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 The COVID-19 pandemic cost people jobs everywhere in the U.S.,
and Illinois was no worse.
But now that the nation is recovering, Illinois is worse off. Illinois job
seekers in May were 26% less likely to find work than their peers in other
states.
Typically, when private – household and business – spending declines, government
support increases to mitigate the decline in aggregate demand. Unfortunately,
Illinois state and local governments entered the crisis with mounting debts and
meager rainy-day funds.
The lack of funds meant large state and local government job cuts as well as no
immediate support for struggling households and businesses. At the start of the
pandemic, Illinois cut state government payrolls by 10,100 and 44,100 local
government workers also lost their jobs. These numbers represent 6.5% of all job
losses Illinoisans experienced between January and April of 2020.
Despite large money transfers from the federal government, the number of workers
in the government sector has continued to fall even after the recovery began.
While Illinois’ private sector recovery lags the rest of the nation, government
employment is also shrinking.
More must be done on the policy front as COVID-19 fears dissipate to help
cash-strapped businesses invest and create good-paying jobs. Illinois’ latest
budget includes $655 million in tax hikes on employers, essentially a sign on
the front door stating Illinois remains closed for business. The fact that a
large share of revenues at all levels of government are spent on debt held out
of state and on pension costs means Illinois’ economy will continue to lag. That
means that relative to the rest of the country, Illinois could be in worse shape
than it was before the pandemic.
According to data from the monthly household survey, Illinois job seekers were
6.2 percentage points less likely to find a job when compared to the rest of the
country on average. Of those who were unemployed in April, 17% found a job in
May, 64% remained unemployed and 19% left the labor force.
Across the country, unemployed Illinoisans were 26% less likely to find work in
May when compared to job seekers across the nation.
Since the recovery began in April 2020, Illinois has added
401,800 jobs (+7.6%), one of the slowest paces in the nation. The only states
adding fewer jobs were Iowa (+7.5%), Nebraska (+7.3%), Alaska (+7.1%), Louisiana
(+7.0%), Oklahoma (+6.0%), New Mexico (+5.2%) and Wyoming (+3.4%).
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Employment levels in Illinois remain 431,400 below
their pre-pandemic peak in January 2020, meaning Illinois has
regained fewer than half the jobs it lost during the pandemic. As a
result, Illinois is battling the eighth-highest unemployment rate in
the nation.
Unfortunately, Illinois’ latest budget signals Illinois job seekers
will continue to struggle relative to residents of other states. We
know this because Illinois leaders continue to make the same policy
mistakes.
Exactly a decade ago, they raised taxes at the
onset of the recovery from the Great Recession. Tax hikes coupled
with declining government services resulted in lower investment and
sluggish productivity and employment growth, contributing to the
state’s lackluster recovery relative to its peers.
This time around, Illinois imposed four taxes on businesses totaling
$655 million. Adding insult to that injury, Illinois lawmakers
couldn't balance the state budget for the 21st year in a row despite
the tax increases.
By raising the cost of doing business in Illinois, the changes will
be a drag on wages, and will lower investment and opportunity for
the state's idled workers.
The tax hikes will not result in higher levels of public investment,
which raise employment and the supply of government services. Nor
will they provide help to needy Illinoisans because more than 25% of
Illinois’ budget is dedicated to rising public employee retirement
costs. That number is expected to continue to increase.
The estimated total cost of pensions had soared to nearly $28
billion on average each year in forgone income and direct payments
to the pension systems by 2017. Tax hikes without any improvements
in the quantity and quality of public services harm the state’s
economic prospects and lower Illinoisans’ incomes.
Turning things around means a constitutional amendment that allows
for a reduction in future pension liabilities and thus pension
costs.
Instead, Illinois leaders put a constitutional amendment on the 2022
ballot to give public sector unions even greater power at the
expense of everyone else. This amendment, Senate Joint Resolution
Constitutional Amendment 11, would permanently raise the unit cost
of government services. Higher cost per government worker could also
lead to lower growth in government employment.
If SJRCA 11 becomes permanently enshrined in the Illinois
Constitution, the state’s labor market performance will continue to
lag.
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