The Real Unemployment Rate in Washington State

There has been a net loss of jobs in the US during the past decade

Nearly all recent foreclosures have resulted from unexpected job losses and an inability to find a replacement job. It will not be possible to solve the home foreclosure problem without also solving the unemployment problem.

 

 

While job growth in the US averaged over 20% for the past 60 years (see chart), in the past 10 years, there has actually been a decline in jobs. The only way many homeowners could make their mortgage payments was by refinancing their homes and using the equity to make their payments. When the housing market collapsed and this option was no longer available, they lost their homes to the same predatory bankers whose reckless speculation caused the current financial crisis.

 

Report on the American Workforce Table 12 http://www.bls.gov/opub/rtaw/stattab2.htm

2009 update from National Employment Table 1 http://bls.gov/news.release/ocwage.t01.htm

 

Gap between Rising Work Force but Declining Jobs Spells Financial Disaster

When the Great Recession started in Washington State we had nearly three million jobs for 3.44 million workers.

Thus, in January 2008, the true number of unemployed workers was about 470,000.

 

 

However, today the number of employed workers has fallen by more than 200,000 to less than 2.8 million. Meanwhile the workforce has grown by more than 100,000 to 5.54 million.

BLS Table 3: Seasonally adjusted http://www.bls.gov/news.release/archives/laus_03112009.htm

 

There are now over 700,000 unemployed workers in our State

 

 

 

As a consequence, the number of unemployed workers in our State has risen from 470,000 in January 2008 to 750,000 today. This is more than triple the official number of unemployed workers listed by the Washington State Department of Employment Security. However, as this data comes directly from surveys of the US Bureau of Labor Statistics, these are certainly real people – likely “couch surfing” at the homes of friends – much like young unemployed workers rode the rails in the last Great Depression.

 

 

BLS Table 3: Subtracting # of employed workers from the total workforce

 

The True Unemployment Rate is now over 21%

The true unemployment rate, taken by dividing the number of unemployed workers in the work force by the total number of workers in the work force was 14% at the beginning of the Great Recession in January 2008 and has risen to more than 21% today.

 

Thus, more than one in five Washington workers is without a job and most have been without a job for more than a year.

BLS Table 3: Dividing # of unemployed workers from the total workforce.

 

 

 

The Cost in Unemployment Benefits is now $4.7 billion annually

According to the Washington State Employment Security Department, the amount spent on unemployment benefits has rose to a record $4.7 billion in 2010 – paid out to more than 500,000 workers in our State last year.

 

The average time for being unemployed was 41 weeks last year (versus only 28 weeks in 2009).

 

 

As of February, 2011, more than 40,000 people in Washington State have exhausted all of their unemployment claims. About 1,000 more workers are exhausting their state and federal unemployment benefits each week.  It would be more productive to pay workers to work than to pay workers to not work. Families need pay checks, not just unemployment checks.

 

Even the statistical rise in jobs in January was actually a decline in jobs

The so called rise of 10,600 jobs in January 2011 was only a statistical manipulation due to seasonal adjustment. There was actually a loss of 47,100 jobs after Christmas. But since they were expecting a loss of 57,700 jobs after Christmas,  the papers reported an increase of 10,600 jobs. 

 

"In a very real sense, we lost jobs. But we lost fewer jobs than we normally would at this time of year." – Dave Wallace, Chief Economist for Employment Security, February 2011

 

But the real reason only 40,000 lost their jobs after Christmas was because fewer people had jobs before Christmas. There were only 12,000 private sector created in Washington State in all of 2010. According to the Washington State Employment Security Department, since there are nearly 800,000 unemployed workers in Washington State, there were 66 unemployed workers for every new job created.

 
http://www.seattlepi.com/local/432215_unemployment.html

  

Washington State School Funding –  Near the Lowest in the Nation

 

 

Even before the current budget cuts, State funding for public schools had plunged to near the lowest in the nation.

Since 2008, over one billion additional dollars has been cut from school funding – firing thousands of teachers. As a consequence of these billions in cuts, our State is now 47^th in the nation in school funding as a percent of income and our children are subjected to the highest class sizes of all 50 States! 

 

In the past 2 years, thousands of teachers, health care workers and other essential State employees have already lost their jobs due to the billions in State budget cuts which have already taken place. Thousands more would have been fired had it not been for billions of federal stimulus dollars – all of which are schedule to expire in the next 3 months. It will take $3 billion additional dollars per year to restore school funding in our State to the national average.

