Working Man’s Blues: Employment Trends in Democrat States Lag

During the past winter of discontent, New Jersey Governor Chris Christie emerged as a model and example of political reform. A young Republican who routed a wealthy Democrat incumbent in a solidly blue state, Christie keeps on surprising. He is making a serious effort to rein in government expenditure, declaring that a "state of fiscal emergency exists in the State of New Jersey" and instituting deep cuts. It brings him into conflict with state workers whose lush packages are at the root of the problem, as well as the Democrat establishment whose patronage system created it. But taxpayers appreciate the governor’s position that they have already been milked dry, and seem willing to give spending discipline a try.

It is a changed day when developments in New Jersey furnish a positive example. In the December 30 2008 edition of the Wall Street Journal there was an arresting article entitled "New Jersey Is the Perfect Bad Example." In it, William McGurn showed that the government sector added 93% of all jobs created in New Jersey from 2000 to 2007.

The BLS data for the full ten years to February 2009 underscore McGurn’s findings and fill in some other unsettling information as well. The government employment growth was entirely at state and municipal employment level, and made for 91% of the increase in total NJ employment, while the federal government, the US Postal Service, and the Department of Defense all shed jobs. The goods producing sector is in a headlong free-fall, losing 138,600 jobs in the decade. One-third of manufacturing jobs disappeared. Now government workers outnumber manufacturing workers five-to-two, making a mockery of the old motto "Trenton Makes, The World Takes." One-third of Garden State workers now work for the government or in health care, which increasingly is much the same thing.

Does anyone imagine it is satisfactory or sustainable that an important state’s economy hardly generates employment outside the government sector?

McGurn’s work invited me to extend the analysis to goods-producing, service, and government employment in all states plus the District of Columbia. There is also the question of party political environment: he blamed New Jersey’s sorry state of affairs on its Democrat-dominated political culture and its high-taxing, heavily-regulating, pro-union, and anti-business ways, but does that bear up to analysis, and if so, does it apply more generally?

To try to get to grips with party politics in all states through time, I researched affiliations of the governor and two senators and the plurality of the House of Representatives delegations and the state senate and legislatures for each year since 1990. I assigned a +1 for a Republican in a year, and -1 for a Democrat, so a state that had a Republican governor in a year, with a Senator of each party, majority Democrat state senate and state legislature, and a Congressional delegation split exactly down the middle would +1 +1 -1 -1 -1 0 for a score of -1 for the year. The most solidly Democrat blue state would thus be -6 year after year, the firmest red Republican +6.

Two next door neighbors, Washington and Idaho, bracket the ranking of the 50 states plus DC by political complexion, from most Democrat to most Republican:

>> bluest: WA DC WV MA AR NJ CA MD IL HI DE
>> next: NY VT IA WI RI MI OR CT ME NC
>> middle: NM MN MT LA COPA NH ND IN TN
>> next: SD VA MS NV AL MO NE KS OK FL
>> reddest: KY OH AZ SC WY AK GA UT TX ID

The BLS employment data show that government is not just New Jersey's growth industry – it has been a growth industry in most states, blue or red. Only in a handful of places has government employment been static or falling: MA, MI, NY, DC, and RI. Yes, they are blue states. But most of them have another issue: in general, they are losing population. That is the dominant factor, not party in power.

The predominant pattern in the last ten years has been for employment in goods-producing industry to decline, in service-providing business to grow somewhat, and in government to grow fastest of the three. That pattern is seen in no fewer than thirty-seven states: AL, AK, AZ, AR, CA, CO, CT, DE, FL, GA, IL, IN, IA, KS, KY, MD, MS, MO, NE, NV, NH, NJ, NC, OH, OK, OR, PA, SD, TN, TX, UT, VT, VA, WA, WV, and WI (in MI government declined, but more slowly than other employment). Government grows at the expense of goods production. In the limit, this places fiscal drag on the economy, which reinforces the original destructive trend and makes it worse. That is New Jersey’s experience.

The states that have experienced the greatest declines in employment in goods-producing industry are (worst first): RI, MI, NJ, CT, NY, NC, OH, ME, MA, and PA. These states are mostly unionized, mostly northeastern or midwestern, and mostly Democrat. The states that have done best in growing employment in goods-producing industry are (worst first): NE, CO, NM, SD, ID, MT, UT, WY, NV, and ND. Near runners-up were TX, AZ, and OK. These states are mostly right-to-work, mostly western, and mostly Republican. Only in strongly Republican Wyoming is employment growth in goods-producing industry consistently positive and higher than either services or government.

Employment in goods-producing industry need not be the holy grail of all economic policy. If someone leaves a job in the declining textile industry in North Carolina, retrains as a radiological technician and gets a better job in that field, no one argues that either that person or North Carolina are worse off.

The problem is when employment in the goods-producing sector as a whole is in total headlong decline. That means industry is giving up on a place. That means industry prefers to take its chances with an administration run by Chinese Communists than by Michigan Democrats.

Of course, productivity has improved the most in goods producing industry, meaning fewer workers are needed to do the same or greater work. This is good. But other things being equal, rising productivity itself should incentivize capital to form in a place and employ workers. If it is not enough, then workers are not sharing in the benefit of their productivity and other things are wrong. Politicians then must ask what else is needed to attract and retain industry. Republicans reliably ask that question. Democrats ask instead what other self-defeating social costs and regulations they can impose on job-creating enterprise, with the dismal results that are here to see.

And this is true despite meaningful regional variation: a Democrat is not the same wherever you go, and neither is a Republican. A Maine Republican is a very different animal than a Texas or Wyoming Republican; in fact, some say it is a RINO. A Mississippi Democrat in 2009 is not ever the same as a Massachusetts Democrat, nor does he necessarily resemble a Mississippi Democrat of twenty years ago.

And speaking of Massachusetts, in connection with the special election there on January 19, the Bay State was commonly referred to as "the blue t of all blue states." It turns out that this is incorrect, and not just because it put Scott Brown (R) into the Senate – Massachusetts is less blue than Washington DC, Washington state, and West Virginia.

Which way does causation run? Are the growth states of the West Republican because they are growth-oriented, or growth-oriented because they are Republican? I would like to think the effects are mutually reinforcing. It makes sense that employment grows in right-to-work states because it can, without restriction. The great Milton Friedman said, "Capital goes where it is welcome and stays where it is well treated."

This much seems clear: the high taxes, restrictive employment conditions, and regulatory activism of the Democrats are utterly failing the working man. In the Democrat fastness of the post-industrial Northeast and Midwest, workers have little to show for their long-term political investment in the party of Roosevelt and Johnson.