One theme that wove it’s way through the speakers at Saturday’s event was that Scott Walker has saved us from the fate of Illinois where they raised taxes and turned the state into a barren wasteland of opportunity. It’s a good bedtime story for conservative children (like Jerrid), but the facts tell a somewhat different story.
Back in January, 2011, Illinois raised taxes on personal and business income. This was to overcome a significant budget shortfall. Wisconsin, as we know, took another path an slashed spending and embarked on an austerity program. If you believe the narrative that the TeaPublicans tell, Illinois is a wasteland and Wisconsin a paradise. And if you look at movement in the unemployment numbers, you might believe them.
Just looking at the unemployment numbers, you’d think that Wisconsin is doing much better than Illinois. But the data actually lead to a very different conclusion once you dig below the surface of the unemployment numbers.
First, Illinois has consistently higher levels of structural unemployment than Wisconsin.
Comparing raw numbers of unemployed is not necessarily valid. You have to look at the trends in employment (rather than unemployment) tracking movements tells a different story.
As you can see from the nonfarm payroll data, Measured from November, 2010, illinois has been slightly more successful at growing their levels of employment. It’s certainly not the wasteland imagined by the conservatives. Nonfarm payroll data are
A statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to represent the total number of paid U.S. workers of any business, excluding the following employees:
- general government employees
- private household employees
- employees of nonprofit organizations that provide assistance to individuals
- farm employees
This monthly report also includes estimates on the average work week and the average weekly earnings of all non-farm employees.
Nonfarm payroll is private sector employment only. According to Wikipedia
In general, increases in employment means both that businesses are hiring which means they are growing and that those newly employed people have money to spend on goods and services, further fueling growth. The opposite of this is true for decreases in employment.
In terms of the raw numbers, Illinois grew their nonfarm payroll between 11/10 and 11/11 from 5,629,000 to 5,686,100 for 57,100 jobs or about 1%. By contrast, Wisconsin nonfarm payroll between 11/10 and 11/11 grew from 2,735,700 to 2,740,200 for a total of 4,500 jobs or about 0.2%. While neither state was a job machine, Illinois certainly isn’t the toxic business wasteland conservatives said it would be.
Returning to the earlier unemployment numbers, unemployment statistics often cited by conservatives to show how well Wisconsin is doing compared to Illinois, are misleading. The metric reported by the Bureau of Labor Statistics for state unemployment rates is the U-3 unemployment figure which represents
Total unemployed, as a percent of the civilian labor force (official unemployment rate)
But this does not include discouraged workers who are no longer seeking employment, have been unemployed for more than 12 months or people otherwise marginally attached to the workforce. Those people are part of the lesser utilized U-6 figure. U-6 measures
Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force
So as workers move from unemployed to underemployed, long-term unemployed (greater than 12 months), or discouraged and no longer seeking work, the U-3 unemployment number will actually drop. Workers who stop looking for work are not part of the U-3 measure.
Conversely, as economic activity picks up, more of those discouraged workers may begin to seek work again and will appear in the U-3 numbers driving the number up. I believe this is what explains the difference between the employment and unemployment figures between Wisconsin and Illinois. Growing positive economic activity in Illinois is actually driving the U-3 number up and the U-6 number down, while declining economic activity in Wisconsin drives the U-3 number down and the U-6 number up. I don’t have direct evidence of this, but there is indirect evidence.
This effect can be seen in another measure, the State Coincident Economic Activity Index. These data clearly demonstrate that Illinois is better positioned to grow than is Wisconsin.
Illinois, with their “job killing” tax increase is moving in the right direction. Wisconsin, where Walker keeps telling us “It’s Working,” has run off the rails.
Failed policies from a political party with bankrupt economic ideas are stifling economic growth in Wisconsin.