Thursday, November 12, 2009

The Alleged "Job Creation" - Quick Case Study

We’ve been told that Government can and should spend vast sums of money in order to “create jobs.” Here’s an article about Oregon's success thus far:

To summarize the article, it seems that Oregon counts a job as “created” no matter how long it lasts, so a 6 hour ditch-digging is counted as one job created. A year-long construction manager position would also be one job created. They’ve claimed to create 3,236 jobs thus far with these standards. The article’s investigation finds that the average work-time for these “jobs” is actually just 35 hours each!!! If we re-calculated based on jobs being 1 year, full time, then the state has created just 54 jobs. The article further states that, if they continue at the current rate of job creation, they will create 688 full-time, year-long jobs.

Oregon's state program (separate from the Federal stimuli) has a cost of $176,000,000.

Thus, the Oregon State Government will have been able to create full-time, year-long jobs for as little as $255,813 each, assuming the program remains as effective as it has been. I would suggest that the marginal cost of each job will actually get higher, because those jobs which are easiest to create, and those most “shovel-ready” (an excellent moniker when one considers the economic grave-digging which is occurring), will be utilized first. It will become more difficult over time to effectively spend the funds… the easy, obvious programs will be exhausted.

A legitimate businessman creates jobs which produce more wealth than they cost. The state creates jobs which cost more than they produce. Businessmen have the incentive to produce. The state has the incentive to employ. This fundamental schism cannot be overstated. Politicians don’t worry, however, because they think wealth comes from the number of people employed, instead of the amount of production per person employed. It is no wonder they have this view… every job created is a vote.

As a final point, I would suggest that individual states are better able to efficiently allocate spending programs than the Federal Government. It is unlikely the Federal Government, with $787 billion to spend, will be more efficient per dollar than Oregon with its much more manageable $176 million. Continuing this line of reasoning, districts are likely to more effectively allocate resources than states, towns more effectively than districts, neighborhoods more effectively than towns, and, wait for it… individuals more effectively than neighborhoods. Case in point: it would not cost me a quarter million dollars to create a job. Yet, I must be missing something here, for if individuals could allocate their own resources, then hundreds of thousands of government jobs wouldn’t be necessary and the government has not suggested that such is the case.