RALEIGH — North Carolina’s continuing struggles with unemployment should remind policymakers that the state’s economy cannot rely on job growth in the government sector. That’s one lesson the John Locke Foundation’s chief budget analyst takes away from the state’s latest employment news.
The N.C. Employment Security Commission’s new report lists the state’s unemployment rate at 11 percent for July, unchanged from June. With the same unemployment rate as Kentucky, North Carolina ranks No. 8 in the nation in unemployment. North Carolina’s unemployment rate peaked at 11.1 percent in May, according to the ESC.
“We learned earlier this week that administrative jobs in the University of North Carolina system have swelled by 28 percent in the past five years,” said Joseph Coletti, JLF Fiscal Policy Analyst. “The university system is not alone. Government has been one of the few sectors showing job growth during the current economic slump. The latest statistics show that government jobs dropped by 21,300 in the past month. But that was after a year in which government employment had grown by 24,000 jobs, according to figures the ESC released in July. Governments grew as the private sector shed jobs.”
A growing government payroll generates some unique problems, Coletti said. “Unlike private-sector jobs, taxpayers foot the bill for the people who are drawing a government paycheck,” he said. “As North Carolina families struggle to pay their bills, they’re asked to devote more of their paychecks to the taxes that fund these additional government jobs.”
“That’s not all — since every job the government creates diverts resources away from the private sector, entrepreneurs and business owners have fewer resources available to create new jobs of their own,” Coletti added. “In the end, new government jobs actually reduce the number of jobs available in the economy as a whole.”
Consumers end up as losers in this arrangement, Coletti said. “The private sector adds jobs to accommodate consumer demands,” he said. “Government adds jobs to accommodate politicians’ and bureaucrats’ whims. When too many resources are devoted to government jobs, the private sector has less freedom to respond to the consumer.”
Seasonally adjusted employment decreased by almost 13,000 workers to a total of 4.03 million, according to the ESC. Unemployment decreased by about 4,800 workers for the month, with more than 496,000 workers now listed as unemployed.
Unemployment has increased by more than 209,000 people in the past year, and the state rate continues to sit well above the rate reported one year ago. The state rate in July 2008 was 6.3 percent.
In light of the new data, it’s good to see the UNC system focusing attention on administrative cuts, Coletti said. “President Erskine Bowles has told reporters that the university system is making cuts that are ‘heavily, heavily weighted’ on the administrative side,” Coletti explained. “Slicing away bureaucratic bloat is good. Now the next step is to put systems in place that block UNC leaders from swelling the ranks of university workers unnecessarily in the future.”
There’s no reason to stop with universities, Coletti added. “If we want to see North Carolina’s economy moving forward as quickly as it can, government needs to limit the amount of resources sucked out of the private sector,” he said. “Adding government programs, growing government agencies, and putting more people on the public payroll is the wrong way to go. North Carolina government needs to get out of the kitchen, so the private sector can bake a bigger economic pie.”