The Trouble With Public Works

Via Erik Loomis, an informative Jason Scott Smith article about the Civilian Works Administration, an early New Deal-era effort to mobilize unemployed workers on public works projects. He notes that this kind of thing has not been attempted again in the future by subsequent administrations, but I think undersells the reasons why. In general I find that progressives underestimate the difficulty involved with doing this on a large scale under modern conditions. The basic reason is that the United States in 2011 isn’t the United States in 1931 and we already have a lot of people working full-time on public projects — public sector workers. And they get paid.

Here’s a chart from the Economic Policy Institute, which is not exactly a bastion of union-bashing or small-government enthusiasm, comparing public-sector to private-sector compensation levels at varying levels of education:

Their bottom line is that “Public-sector Workers Earn Less,” which, as you can see, is true on average based on their methodology. But this is all about highly educated professionals who have low unemployment rates. You’re not going to hire a mass army of cheap government lawyers as a public works project. The idea would be to hire large quantities of relatively low-skill workers, people in the categories that currently have high unemployment rates, and put them to work doing something. Now we have a question. What do we pay them? If we pay them less than current public employees make, then current public employees and their unions are going to be very upset — it’s union-busting disguised as work-relief. But if we pay them the union premium wages that low-skill government workers get, then we’re going to have a different set of problems. If we target the program exclusively at the currently jobless, then currently employed people are going to think it’s unfair for their tax dollars to be supporting premium wages. But if we don’t narrowly target the program, then people are going to quit private sector jobs and go take work-relief jobs. Whether you think that’s a good outcome or not, what you’re talking about under that scenario is a quasi-permanent increase in the size of the public sector that needs to be paid for with higher taxes, not an emergency economic relief effort that can be responsibly financed through pure borrowing.

What’s more, the whole thing is largely unnecessary. Since we already have a lot of people working in the public sector, and since state and local governments are constrained by balanced budget requirements, you can simply have the federal government borrow money to give to states and localities in order to avoid layoffs. This is a big part of the administration’s American Jobs Act, and it’s both easier to implement and less politically problematic than trying to launch a brand new public works program.