Unfortunately, Obama didn’t mention a major barrier to job growth in the public sector — and neither did Ezra: unsustainable compensation structures. This problem existed before the recession, but it’s gotten worse during the recession, because public pension systems are designed to have very rapid rises in current-year cost in the years following a recession.
Take a look at the attached chart from San Jose, California. As you can see, San Jose had an average of 7.5 employees per 1,000 residents from 1986 to 2005, and never dropped below 7.0. But in the last two years, that ratio has cratered — to 5.6 per thousand this year, with further cuts expected next year.
This is partly because revenue has risen only modestly, with general fund receipts rising 19 percent in a decade. But the main reason is that costs for a full-time equivalent employee are astronomical and skyrocketing. San Jose spends $142,000 per FTE on wages and benefits, up 85 percent from 10 years ago. As a result, the city shed 28 percent of its workforce over that period, even as its population was rising.