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California Budget Furloughs Put Into Perspective

July 28th, 2009 Michael McDonough

As a quick exercise I wanted to put into perspective the magnitude of California’s requirement for state employees to take three days of furlough a month.  The average state employee in California earns US$65,000 per year.  This program will impact roughly 210,000 of the states 359,000 employees.  This means over the course of one year these employees will each lose out on 36 days of pay, equating to roughly US$9,000/year or about 14% of total income.  Therefore, the estimated burden shared by these 210,000 employees will be roughly US$1.8bn, or more than the GDP of a small country like Belize.  I am slightly amazed when I think that these employees not working 36 days out of the year could exceed the GDP of a nearby country, albeit a small one.  This will of course have some adverse effects on the CA economy in terms of consumer spending and sentiment, but will be far outweighed by the state’s already dreary employment trend leading to an unemployment rate of 11.6%, coupled with a national malaise on consumer spending.

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