Home > Uncategorized > The Economic Impact of Scott Walker’s Legislation

The Economic Impact of Scott Walker’s Legislation

Scott Walker is trying to pass a legislation that will cut pay, reduce benefits, and hurt unions for public workers. The basis for this new legislation is that it will reduce the state debt, increase jobs, and provide more economic production.  But, in fact, close analysis of the bill shows it will do just the opposite. According to the liberal think-tank the Institute for Wisconsin’s Future, approximately 9,900 jobs will be lost when this legislature goes into effect. That, coupled with the estimated $660 million of decrease in economic production, will be a body blow to Wisconsin’s already crippled economy.

One of the main focuses of Walker’s legislature is pay cuts. Although the governor is trying to rid the state of furlough days,the pay cuts are still going to be massive . The new legislature aims to increase the amount automatically deducted from the state employees’ paycheck that goes to pensions and insurance for those employees. That amounts to  7.8% off of the check. For local workers, that pay cut is halved, to 3.9%. Why is this relevant? In order for people to buy things, they need money. Money comes from your job. If your job provides less money, you can buy less products. The overall cost of the pay cuts comes out to roughly $994 million.

The pay cuts are only one piece of the legislature pie. The job losses are monumental. 9,900 private-sector jobs will be lost as a result of this bill. These job losses will also hurt the economy. When there are 9,900 less people in Wisconsin who actually have money to spend, the economy will suffer. How will this happen? The pay cuts of public employees will reduce the overall level of capital in the Wisconsin economy. Less money in the economy means that there is less money to pay the private employees. Therefore, many private-sector jobs will be lost and the already high unemployment rate will creep even higher.

Although this source is slightly biased against Governor Walker’s conservative views, there is logic in the conclusions of their report. The pay cuts could start a domino effect. The pay cuts lead to less total capital in the economy. That leads to less money for the private-sector jobs. The private-sector jobs are then eliminated, leaving less money to spend for the people whose jobs have been removed from the grand scheme.That leads to a higher unemployment rate and roughly $660 million lost in economic production. Basically, if this economy goes as depicted in this simulation, the state is going to receive another hard blow.

Source: http://www.wisconsinsfuture.org/

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  1. Ann Smith
    February 17, 2011 at 10:26 am | #1

    Unfortunately, Doyle left the state if WI in severe debt. 60% of taxpayer’s money, pays for public workers and benefits. Myself in the private sector pay 30% of my health insurance, 70% of dental, and 6% towards my retirement plan. I have NO pension. So to keep reading about the “poor” deprived public employees, frankly, makes me sick to my stomach. I know dozens of people who have lost their jobs over the last few years. I’m sure they would be more than happy to take someone’s place for less. Also, union workers make an average of 30% MORE than private employees, si I should feel bad for you?? http://www.afscme.org/about/396.cfm

    • February 17, 2011 at 10:41 am | #2

      Although this may be true, Walker is rushing into this legislation. He’s cutting a tenth of public workers’ salaries, whose salaries are pretty pathetic to begin w/. And for the fact that you don’t have a pension, that’s your problem, not mine.

  2. kathleenculver
    February 17, 2011 at 11:29 am | #3

    @peter, I think that last line was disrespectful and not meaningful. @ann raises some good points, but the clearest one to me is that people are not discussing the same issues. Part of what you are opposed to (and I know because I’m your mom) is the loss of collective bargaining, which saves the public zero dollars.
    @ann, public workers have lost jobs too and the economy has hammered every sector. But why use that as an excuse to bust unions and kill collective deliberation? Public employees should contribute more to benefits and (I’m going to get slammed here), some should be laid off. But without bargaining, draconian cuts could eviscerate some employees with no protection whatsoever. How does the budget situation justify that particular angle?
    Finally, @pete, you need to rethink your arguments and present them with clarity. Consider that this afternoon’s homework.

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