Farscape is the Best. Show. Ever. This is a minor character named Furlough, which matters to me because that's today's Post topic and that's how my mind works.
Have you heard? We’re in a budget crisis. States are trying to creatively save money, and the latest craze involves “furloughing” their employees several days per month in an effort to reduce wage costs. (Perhaps it was lost on them that the last time anyone used the term “furlough” in the public eye, it went over like a lead balloon.) Nevertheless, some 19 states have imposed furloughs in the last year or are considering them.
Take California, for example, our nation’s basket case. Three days per month, some 200,000 state workers take a forced day off. In theory, this saves $1.3 Billion in state wage costs. The problem is that all those workers now have $1.3 Billion less to pour back into California’s stagnant economy. One state employee indicated that his staples will continue to be met (mortage, food) but “it’s cut my disposable income…down by about 50 percent.” His cutbacks hurt local businesses, but they also cost the state money in lost taxes.
Here’s the real kicker: how do you calculate the lost efficiency of a truck spilling wine cork lubricant all over a Northern California freeway on a “furlough day”? There was a 2-hour delay in sending out a clean-up crew, and it took 12 hours to clean up. How do you calculate the cost to the private sector of people taking more time off work to wait in longer lines at the DMV because of their furlough-shortened hours? (Actually, we at Pop Economy! revel in calculating such costs, but that’s beside the point…)
John Sullivan of San Fransisco State University has analyzed furloughs at private firms and concluded that layoffs yield superior results. On the other hand, if and when the economy recovers, furloughing means you still have your workers “at the ready”. Before we leave the topic, it’s instructive to learn from history.
Several years ago, the French Government set out to reduce their double-digit unemployment by lowering the maximum workweek from 39-hours to 35. Right on the surface, you can see where they’re going: each worker has instantly shared a new 4-hour per week job to fill. However, the premise was wrong: that there’s a fixed number of jobs in the French economy, which can be rationed. Consider another historical example: unless you’ve been living under a rock, you know that Mexico City is one of the most polluted cities in the world, trapped under a dome of fetid gray smog. What to do? In the 1990’s the government legislated that cars stay off the streets 1 day/week on a rotating basis based on license plate. (Fewer cars on the road = less air pollution) So how did the “car furlough” work? Well, people who had two cars were able to game the system by always being able to drive on any given day, as were people who chose to buy a 2nd car just for that purpose. The net result was that the law produced an increase in car and truck traffic, and therefore, emissions. It was later repealed.
I cannot make a Ledger entry for State Furloughs at this time, since we just don’t know whether they save money or cost money. As you can see, we have to be careful of “unintended consequences”. This is expertly described in the essay on my Links page, “What is Seen and Not Seen” by Frederic Basquiat. (Incidentally, both examples cited above are from the excellent book, Naked Economics, by Charles Wheelan.)
