The Greek ruling coalition has said it will cut 15,000 government workers as an austerity sacrifice to the European Commission, European Central Bank and International Monetary Fund. The “troika,” with Germany in the background, believe that Greece has still not made enough budget cuts to lower a deficit that continues to grow — to some extent because of a shrinking GDP. The 15,000 may seem like a very modest number, but it is equivalent to about 450,000 public sector layoffs in the U.S., based on the size of the working population in both countries. That is about 150 million in America and 5 million in Greece.
A cut of 450,000 public sector jobs in the U.S. might not devastate the economy, but it certainly would wound it deeply. Over the past six months, the number of jobs added on average per month has been about 120,000. The loss of 450,000 jobs could take several months to overcome. In the meantime, the government would carry the cost to support those who have become unemployed, and the growth of consumer spending, so critical to GDP, would face another setback.
The 15,000 jobs cut are another reason to question the power of austerity to fix national deficits and, eventually, bring down national debt. Greek unemployment is already 13%. Another 15,000 jobless people would increase that by half a percentage point. And more cuts in the private labor force of Greece are likely, as are cuts in the pay of those who will keep their jobs for now. The insult to a Greek recovery is well beyond the 15,000.
There is no guarantee that if austerity fails, because the Greek economy does not recover in the next year, that those who provide funds to Greece will ask for more cuts in government expenditures. One of the easiest ways to do that will be to set another tranche of layoffs. It is usually easier to identify people than to sift through complex government programs for budget cuts.
A loss of 15,000 Greek public sectors workers would be close to half a million jobs in the U.S. The American economy has gained strength, but layoffs of that size would undermine whatever gains have been made here in the past two quarters.
Douglas A. McIntyre
Sponsored: Find a Qualified Financial Advisor
Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.