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Wednesday, Dec. 21, 2011

Walker's Policies Are Killing Wisconsin's Economy

Job losses and shrinking paychecks are to blame

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If Wisconsin were on the same job-growth track as the rest of the country, the state would have added 33,800 jobs since April.

Instead, under Gov. Scott Walker's leadership, the state is shedding jobs month after month.

In November, Wisconsin lost 14,600 jobs while the rest of the country added 120,000. In the past five months, Wisconsin has lost 34,900 jobs.

Walker's track record is so bad that the Federal Reserve Bank of Philadelphia found that Wisconsin is dead last in job creation among the 50 states.

The first-year effects of Walker's policies on public employees—as well as their ripple effects on the state's economy—have been analyzed in a new study from the Institute for Wisconsin's Future (IWF), which found:

  • The average public employee has taken a pay cut of almost $3,000, or about $60 per week, thanks to Walker's requirement that they contribute more toward their health care and pensions.
  • The pay cut given to 260,000 full-time public employees amounts to $700 million taken out of the state's economy each year, which means less money to be spent at Wisconsin's small businesses.
  • The shrinkage of the state's economy due to public employees' pay cuts will lead to a loss of about 6,900 full-time jobs in the first year of Walker's budget.
  • Walker's rejection of $553 million in federal funds—including $390 million for high-speed rail and $130 million for Medicaid in just the first year—will cause the loss of about 4,700 private-sector jobs.
  • Walker's $975 million in cuts to state and local programs—including education funding, recycling and transportation—will cause about 5,400 full-time private sector jobs to be lost. 
  • The average pay cut to the 47,210 public sector employees in Milwaukee County is $2,620, reducing the local economy by $123.7 million.


Cutting Paychecks Instead of Investing in Workforce

IWF's research director, Jack Norman, said his organization's analysis, titled "The Price of Extremism," shows that Walker has taken the wrong approach to stimulating the state's sluggish economy. Instead of supporting the middle class during an uncertain economy, Walker's taken money out of workers' paychecks. Instead of being spent in local businesses, that money is then diverted to pension investments and health insurance companies.

"In the midst of a struggling economy, the worst thing you can do is to cut," Norman said.

He said a better way to produce growth is to ensure that workers are able to bring home steady paychecks, which they spend in neighborhood shops and restaurants.

"But Walker is driving money away from where we want it to be spent," Norman said.

As a result of reduced consumer spending power and demand for goods and services, Norman said that entrepreneurs wouldn't want to launch a new business in Wisconsin and established businesses won't want to hire more workers.

"Demand is what drives business decisions," Norman said.

But won't a property tax freeze help put money back into the pockets of Wisconsinites?

"That doesn't offset the cuts," Norman said.

And what about Walker's tax credits for investors and "job creators"?

"Tax incentives are long-term strategies," Norman said. "We need something immediate."

A recall, perhaps?

"There isn't a whole lot a political leader can do to create jobs," Norman said. "But a political leader can create a lot of damage by enacting policies that kill jobs. This is a good reason to get rid of Walker midterm."

In a press statement, Department of Workforce Development (DWD) Secretary Reggie Newson blamed the bad jobs numbers on the way employment data is gathered. The state surveys employers, then sends the data to the federal Bureau of Labor Statistics (BLS), which then generates job estimates for the state DWD to release. The BLS revises its estimates as more information is received. In October, it reduced its estimate of job losses by 7,300, from 9,700 to 2,400 jobs lost.

DWD spokesman John Dipko disputed IWF's assertion that Walker's budget and collective bargaining changes have contributed to the state's stalled economy.

"The reforms in Act 10 not only are helping to balance the state budget, but they are making local governments work better and holding the line on property taxes, which benefit working families and businesses and support a climate for private-sector job creation over the long haul," Dipko wrote in an email to the Shepherd.