While the Federal Government tries to stimulate the economy by increasing government jobs, they are killing the economy. Let’s look at the effect of a government job. Jobs in the private sector are necessary not only for the economy, but to fund any federal or public sector jobs. It takes 7 to 10 private sector jobs to fund 1 federal job. Remember this when you hear about funds to save jobs.
Every federal job is paid for by what? The taxes from the private sector. That is, jobs in the private sector must be taxed to pay for any federal job. Well, how many private sector jobs does it take to pay for one federal job. This is far worse than it seems. If the pay for both jobs were the same and taxes were 20% of income, it would take 5 private sector jobs to pay for 1 federal job. However, federal jobs pay a lot more and additionally have a much bigger benefit package.
If the average Federal employee is making over $70,000 plus benefits, while the average private sector job pays about $40,000, that ratio of 5 private sector jobs to pay for 1 federal are much too low. Additionally, the benefit package for the federal employee exceeds the private employee by over $30,000. It may take as many as 7 to 10 private sector jobs to pay for each federal employee.
We should be balancing private enterprise and jobs with any government expansion or jobs. That is, the best outcome would be, you want to expand something, well you need to raise the money. How do you raise the money? You expand the private sector. Anything less than this is increasing a burden on the private sector. So, the stimulus or job bills in congress are killing the balance in the economy, unless you want a government controlled economy.
So, what do you think is happening to the economy right now as we expand the federal government! They are killing the future. Weekly jobs or unemployment numbers may sometimes seem positive, but if we look deeper and there is as large public sector job component, the future is in trouble.
Don’t make any mistake, there will be temporary positive numbers in growth and employment caused by government expenditures. The media will love much of this as potentially good economic news. Unfortunately, it will be like treating the symptoms not causes of the illness we are currently suffering. Increases in taxes to pay for all this, will not be any incentive for business to expand or new business to take the risk of being a startup. While taxes increase, business must reduce their expenses. That will reduce employment either through direct layoffs or increasing efficiency by replacing manpower.
Cries to save the teachers, firemen and police are really just camouflage to increase taxes. I’ll discuss education and teachers some other time. The public sector already has the police and firemen employed. It is their other public programs that they want to fund.