9th, 2014 02:05 pm
Gov. Scott Walker

Gov. Scott Walker

Recently the Journal Sentinel published a commentary by Marc Levine titled Gov. Scott Walker to blame for poor job growth. This was followed a week later by Gus Ramirez’ commentary, The real reason Wisconsin growth lags? It’s not Gov. Scott Walker, only to be followed by Why is Wisconsin lagging other states on jobs? by Oshkosh economics professor Kevin McGee.

By this time there is little doubt Wisconsin has lagged the nation and most of its neighbors in job growth since Walker took office. Wisconsin ranks around 34th among the states. If it had grown at the same rate as the US or neighboring Minnesota, Wisconsin would have about 50,000 more jobs. A comparison with other neighboring states puts the gap at 20,000-30,000 jobs. Even the very Walker-friendly American Legislative Research Council, in its 2014 edition of Rich States, Poor States, rates Wisconsin’s economic performance as 44th among the states.

The problem arises when it comes to assigning a cause for this performance. A mantra in statistics is that correlation does not prove causation. Studies by political scientists have found that voters tend to credit governors when times are good, and blame them in bad times, even when the causes are clearly beyond the control of the governor. For example, when world energy prices are high, governors in energy-producing states such as Texas tend to be more popular than when prices are low.

Unfortunately we cannot run a lab experiment in which Tom Barrett wins the election and then sit back and see what happens to jobs. Thus we must turn to less definitive analysis.

Annual change in jobs.

Annual change in jobs.

First, we need to recognize that Wisconsin’s economy rides that of the nation, as shown in the graph. When the nation prospers so does Wisconsin. Any comparison between two time periods using Wisconsin data that does not take into account national data for the same periods is likely to be of little value. It is unfortunate that both the Walker and Mary Burke campaigns have fallen into this practice.

A second observation is that Wisconsin has experienced a downward trend over the last 20 years in its percentage of the nation’s jobs, as shown in the next graph. One notable pattern is that Wisconsin tends to hold its own or even gain on the nation when the national economy is weak. Perhaps Wisconsin employers are more reluctant to lay off workers when times are bad.

Wisconsin Jobs as % of US.

Wisconsin Jobs as % of US.

The second graph also shows job growth in each governor’s terms. It is likely that a governor’s supporters would claim he was responsible for good times and that other factors were to blame when the results weren’t so good. Opponents might follow the opposite pattern. The Levine and Ramirez articles fit this pattern.

Critics of Governor Jim Doyle’s economic policies—and by extension Mary Burke’s—tend to concentrate on the period from 2005 to 2007. While Wisconsin’s economy was growing—and unemployment was between 4.7% and 4.8%–Wisconsin jobs were not growing as fast as the nation’s. In an earlier article I suggested alternative explanations for this, notably that Wisconsin’s housing bubble was smaller than that of the nation and the national trend to off-shoring manufacturing hit Wisconsin harder than states with less manufacturing intensity.

In the final year of the Doyle administration, jobs started growing both nationally and in Wisconsin. Breaking the traditional pattern, the growth rate was greater in Wisconsin. After Walker became governor, Wisconsin jobs continued growing, but at a rate less than the national rate. This leads to the question; did Walker’s policies have something to do with this? With other policies would Wisconsin have continued the growth of the final Doyle year? Or was Wisconsin fated to return to its historical behavior of growing less than the nation?

Let’s start with Ramirez’ argument. It should be noted that the company he heads, Husco International, has a reputation as being well-run and gaining market share as a supplier to the automobile industry based on innovation and attention to quality, a justified reputation in my experience. It has facilities in Waukesha and Whitewater Wisconsin as well as China, India, England, and Maquoketa, IA.

Ramirez starts by criticizing Obama administration policies, but it is hard to see how these would affect Wisconsin differently than other states, and he does not pursue that track. He then zeroes in on two factors that in his view account for Wisconsin’s sluggish growth.

The first of these is uncertainty caused by the recall re-election. Governor Walker has also pointed to this and predicted that once the recall was over, Wisconsin would take off. But this didn’t happen; if anything Wisconsin growth fell further behind after the recall. Ramirez then suggests that uncertainty about the upcoming election is the culprit. He doesn’t say what business-friendly policies would likely to be reversed if Burke were elected. As I discussed in a previous article the chance of Republicans losing control of the legislature is remote, so it is unlikely any legislation opposed by the business community would be enacted.

