Austerity Sucks: Another Drag on the Post-Recession Economy Is Public-Sector Wages

By Monique Morrissey
The aftermath of the Great Recession has led to outright wage declines for the vast majority of American workers in recent years, resulting in a full decade of essentially stagnant wages. Though you might expect public-sector wages to have weathered the recession and its aftermath better than private-sector wages, the opposite appears true: While the decline in real public-sector wages started later, it was steeper and ultimately more damaging. According to the Bureau of Labor Statistics’ Employment Cost Index, public-sector wages have fallen by about 1.3 percent in inflation-adjusted terms since 2007, where private-sector wages have been essentially flat (an increase of 0.3 percent). Unlike in previous recoveries, state and local government austerity has been a major drag on job growth and the broader economy. The number of public-sector jobs fell by almost 3 percent in the three years following the recession, while the number of private-sector jobs grew (albeit anemically). The fact that public-sector wages have lagged behind those in the private-sector exacerbates government’s drag on the economy.
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