Are teachers a protected class?
State and local employees have not been as hard hit as the general economy. At 19 million strong, this workforce comprises about 14.6 percent of total U.S. non-farm employment. It looks as if education workers are particularly being shielded from job cuts.
Chris Mauro, Head of U.S. Municipals Strategy at RBC Capital Markets wrote today in a privately circulated research note (emphasis mine):
[O]n a percentage basis, the state general government (non-education) sector has seen the largest decline in employment since December 2007. As of October 2011, it is down almost 6% from its recent peak.
Similarly, local education employment is currently down about 3% from the peak and has now also declined by a greater percentage than in any of the prior three recessions.
State education employment, which has historically been very recession resistant, has been growing at a moderate rate since December 2007 but, here again, the growth rate has been slower than in any of the previous three recessions.
I’m fine with this as long as student performance increases and America turns out high school and college graduates who are ready to meet the 21st century with good reading and comprehension skills. It would be a sad thing, though, to devote increasing amounts of precious tax revenues to school systems and universities that are graduating barely literate students. If America is making a bet on education, it really needs to pay off.
The tax collections that support education workers have bifurcated recently. State revenues have returned to pre-recession levels thanks to strong sales and income tax collections, while local revenues have been lagging due to lackluster property tax collections. Though teacher salaries are mainly funded by local taxes, states do pass through significant revenues to local school districts, and higher education receives big cash flows via state funding and loans that students take out to attend college.
Outside of teachers, local governments employ a lot of firefighters, police officers and health and hospital workers. If education workers remain a protected class, then the layoffs will have to come from these areas. RBC’s Mauro comments on non-education local employment:
The sector that continues to puzzle us is the local government (non-education) sector which, while having reduced employment significantly (4%) since its peak in July 2009, has yet to match the payroll reductions experienced during the double-dip recession of the early 1980s. We find it intriguing that, in the aftermath of the deepest economic downturn since the Great Depression and in the face of significant cuts in state aid and declining property tax bases, local government employment remains, on a percentage basis, higher than it was in the 1980s.
If the economy stays weak and the federal government does no further stimulus, then it’s likely we will see more local job cuts. The question really is, can teachers remain a protected class?