Tuesday, December 01, 2009

How Do You "Create Jobs"

That is, without creating a new bubble.

Paul Krugman has been advocating for a "jobs bill", allocating funds to "create jobs", but the best argument for that seems to be that there's not really anything else that the government can do. You hope to create or sustain enough jobs to contain unemployment levels until the economy "naturally grows" to the point where it's no longer necessary. The measures for the success or failure of a job bill are crude - if unemployment is above projected levels it has "failed". But even assuming projections of the future unemployment rate have any validity (and they're really, at best, educated guesses), many factors can confound the jobs picture.

A great many of the jobs that have disappeared with the bubble were in the housing industry, and related industries. It's possible to improve the market for the construction trades through government contracts, but as Krugman notes today, that effect only lasts as long as there are approved, funded projects to build:
Two stories this morning highlight the risks. The WSJ has a report on highway construction titled Job Cuts Loom as Stimulus Fades:
Highway-construction companies around the country, having completed the mostly small projects paid for by the federal economic-stimulus package, are starting to see their business run aground, an ominous sign for the nation’s weak employment picture.
I suspect that a second, third, fourth round of funding will have a similar effect - sure, it keeps some people employed, but that the construction industry is so far off its peak that it cannot reasonably "naturally grow" enough to absorb laid off workers or to sustain itself without those contracts. By all means fund infrastructure, and perhaps fund it at a level above where you would in a conventional economic environment, but for the sake of improving the nation's infrastructure. But unless there's some reason to believe that you're doing more than cycling workers through short-term employment before another long-term layoff, there must be better ways to create jobs.

As we emerge from the current recession, I expect that a lot of employers will review their historic employment practices and implement some changes, none of which will be good for a traditional "job" market. I expect there to be more part-time workers (particularly if we get an ineffective healthcare reform bill from the Senate), more independent contractors, more outsourcing, more attempts to replace manpower with automation. Perhaps Krugman's proposal for a "tax credit for employers who increase their payrolls" would help, but I suspect that would for the most part mean giving companies money to do what they were going to do anyway.

As for literally creating jobs through a "small-scale version of the New Deal’s Works Progress Administration"? Even if you could identify appropriate tasks for the workers to perform, I'm not sure that it's the best way to spend money. Would this be a WPA for the information era? Because if it's about manual labor, I would expect that most gradates of the program would find the job market as lacking as any other construction workers whose employer's contracts were completed.

I still think that it's time for a real investment in helping workers figure out how to help themselves. I suspect that would be a lot cheaper than most "job bill" proposals, with the added benefit that people who can employ themselves are less likely to again find themselves included in the nation's unemployment statistics.


  1. 1. It would be nice if the "infrastructure" plan actually involved some planning. Maybe they could use some of the money to create/subsidize mass transit? Even if the money targeted bridges or public buildings instead of going toward "one more round of shoddy road consturction" it would be more paletable.

    2. I like the "helping workers learn how to help themselves" idea in theory . . . but you can think of anyone worse than the Government to teach classes in "starting a small business"? Hey, maybe they could contract it out?


  2. I don't think the government should teach the courses, no, but I do think that you could get community colleges to offer courses, put together online curricula and courses, etc.

    In terms of major infrastructure, I do like mass transit - not pseudo mass transit pipe dreams such as rail systems that carry individual cars, but efficient alternatives to air travel, and improved transit for urban communities that lack an existing quality mass transit system.

    I would also like to see a federal investment in clearing out junk buildings in cities like Detroit - not houses, or even small apartment buildings, but the large, abandoned commercial and industrial properties that cannot reasonably be rehabbed and will take a substantial effort (and quite possibly also an environmental cleanup) to remove. I don't see that state or local governments will ever do that themselves, yet those buildings can be a huge impediment to redevelopment.

  3. I should add that part of what the government can do to foster entrepreneurship is to reduce the burdens on would-be entrepreneurs, as previously discussed.


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