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State Pay Cuts Could Affect Local Economies


The layoffs and pay cuts Governor Schwarzenegger ordered for state workers this week could take a bite out of the state's economy. From Sacramento, Marianne Russ reports.

Imagine you just learned you might be looking at a much slimmer paycheck come September. Chances are, you'd put off buying that new TV or expensive vacation, says Kristin Van Gaasbeck. She's an Associate Professor of Economics at Sacramento State University:

Van Gaasbeck: "They may hold off on those kinds of expenditures just because they aren't sure."

And she says that can hurt the state's economy. Van Gaasbeck says there's something else at play too.   Most economists agree that how much you're paid affects your job performance.

Van Gaasbeck: "We would certainly expect that if the workers take this wage cut that that's going to affect the quality of services that they can provide to the general public."

The pay cuts may or may not happen. The State Controller says he will not comply with the Governor's order. And if lawmakers pass a budget soon, they cuts could be avoided.

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