The second factor is problems with the Wisconsin workforce, which he blames on the Milwaukee Public Schools. He claims that to fill 250 jobs in Milwaukee, Husco would have to interview 5,000 applicants and the initial 250 employees would turn over several times. He does not cite any source for this estimate. It seems unlikely it would be based on Husco experience, since its workforce is likely drawn from Waukesha, Jefferson, and Walworth counties. Was this estimate based on the experience of another company? We cannot tell from the article.

Both Ramirez and another outspoken critic of the Doyle administration, Richard Uihlein, owner of the Uline Company are long-time Republican donors to Republican causes. Thus one has to wonder how much of their complaint reflects their partisan orientation and how much is an unbiased view of the Wisconsin business climate. Ironically both men’s companies received substantial grants from the Doyle administration.

Levine’s argument reflects a controversy that has been going on nationally since the start of the Great Recession: whether the economy is best healed by government stimulus funding intended to move money into the hands of consumers who will spend it, or whether the solution is to restore confidence by reducing government deficits. When I took my first economics course many years ago it appeared this question had been definitely settled by the Great Depression in favor of stimulus to bring the economy back to normal. People pointed to 1937 when Roosevelt panicked over deficits, cut back spending, and the Depression returned. Or to the fact that the Depression never ended until massive military spending in anticipation of World War II.

The argument goes something like this: in an economic crisis the rational action for individuals is to cut back spending. But one person’s spending is another’s income, setting off a downward spiral of decreased spending, decreased income, and growing unemployment. The only entity that can counteract this spiral is the government.

Compared to the federal government, states are limited in what they can do to counter a recession. When tax revenues go down they cut spending to balance their budgets. Yet even within such limits there are things the state can do to stimulate its economy. Accepting proffered federal money is one. Had Walker accepted federal funding for high speed rail and Medicaid expansion, this would have put more money in consumers’ pockets without requiring cuts elsewhere in the budget.

How a state budgets may also make a difference. As McGee points out, balancing the budget through furloughs (as Doyle did) may have less impact on consumer spending than shifting the cost of benefits to employees (as Walker did). The first is regarded by the employee as a temporary cut in income, while the latter is considered permanent. Even if a state budget seems held together with baling wire, holding off on spending cuts until after the crisis passes may be the better part of valor.

This is the model both Levine and McGee offer. It has the advantage of explaining why job growth that was better than the nation in the first year of recovery became worse in the years that followed. Before accepting it as an explanation for the Walker jobs record, however, we need more quantification. Are the effects of turning down federal funds and cutting public employees’ effective income sufficient to explain the Wisconsin jobs gap? In most cases, it appears that no one has done the calculations. An exception is a recent report from the Council of Economic Advisers that estimates the effect of states turning down funds for the Medicaid expansion, which estimates it will cost Wisconsin 2,500 jobs in 2014 and 5,500 next year because of the ripple effect of the additional federal funding.

If economists were to use the same factors that, say, the Congressional Budget Office uses, and then calculated jobs lost from the decisions to forego federal transportation or Medicaid funds or reduce public employee buying power and the ripple effect on the state economy, how close would they come to explaining the Wisconsin job gap? Wisconsin would be well served if it had an organization doing such economic analysis without a stake in the outcome.

3 thoughts on “Data Wonk: Is Walker to Blame for Poor Job Growth?”

  1. Dawn's Early Light says:

    ” The first is regarded by the employee as a temporary cut in income, while the latter is considered permanent. Even if a state budget seems held together with baling wire, holding off on spending cuts until after the crisis passes may be the better part of valor.”

    Yes – permanent pay cuts and wage increases that barely keep up with inflation or the cost of healthcare premiums had a significant impact on take home pay over 200 thousand public sector workers. Some workers were put into poverty wages as a result of Walker’s ACT 10 policies. Billions cut from education and not restored for 4 years now had a significant impact on school spending. All cuts had a significant impact on economic stimulus in WI. Walker’s austerity and trickle down economics have failed miserably. Walker created a false budget crisis to attack public sector workers. Extracting billions from the economy has created another Kansas. Get the bailing wire out and make some hay about Walker’s failures. Valor?

  2. David says:

    Walker and his current version of Republican governance are the least educated in modern history. The lack an vision or knowledge on how to instigate positive leadership and instigate improved job creation. Walker himself leaves a trail of corruption including his recent hiring of Cindy Archer to a $136K civil service position against the selection committee. All their laws have come from corporate written contributions toward ALEC and have almost nothing to do with stimulation on job creation. The tax break was a multi-billion dollar bait and switch robbery from public works to large corporate and wealthy donor interest that have done nothing but cut jobs and out-sourced them in the last 30 years. What a stench and pall they have caste on this beloved state of Wisconsin.

    Tax cuts to corporations further erodes the purchasing power of the majority of us. The money they get is used to invest overseas and in other countries so they can create more jobs there and sell us cheap junk.

