Government Created Jobs Worth the Cost?
Paul Krugman argues that President Obama’s critics are misrepresenting his so-called “economic stimulus” plan. For example:
[T]here’s the bogus talking point that the Obama plan will cost $275,000 per job created. Why is it bogus? Because it involves taking the cost of a plan that will extend over several years, creating millions of jobs each year, and dividing it by the jobs created in just one of those years.
It’s as if an opponent of the school lunch program were to take an estimate of the cost of that program over the next five years, then divide it by the number of lunches provided in just one of those years, and assert that the program was hugely wasteful, because it cost $13 per lunch. The actual cost of a free school lunch, by the way, is $2.57.
The true cost per job of the Obama plan will probably be closer to $100,000 than $275,000 — and the net cost will be as little as $60,000 once you take into account the fact that a stronger economy means higher tax receipts.
The comparison doesn’t hold up. A school lunch is a consumable; once it’s eaten, another unit is required. A job, on the other hand, is an amorphous entity. If it costs $275,000 over 5 years to create a single job, there’s no way to know what the divisor is. The job isn’t created until it’s created — meaning the alleged stimulus doesn’t happen in the early years — so the jobs created in the out years don’t count as five units and the jobs created in the early years may or may not continue beyond the first year or two.
Regardless, let’s assume Krugman is right and that on average the cost of creating a job is $100,000. That’s a lot of money. Rather few jobs as a percentage, after all, actually pay $100,000 a year. Even at $60,000 — under the rather odd assumption that spending $100,000 to create a job the economy wasn’t otherwise demanding will create $40,000 a year in economic expansion — it’s a lot of money; outside of a handful of expensive metropolitan areas, $60,000 is an upper middle class salary.
Image by Flickr user lumaxart used under Creative Commons license.