Calculating Jobs

One of the key issues facing the Obama Administration and politicians around the nation is how to justify massive spending courtesy of the $787 stimulus bill (aka porkfest). Today's New York Times brings the issue of job figures to the forefront.

We get a glimpse of how the government calculates job creation from its various projects. This comes in relation to a New York City transportation infrastructure improvement - the replacement and upgrade of ramps leading to the Staten Island Ferry:

“As you are aware, the effort to measure the impact of federal stimulus dollars on local labor markets is, at this point, extremely speculative,” said Mr. Thompson, the likely challenger to Mayor Michael R. Bloomberg in the November election, said in a letter to the mayor. The comptroller said the mayor had more than doubled the job-generating effect of the money.

Even one of the ferry terminal project’s biggest champions was unsure how the jobs estimate was calculated. Representative Michael E. McMahon, a Democrat from Staten Island, said the company hired to rebuild the ramps to the terminal would employ 100 to 200 people at the site once the work got going in the fall.

The construction company, Conti Group, has leased offices near the terminal as a base of operations. Once Conti has workers on the site, tearing down the 60-year-old ramps and replacing their steel bases, the ripple effect will take hold, Mr. McMahon said. Those workers will spend their pay on lunches from nearby delis, and their employer surely will buy supplies from local merchants, purchases that could spur additional hiring in the neighborhood.

Add it all up, he said, and “you get into the hundreds” of jobs. But, he added, “I don’t see how you get thousands.”

Still, Mr. McMahon did not want to foreclose the possibility of such a boon from a single repair project. “If you find out it’s thousands, would you let me know?” he said.

On the ferry terminal project, they cited a United States Department of Transportation standard of about 28 jobs created, both directly and indirectly, for every $1 million spent. The comptroller countered that the more conservative ratio of 11 jobs per $1 million recommended by the president’s Council of Economic Advisers would have been more realistic.

Taking the 11 jobs per $1 million, the average cost to taxpayers for each job created is more than $90,000 per job. If the DOT figure of 28 jobs created is accurate, then the average cost to taxpayers for each job created is $35,714. The real figure likely falls somewhere in the middle, but it goes to the difficulty of assessing job creation under this or any spending package designed and called stimulus.

The jobs figures anticipate creation of jobs associated with the support of the transportation work being done, whether it is a restaurant nearby or a grocery store or other nearby business that benefits from work being done, and not just the actual number of workers on the job.

However, this is where things get sketchy: the city's online tracker of stimulus funds attributes nearly 5,000 jobs for the $175 million ramp replacement, while the ARC Tunnel (the Hudson River tunnel to support NJ Transit and Amtrak service on the Northeast Corridor) that will cost $7 billion, is expected to generate about 6,000 construction jobs.

The problem for the Times is that they're conflating construction jobs with overall jobs created, even though that figure itself is subject to gross inflation. It would be far more accurate to gauge job creation from these kinds of projects by simply providing the number of construction jobs created, rather than trying economic alchemy to divine the effects beyond the actual contracted-for work.