Sunday, January 2, 2011

Could North Carolina lose 21,000 jobs, or 74,000 jobs from budget cuts?

"Gov. Bev Perdue faces the worst crisis since the Great Depression,
with a projected $3.7 billion shortfall in a $21 billion budget next year.

Because the legislature seems unlikely to raise taxes,
we are talking about a roughly 18 percent budget cut.

To put that in perspective, you could close the shortfall
if you shut down both the University of North Carolina
and the state community college systems.

The state could be looking at laying off 21,000 public employees next year,
the N.C. Budget & Tax Center, a private liberal group,
concluded after analyzing the budget cuts that Perdue has asked her departments to prepare.

That is about 7.4 percent of the state's work force.

If $3.7 billion divided by 21,000 = $176,190.48 per job,
but $3.7 billion divided by $60,000 per job = 61,667 jobs,
and $3.7 billion divided by $50,000 per job = 74,000 jobs,
how did the N.C. Budget & Tax Center come up with 21,000 jobs?

One idea being floated by one of the state's wise men, John Sanders,
former director of the Institute of Government in Chapel Hill,
is that Perdue and the legislature follow Gardner and cut salaries rather than institute massive layoffs.

Though temporarily cutting salaries would be very painful, it would spread the pain equitably.

Many people, of course, live very close, and a pay cut of, say, 15 percent
could cause some people to lose their cars or their houses.

But there are good reasons to think about this.

At a time when the state is supposed to be focused on creating jobs,
such a massive layoff could drive the state's unemployment level to 10.2 percent.

Large-scale layoffs would save money, but there would also be plenty of expenses
-separation costs, unemployment benefits, training and other costs.

Putting 21,000 people out of work is bound to affect car dealers,
real estate agents, merchants and the economy in general.

...Throwing thousands more people out on the street in this difficult job environment
should be a last resort."

Rob Christensen

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jon said...

Do you suppose there are costs other than salaries George?

George Hartzman said...


Like healthcare costs paid to third parties, of which if cut off, jobs are lost.