I was excited to hear the news that President Obama had announced a renewed focus on jobs.
After all, absent from all of the talk about debt ceilings, tax increases and spending cuts was a much more important picture: getting the unemployed back working would help increase revenues and decrease spending.
While there may be problems with what is currently being proposed (I’ll get to that), the real issue is that creating jobs, real jobs, is a difficult thing to target. That’s not just for the government either. Companies too have difficulty creating jobs out of thin air and doing so could mean trouble down the road.
The real question is: what, if anything, can the government do to create jobs?
When you hear the numbers thrown out in reference job creation programs, it’s easy to be optimistic. As the Seattle Post-Intelligencer found out though, there is reason to take those figures with a grain of salt:
Last year, Seattle Mayor Mike McGinn announced the city had won a coveted $20 million federal grant to invest in weatherization. The unglamorous work of insulating crawl spaces and attics had emerged as a silver bullet in a bleak economy – able to create jobs and shrink carbon footprint – and the announcement came with great fanfare.
McGinn had joined Vice President Joe Biden in the White House to make it. It came on the eve of Earth Day. It had heady goals: creating 2,000 living-wage jobs in Seattle and retrofitting 2,000 homes in poorer neighborhoods.
But more than a year later, Seattle’s numbers are lackluster. As of last week, only three homes had been retrofitted and just 14 new jobs have emerged from the program. Many of the jobs are administrative, and not the entry-level pathways once dreamed of for low-income workers. Some people wonder if the original goals are now achievable.
Some folks will pin the blame on the government for the failures of the program so far (which is, at least partially, justified). And others will laugh at the difficulty that the government has in creating 2,000 jobs out of $20 million dollars.
Later in the piece, it is mentioned that one of the issues is figuring out who to hire, what to pay, and what the job standards are for these 2,000 new jobs. Other issues include finding ways of increasing demand for the weatherization service. They may figure it out in time (they have until 2013 to use the funds) but whether they can hit their goals seems to be in doubt.
Of course, the dirty little secret is that if you asked an executive how they would create 2,000 jobs from $20 million dollars, they would probably hesitate too. Much of that money would likely go to either research or marketing rather than covering the direct employment costs. Creating a new product or increasing demand for an existing product would be a better bet for job creation than simply using the money to hire people.
Creating that demand takes time, no matter if you’re putting money into the private or public sector. And that fact shouldn’t be lost when looking at some of what President Obama said he would unveil in a month’s time:
Obama’s jobs agenda, which he plans to tout on his Midwestern tour, calls for $30 billion to rebuild roads, bridges and ports; improvements to the patent system to spur innovation; trade deals with a trio of countries to boost exports; a $40-billion extension of unemployment insurance benefits; and renewal of the current one-year reduction of the payroll tax at a cost of up to $120 billion.
While the reduction in payroll taxes is a nice thing for businesses, there has been no tie to an increase of jobs due to that extra money. In fact, extra money might be the last thing many companies need (companies in the S&P 500 are sitting on a record level of cash). While keeping unemployment going is the right thing to do, it doesn’t create jobs. Same thing with improving the patent system (assuming it isn’t intended to increase the number of law jobs) and improving trade agreements.
We’re left with the only true job package in the President’s current proposal: $30 billion for rebuilding infrastructure. This might be the easiest jobs program to initiate since so many with those trade skills are in fluctuating work situations already.
What it doesn’t solve is job creation past construction jobs. As we’ve found out, many of these proposals will take years to get to their full advantage. Others might never get there at all. Meanwhile, the overall employment situation isn’t going to change for the better any time soon.
If this program is what we can expect out of Washington as far as solutions, there’s a good reason to be cynical, at least right now.