 

US Census Bureau, Public Education Finances, Annual Reports, Table 12

 

Billions in Cuts to the State Budget and Firing Thousands of Public Sector Workers (Hoover Economics) will only make things worse

This situation is likely to get much worse in the coming months as federal stimulus funding ends and thousands of teachers and other public sector workers lose their jobs. About 50,000 public sector workers will lose their jobs this summer – which will lead to downstream private sector job loses of another 50,000 (see image below). This will bring total jobs down below 2.7 million just as the work force is rising up to nearly 3.6 million. Thus, within a few months, there may be as many as 900,000 unemployed workers in Washington State.

 

 

The economic meltdown coming this summer will not only greatly increase foreclosures, but unemployed workers cannot shop at stores and can not pay taxes.

 

Therefore State revenues will continue to decline setting off a downward economic spiral much like what happened in 1930 to 1932 under the Herbert Hoover “budget balancing” economics.

 

 

Washington State Employment Will Decline if All Cuts Budget passes this year

In November, 2009, employment was just above 2.8 million. The Washington State Revenue Forecast Council predicted employment would rise rapidly to 2.85 million by 2011. In response to the ERFC report, I issued a report predicting that employment would remain below 2.8 million through 2011.

 

 

We currently have about 2.78 million jobs. Many State budget cuts and job losses will go into effect this summer as 10,000 teachers, 10,000 college instructors and 20,000 health care workers are fired. These mass firings will be followed in the Fall be tens of thousands of downstream private sector employees losing their jobs.

By the end of 2011, the number of employed workers will fall below 2.7 million. Total job losses will exceed 120,000.

 

We Should be Protecting Middle Class Homeowners instead of giving tax breaks to big banks

The US Commerce Department reported that corporate profits hit a record $5 trillion in 2010. Corporations are now sitting on trillions of dollars in liquid assets – which they are investing mainly to buy up assets and create jobs overseas. The Fed recently reported that bank reserves had risen from $2 billion in August 2008 to nearly one trillion dollars in August 2010. The four largest banks (Bank of America, JP Morgan Chase, Wells Fargo, and Citigroup) received hundreds of billions in subsidies from the US tax payers.

 

 

Meanwhile millions of Americans remain unemployed and through no fault of their own have lost their homes, their health insurance and their life savings –

while banks now rack in record profits from record foreclosures. Millions of Americans could remained in their homes, if bailed-out banks were required to work with homeowners in good faith to find solutions which allow homeowners to stay in their homes and if unemployed workers were given a chance to earn a pay check. The government should represent and protect not merely the greed of banks to maximize profits, but also the needs of people to stay in their homes and have real jobs. We should protect not merely banks from failure, but also homeowners and middle class working families.

 

 

Out of Control Tax Breaks for Billionaires

State Revenue compared to Tax Exemptions (to nearest Billion)

Washington State Office of Financial Management, 10 Year Financial Trends, Schedule 5: Near General Fund. Annual Tax Breaks extrapolated from DOR Tax Exemption Reports. See also http://leap.leg.wa.gov/leap/Oversight/histongf.pdf

 

 

Tax breaks for billionaires and major corporations in our State have skyrocketed 250% during the past 10 years (from $20 billion per year in 1998 to $50 billion by 2008):

Over 90% of these tax exemptions benefit the richest one percent, with much of this wealth being shipped out of State and even out of the country, creating jobs overseas instead of here in Washington State.

 

In shifting the tax burden to our middle class, and causing the firing of thousands of public servants, these massive tax exemptions for billionaires do not create jobs. Instead, they cost jobs.

 

We now spend $8 on corporate tax breaks for every dollar we spend on teachers.

If we cut back on corporate tax breaks for the rich by even 10%, we could be hiring teachers and doctors and health care workers instead of firing them.  

 

We Should help those who are victims of the Recession instead of just helping those who caused it

 

 

The Solution is a Public Works Program combined with a Fair Tax Structure to Rebuild our Economy from the Bottom Up

 

The world is less and less disposed “to wait for the miracle”—to believe that things will right themselves without action on our part… There is no possibility of balancing the Budget except by increasing income, which is (only done by) increasing employment.

John Maynard Keynes, The Means to Prosperity  1933

 

What would FDR Do?

In a nearly identical financial crisis, FDR saved our nation by creating a Public Works Program:

 

 

“The country needs and, unless I mistake its temper, the country demands bold, persistent experimentation. It is common sense to take a method and try it: If it fails, admit it frankly and try another. But above all, try something. The millions who are in want will not stand by silently forever while the things to satisfy their needs are within easy reach.”

 

FDR campaign speech  http://newdeal.feri.org/speeches/1932d.htm#23.

 

What would Ike Do?

