The Upside of the Downturn

As private-sector hiring slows, government has better odds of getting the top talent it so urgently needs.
by | November 5, 2008
 

Let's be clear on one point: Nobody knows yet how bad this downturn is going to be for the states and localities. It is true that real estate and equity values have gone into a swoon unlike anything we have seen for a long time. However, this alone will only do modest damage to state and local budgets. Property taxes account for only about 16 percent of revenue, on average. Sales and income taxes are more than twice as important; for the states, more than 50 times as important. So, what matters most aren't asset values, but how much shrinkage there will be in the payrolls that feed income and sales. The financial economy has certainly taken a hit. But we need to wait for the other shoe to drop -- the consequences for the real economy -- before we know where we stand. (Right now, of course, it looks like that other shoe will be a muddy, size-16 combat boot.)

And let us get one other thing straight: The downturn is bad news, on balance, for just about everyone, public managers included. Any sane patriot has to wish the country could dodge what's almost certainly coming at us.

That said, there may be an upside for people who work in, and care about, state and local government.

The most obvious, and least noble, reason for cheer (comparatively speaking) is that public work has always been a good port in a storm. There will surely be state and local layoffs before this is over, but it's likely there will be relatively few. In good times and bad, private-sector workers historically face three or four times the level of job insecurity as their public-sector counterparts. Since 1975, total government employment has increased in every single year except 1981 and 1982, and, even in those years, the job losses were minor. It's quite possible, in fact, that city and state payrolls will surge in the coming slump, since many experts call for massive intergovernmental grants as the most efficient channel for fiscal stimulus.

A second, and more important, silver lining is that government is getting some respect after a very long drought. As erstwhile masters of the universe on Wall Street holler for help from Uncle Sam, and trillions of dollars in asset value vanish like the dew, Americans are coming to see that the magic of the market has its Slytherin side. The stakes are too high to indulge in schadenfreude. And, certainly nobody wants or is expecting the country to suddenly scorn private enterprise and flock to bureaucracy. But, as the temple of free-market fundamentalism collapses around us, Americans are coming to recognize that government does, after all, have an important part to play in the next stage of our history. Let's try to earn this stepped-up status, and make it stick.

However, perhaps the most consequential upside of the nation's plight is the prospect of bringing talented young people into government, and just in time. A large cohort of unusually talented people signed up for public service in the 1970s, lured by Kennedy-era idealism and the fun and challenge of new programs. Some of these stalwarts left as public service lost status, the pay gap widened and excitement ebbed. But many were committed enough to the mission to stay on, and this group has kept the lights on in agency after agency as younger folks of comparable ability opted overwhelmingly for GE, Google or Lehman Brothers.

Today this generation is inexorably getting older, and heading for the exits. Roughly one third of the federal workforce is expected to leave in the next five years, and the pattern is similar in most cities and states. Until recently, it looked like we had no hope of replacing them with anything close to the same caliber of personnel. Now, as the downturn stifles hiring in the private sector, the public sector has better odds of getting the share of top talent it so urgently needs. The young stars with the potential to make government perform -- as it needs to perform -- 10, 20, 30 years from now will be heading your way in the months to come. Sure, things are going to be tight. But, make some room for them. It will pay off.

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