The New York Times
editorial this morning, “The Myth of Job Creation,” attempts to correct the
misconception, voiced by Mitt Romney and quoted there, that “Government does
not create jobs.” My, Mitt. And you are supposed to be a numbers-crunching analyst?
Government does too create jobs—and
the NYT makes the case for the
obvious.
I thought I’d look back to 1939 and see what roles
government jobs play in total employment. Government as here defined includes
the federal, state, and local. In the case of the federal, it includes postal
employees as well as bureaucrats. At the state level it includes state-run
educational schools. At the local it includes public schools. All education,
except the private, is included.
In this 74-year period, government has accounted for, on
average 16 percent of all employment. The lowest point came in 1947 (12.5%),
the highest in 1975 (19.2%); government employment last month was close to the
average (16.5%).
Now as all good wonks and analysts should know, job creation, whether by government or private
industry, has a multiplier effect. This means that adding employees has secondary
costs. New people need furniture, computers, sometimes vehicles, tools,
occasionally uniforms. They consume supplies that would not otherwise be
consumed. The hiring of new employees, consequently, increases demand. And in
meeting it, new jobs are created (or preserved). The reverse, of course, is
also true. Layoffs are bigger, in total effect, than the number of jobs erased.
How big is this multiplier? The NYT points at the Economics Research Institute to justify what I
viewed as an exaggerated multiplier effect. Looking at the source, however, I
saw a lower number for the actual new-job-related
multiplier. It excludes some of the tertiary effects the NYT includes. (Journalists are not visceral analysts, alas.) EPI projects
a 1.67 multiplier for state-and-local employment. This means that 100 jobs
created at the state-and-local level translate to 67 jobs created elsewhere. It seems
safe enough to assume that a similar multiplier applies to federal workers as
well. That would mean that the 22 million government jobs in place last
September accounted for an additional 14.7 million jobs in the economy.
Now I’ve never heard of any private company generating
public sector jobs—unless it does so by crimes and misdemeanors the prosecution
of which (we pray and hope it really happens) will generate jobs for public
prosecutors and the clerks who help them, police and other investigators,
judges and wig-makers, and even (but this is to hope too much), wardens and prison guards.
Well put, and a delightful piece for Jobs USA,... one day.
ReplyDelete