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.