I appreciate that you’re smart enough to understand the velocity of money, but what you didn’t understand how it is different if the money enters through banks (traditionally how it’s done) vs. entering to a business. I agree that if it enters via a bank, the velocity is pitiful becase they hoard it because of their need to replenish their balance sheets. However, it isn’t the case if you give it to Joe’s Road Construction Company because they’ll disperse it quickly. I’m sorry that you’re not smart enough to figure out the contrast – you’re just a smart ass. How typical for an American.

Ted

http://www.dot.gov/recovery/docs/section 1512jobsreporting.htm

“For example, for 40 hours per week in a 13-week quarter, the number of hours in a full-time schedule would be 520. Thus, even if the project started during the last month of the quarter, the grant recipient should take the job-hours worked during that last month and divide them by a full-time schedule for the entire quarter (i.e., 520 hours) to estimate the number of full-time-equivalent jobs that were worked during that quarter. Hence, if the project hired 30 people, each working a full-time schedule, but only for the last month of the calendar quarter, then the grant recipient should report that 30 people worked 173 hours each during the last month of the quarter, for a total of 5,190 job-hours.

The grant recipient should then divide those 5,190 job-hours by a full-time quarterly schedule of 520 hours to get 9.98 full-time equivalent jobs for the quarter.”

In other words according to the DOT, a full time equivalent job is not one person working for 1 month, as Salmon implies. 30 people working for 1 month in the quarter only count for 10 FTE jobs, not 30. Salmon is replacing “FTE equivalent job months” with “FTE equivalent jobs”. Nowhere in the passage he provides does it say that the total number of jobs is equivalent to the total number of job months. All it says is that the FTE job months are calculated by a certain formula in line with DOT guidance.

Salmon’s interpretation of the data is not supported by the quote his provided and is contradicting the very DOT guidance that the quote he provided says the study is based off.

Yes, he’s very adept and numerical acrobatics, but the crux of his entire philosophical position boils down the following:

“every $30,000 or so spent on the arts, one more person gets a job, compared with about $1 million if you’re building a road or hospital. And such spending has a truly lasting benefit: the Works Progress Administration didn’t just create murals, it subsidized enormous leaps in graphic design, in theater (including America’s first all-black production of Macbeth), and in fine art. ”

http://www.theatlantic.com/doc/200907/id eas-artists

So in Salmon’s view, the government should be, instead of investing in things like roads and hospitals, be paying everyone to paint murals. Why? Because in the world of Salmon’s statistical acrobatics, this gets the most “jobs per dollar.”

Jobs that only last one year, of course.

Jobs that pay sh!t, of course.

Jobs that contribute nothing to the long term productivity of America, of course.

But hey, they make for good math!

Perhaps we should just pay everyone in America $1 to sit at home and be a couch potato. Then we can create 300 million jobs with just $300 million. That would be an excellent program, according to Salmon. It meets his one, and sole criteria: “create a job [indefinitely] on the least fixed amount of money possible.”

Salmon thinks the $92,000 per job per year is inaccurate because it’s really $92,000×3=$276,000 over 3 years. So an employee who makes $75,000 annually and whose job requires $17,000 annually in office space, equipment, power, etc. is too expensive, according to Salmon. Ask any small business owner and they will tell you that it costs a lot MORE than the average salary to create a new job. If the business owner wants to hire a new employee at $50,000 per year base salary, they also have to pay for administrative overhead, legal risk, health insurance, dental insurance, office space, a computer, a phone, a truck or whatever other equipment the person needs, not to mention taxes. The total annual cost may come in at $70,000 for a $50,000 a year job or more than that. Over 3 years that is $210,000. Since most businesses will keep on competent employees or at least their position indefinitely so long as revenues are at least steady, over 10 years that is $700,000, over 20 years $1.4 million, for 1 job! And this is in the PRIVATE sector. But it IS WORTH IT.

Why? If that employee is contributing more to the enterprise than their total cost! That is the key. Just like conservative journalists who attribute all budget woes to spending while missing the revenues side, which is far more important in the long term, so does Felix Salmon completely miss the most important factor at work here: the VALUE of the labor provided! If everyone thought like him, no businesses would ever hire anyone for anything.

Instead, somehow we are supposed to create good paying mural painting jobs… at a rate of $30,000… which will create a job that lasts indefinitely? That would be a good job according to Salmon, assuming how you can figure out how to life for the rest of your life on 30 grand.

Having “more jobs” is NOT by itself necessarily desirable. All it means is that more people are working harder. The point of jobs is the idea that you’re building a stronger economy, a more prosperous future, and that people have the security they need to raise a family and afford health care and send their kids to school. Paying a million people a lump sum $29,500 plus $500 for paint brushes and telling them to go make murals wouldn’t accomplish that. Building roads, bridges, nuclear power plants, hospitals, etc. would accomplish that, something Salmon never even mentions.

The reason being he is more interested in making his argument than in making good policy, a trait that he shares with many Republican lawmakers. Earth to Salmon: No one gives a crap about the “first all black production of Macbeth”! When the Chinese or Japanese or whoever else we owe debt to comes asking for repayment, will they accept the “first all black production of Macbeth” or the apparent American dynamism in graphic design (which owes everything to the 1930s and nothing to advances in computer technology, according to Salmon) in lieu of trillions of dollars and the manufacturing goods those trillions could buy? Oops.