    Accepting transportation funds for rail service would have created transit nodes for business opportunities. Transportation has been a job creator for thousands of years.

    The legislature and Walker cut back on energy efficiency and renewable energy funds through the Focus on Energy Programs. This is a known job creator and cuts into the state’s $12 Billion annual export of cash for fossil fuels. This program puts money directly into the hands of the consumer of energy every year after improvements are made.

    The legislature could have had a sales tax holiday, and they still could, on all goods and services made in Wisconsin to stimulate local businesses.

  3. jerry person says:

    ALEC owns Scott Walker he says proudly in his biography. Walker will never be intimidated by the people. He knows ALEC has always PAID his way since 1992.
    Scott Walker remembers creating jobs as assemblyman in Wisconsin . It was easy with ALEC. 32000 UNION public sector jobs since 1995. It is not as easy this time with out using your tax dollars. Scott Walker has created ALL Wisconsin`s budget problems working for ALEC. When Scott Walker was a state representative and the chairman of the Assembly Corrections Committee, he introduced bills that would privatize state prison operations and that would allow private corrections companies to open prisons in Wisconsin to house inmates from other states. This allowed outsourcing our Prisoners in several states.

    In 1995 Walker and Prosser as state assemblymen championed for ALEC with truth in sentencing telling the legislatures it would not cost a dime it was to give judges not parole boards the control over sentencing. Then Walker filibustered to stop sentencing changes after the fact misleading ALL the legislatures. With out the sentencing changes Wisconsin`s prisons quadrupled over night. Most people sentenced to 2 years now had to serve as much as 6o years. As the Wisconsin Budget watch Blog shows . Stopping just a percentage of these long sentences Wisconsin would save 707 million per year. Wisconsin could have free tuition colleges. It shows Wisconsin has wasted 100 billion if you add the numbers to the state budget since 1995. Not including the building new or remodeling of 71 courthouses & 71 county jails & 441 police stations and dozens of prisons 28 billion plus interest. It is 2.5 billion annually out of the state budget just to maintain these Palaces called jails and courthouses. No expense spared. The total is over 28 BILLION plus the 60 Billion spent by social services to support prisoners families because the bread winner was a political prisoner as US Att gen Eric Holder explained. Then farming out prisoners in several states until the courts realized it was not allowed in the Wisconsin constitution. Wisconsin then hired 32000 union public sector workers to fill the jobs housing the prisoners from deputies , judges, district attorneys all owe Walker for creating there jobs. 32000 UNION PUBLIC SECTOR JOBS. This cost taxpayers over 3.8 billion or a half million per day to house these EXTRA prisoners per day in Milwaukee county alone. Wisconsin claims it has 24,000 prisoners compared to Minnesota`s 5500. Wisconsin`s corrections population is 104,000 with many in half way house and county jails and county prisons that are not counted. . In 1995 Milwakee county had less than 200 prisoners now it has thousands. When Prosecutors Mishandle Cases, Everyone Pays…Except For Them
    Is Scott Walker moving Wisconsin forward ?
    This your reason for budget problems in Wisconsin. Big spender big government Scott Walker. Why does he not work for the people he is taking his check from the people ? Walker has ALEC on his Biography and is proud of this scam. ALEC has no place in any democracy. Ronald Reagan said where collective bargaing and UNIONS are not allowed Democracy and freedom is lost. Unions created the great American miracle so everyone could prosper. Reagan calls Walker a communist . In walker`s America we have slave labor like in Fred Koch`s RUSSIA. Could or would an Amercan consider any type of voter suppression ? Could or would an American end liberty and justice for all for personal gain ? Could or would an American not take care of it`s own people ?
    This ends all rumor that Scott walker even considers the constitution or liberty and justice for all. these Are Koch`s / ALEC Russian revolutionaries ideals from fred Koch in Russia where he made his first millions. This would end or slow down many of the states criminal regimes called justice systems in Wisconsin . ALEC and Scott Walker have ruined generations of our youth for personal and agency gain. This has allowed ALEC corporations and Scott Walker to scam BILLIONS off the Wisconsin taxpayer.
    Scott Walker will Pray in church or sunday and pray on the people all week long.
    Scott Walker Not educating children is child abuse. Websters Dictionary says to change what is norm for persnal, political, or religous reasons is an act of perversion. This is walkers agenda to pervert America to koch`s russian Communism. PRISON SLAVE LABOR just like Fred Koch used in Russia. walker is allowing Koch to win the COLD WAR for his Russia.
    This is Paul Ryan when he was still supporting America.

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