From 1944 to 1963, the marginal tax rate for the wealthiest members of society hovered above 90%, with unemployment during this period as low as 1.2 percent and a high of 6.8 percent. Since 2001, the corporate tax rate has been lowered to 15% on capital gains –with many of the wealthiest corporations, like Exxon, paying no taxes at all - and the true unemployment rate has skyrocketed to over 20%.

 

 

A Simple Solution… Cutting Corporate Welfare instead of Cutting Education and Health Care

 

There is another option which does not require any cuts or any tax increase in the general public.  If we rolled back all corporate tax breaks to what they were in 1996, by simply repealing every corporate tax break passed since 1996, it would generate at least $6 billion in additional State revenue per year. Rather than firing 100,000 workers, we can create jobs for an additional 100,000 workers – bringing employment UP to 2.9 million instead of causing it to fail to 2.7 million.

 

 

JOB CREATION PROGRAM

To reduce foreclosures and homelessness in Washington State, any worker who has been unemployed for a period of more than 6 months, or who has ran out of unemployment benefits, should be eligible to apply for a Public Works Program to be administered by the Washington State Employment Security Department. To the extent that funds are available, such jobs shall be for 32 to 40 hours per week paid at the Washington State minimum wage, but also including full medical and dental benefits through a Washington State Public Option health program. Such jobs shall serve the citizens of Washington State including, but not limited to assisting in public schools, health agencies, road construction and repair, school construction and repair, or any other jobs which provide worker training and public service.

 

 

JOB CREATION TRUST FUND

To provide funding for these public service jobs, the legislature should repeal all tax exemptions passed since 1996. This will generate about $4 billion annually which will be placed in a Trust fund available to the Department of Employment Security to provide public service jobs as described in Section 7 above. It has been estimated that one billion dollars per year could provide at least 30,000 minimum wage public sector jobs. Repealing all tax exemptions enacted since 1996 should therefore provide at least 120,000 public sector jobs, as well as another 120,000 downstream private sector jobs through the “multiplier effect.” Creating 240,000 new jobs would be enough to return employment to about what it was at the beginning of the Great Recession – reversing the downward economic spiral our State economy has been on during the past three years and providing homeowners with a self sufficient pathway for staying in their homes.

 

A Simple Bill to Create 100,000 Jobs

NEW SECTION, Sec. 1. JOB CREATION PROGRAM To further reduce foreclosures and homelessness in Washington State, any worker who has been unemployed for a period of more than 6 months, or who has ran out of unemployment benefits, shall be eligible to apply for the Washington State Public Works Program to be administered by the Washington State Employment Security Department. To the extent that funds are available, such jobs shall be for 32 to 40 hours per week paid at the Washington State minimum wage, but also including full medical and dental benefits through a Washington State Public Option health program. Such jobs shall serve the citizens of Washington State including, but not limited to assisting in public schools, health agencies, road construction and repair, school construction and repair, or any other jobs which provide worker training and public service.

 

NEW SECTION, Sec 2. JOB CREATION TRUST FUND To provide funding for these public service jobs, the legislature hereby repeals all tax exemptions passed since 1996. This will generate about $4 billion annually which will be placed in a Trust fund available to the Department of Employment Security to provide public service jobs as described in Section 7 above. It has been estimated that one billion dollars per year could provide at least 30,000 minimum wage public sector jobs. Repealing all tax exemptions enacted since 1996 should therefore provide at least 120,000 public sector jobs, as well as another 120,000 downstream private sector jobs through the “multiplier effect.”

 

Conclusion… It is time to Put Washington Back to Work

By Rolling Back Tax Breaks for Major Corporations

Our State’s economy and our public schools are facing a financial train wreck in the next two years – with consequences more severe than anything we faced in the past 70 years. We need bold leadership and courageous action. An All Cuts Budget will only lead to the firing of more than 10,000 teachers – placing at risk the future of one million children. It will also lead to the firing of more than 100,000 other workers - sinking our State economy back into recession or worse. Unemployed workers cannot pay taxes and cannot shop at local businesses. This is why there cannot be a recovery until there is a full employment program in our State.

 

 It doesn’t have to be this way. .  If we rolled back all corporate tax breaks to what they were in 1996, by simply repealing every corporate tax break passed since 1996, it would generate at least $6 billion in additional State revenue per year. Massive tax exemptions for billionaires do not create jobs. Instead, they cost jobs.

 Reducing corporate welfare for the richest corporations in the history of our planet will create more than one hundred thousand jobs and is the most important thing we can do to restore our economy.

 The 2011 legislature faces a clear choice. They can fire thousands of State workers to protect tax breaks for major corporations. Or they can end tax exemptions for the rich to protect our State’s economy. As always, your comments and feedback are greatly appreciated.

Please feel free to email me if you have any questions.

 Sincerely,

David Spring M. Ed.

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