In his determination to make useless criticisms of Democratic lawmakers, Salmon forgets why any of this matters in the first place. It’s sheer insanity.

Senators and house reps need to stop staring into their magic eight-balls. No one is going to believe anything our circus clown politicians say. Not while average citizens scramble to find enough money just to get by. Just another example of congress talking a great game while doing nothing.

I am well aware that no one is claiming that jobs for life are being created.
I was trying to use that phrase to show the absurdity of using “per job” as a meaningful metric. (A reductio ad absurdum if you will.)

Clearly everyone agrees that $200k to employ someone for two years is better than just for one year. Forty years would be even better.

Let me simplify for Felix and you: THE LENGTH OF TIME THE JOB LASTS MATTERS.

Its interesting line of discussion, but measuring how efficient spending is on job growth is all about what variables and other “indirect” job growth results. Think about it – with out sufficient infrastructure, job growth is likely to be none existent in a given community as individuals would not be able to engage in commerce at the level needed to participate in the global economy. Such long term investments that contribute to the flow of commerce and most importantly its growth, simply can’t be measured through a hard math equation.

173 x 8,400,000 job opportunities = 1,453,200,000 job losses
in the USA since the Recession started.

I just want to clear this up.

Condensing the value of job creation into $/job created ignores a host of issues. Namely, that all jobs are of equal economic value.

TedS,
Seeing as how you like big words that the majority of the population have trouble following, I have one for you: sophistry. The government is clearly talking about job creation and job “saving”. The velocity of money is seriously negative right now due to debt not being repaid so that argument is just sad.

TinyTim1,

No one is remotely claiming “jobs for life” are being created.

LucidOne,

It is true that our infrastructure is in average shape. However, the projects being done are almost all marginal improvements of existing infrastructure. If you repave a highway can anyone claim with a straight face that the economy will boom due to an almost imperceptible improvement in ride smoothness?!
US basic infrastructure is in place. India, which has very backward infrastructure, can clearly benefit by putting in decent roads and making sure the electricity stays on. The US has solved these problems.

Great article. Politicians need to be honest. Felix did an excellent job of pointing out the lengths politicians will go make things look better or worse than they actually are.

We need the upgrade in infrastructure. This is true. And projects like that do create jobs. But don’t call that “job creation”. The unfortunate truth is that congress is so tied up in its pissing contests and campaigns that as a body it simply refuses set all of that pettiness aside in order to serve the citizenry properly.

Congress hasn’t done much of anything to serve the interests of the citizenry. And now they’re trying to color what little they have done as being more substantial than it is. It also goes to show how difficult it is for politicians to be honest with the people they supposedly serve.

They also want to start over on the health reform bill. Perhaps that new starting point should come with a whole new congress as well. Get rid of all the old dogs and their tricks. It’s time for true public servants to occupy the halls of congress.

Infrastructure spending has been routinely shown to improve an area’s economic potential and quality of life. It benefits the greatest number of people, versus other dubious public works projects like stadiums, shopping districts etc.. Infrastructure is the artery that enables the economic organism to function. Without it, everything slowly degrades until robust economic activity ceases.

Unfortunately, Felix, you again demonstrate the vulnerabilities of your overly theoretical approach. It is not about “X” jobs created per “y” dollars. It is about keeping the economic engine running at its full potential. If you provide the best possible economic environment, then you will encourage growth, which in turn creates jobs. For every mile of road built, and every contractor employed, the ancillary economic effects are beyond your simple calculations. It is simplistic and amateur to say otherwise.

I can totally relate to Rep. DeFazio’s disgust with your assertions. The fact that such an ingenue would lecture a sitting congressman, who has more experience creating jobs, and building communities than you could even dream of, just demonstrates your disconnect from reality. It also further emphasizes the need for actual “experts” to comment on these issues, not arm-chair economists and media talking heads.

I bet you feel proud of yourself for successfully baiting a congressman. However, when you are proven wrong, will you take responsibility for the inaccuracy of your statements? It is inherently easy to criticize, but it is much more difficult to present solutions. So, since you are the job creation expert, what do you suggest should be done? Don’t fall back on the tired old solutions being tossed around the blogosphere, since you’re such the accomplished journalist and academic, why not suggest something new, instead of using your soapbox to discourage any positive economic measures.

Surely you have to agree a metric and then compare different investments for that metric.

The correct metric is job-years, as well demonstrated by the 1 year railway vs. 2 year highway example.

Then you need to subtract the VALUE that the project is creating in terms of end-product.
If the job is simply to dig a hole and fill it in again, then we can say the value created is ZERO since the end-product is the status quo.
For highways and railways there has to be a number that can be used to derive the value of the project.
Perhaps the value will be more than the cost invested, in which case the cost per job-year would be negative.
Frankly, any infrastructure project SHOULD be able to generate positive ROCE, particularly with ZERO cost of capital.

IMHO, arts subsidies simply don’t create value. Unless of course the end-product (“art” presumably) is more valuable that the cost to employ the artist+materials.
If that were the case, then why would the artist need the subsidy in the first place?

Felix is a. using the wrong metric and b. screwing with the numerator by ignoring value creation. Both errors favour the arts subsidy argument (particularly as infrastructure is so heavy on material costs vs. labour costs when compared with an artist).