Archive for Greg Mankiw

Dirty Stimulus Jobs Data Exaggerates Stimulus Impact

One of the key talking points for the stimulus that was passed earlier this year was that it would “save or create” jobs. Lots of jobs. Oodles of jobs. Jobs piled so high, we’ll have to hire people to dig us out of all the jobs we will have.

Or, more specifically, the Obama administration stated that they would “save or create” 4 million jobs.

This led to a great deal of mockery over the “save or create” turn of phrase, but the administration set out to actually measure the number of jobs that were saved or created by having recipients of the stimulus funds fill out a form in which they indicate how many jobs that particular chunk of the stimulus created (that form can be found here).

Now, if you look at recovery.gov, you’ll see that the stimulus has “saved or created” 640,000 jobs. That is only 16% of the promised jobs, but it’s still a pretty big number. I was curious how they got it, so I downloaded the raw data and started sifting through it. This is what I found:

  • Over 6,500 of all the “created or saved” jobs are cost-of-living adjustments (COLA), which is really just a raise of about 2% for 6,500 people. That’s not a job saved, no matter how you calculate it.
  • Over 6,000 of the jobs are federal work study jobs, which are part time jobs for needy students. As such, they’re not really “jobs” in the sense that most other federal agencies report job statistics (We don’t count full time college students as “unemployed” in the statistics.)
  • About half of the jobs (over 300,000) fall under the “State Fiscal Stabilization Fund”, which can be described like so: Your state (perhaps it rhymes with Balicornia) can’t afford all the programs it has running, but when the state government tries to raise taxes, people yell and scream and threaten to move. The federal government comes in with stimulus funds and subsidizes the state programs. Consider this a “reach-around” tax in which the state can’t raise taxes its citizens any more, but the federal government can. So the federal government just gives the state the money to keep running programs they can’t afford on their own.
  • There are, scattered hither and non, contracts and grants that state in no unclear language that “This project has no jobs created or retained” but lists dozens, if not hundreds, of jobs that have been “saved or created” by the project. It makes no sense whatsoever.

Finally, there is a statistical problem to the data here that I’ve not heard discussed at all, the problem of job duration.

Because there is no guidance in the forms on the proper way to measure “a job”, recipients are left to themselves to figure out what counts as a job. Some of them fill it out by calculating “man-weeks” and assume one “job-year” to be the measurement of a single job. Others fulfill contracts that only require two weeks, but they count every person they hire for every job to be a separate job created.

As an illustration: Let’s say you have a highway construction project in the Salt Lake City area that takes one month. A foreman is hired for the project and he brings on 20 guys he likes to work with to fill out his crew. That is 21 jobs “saved or created”. While that job is being completed, the funding if being secured for another highway construction project. By the time that funding goes through, the first project is done and they decide to just move the whole crew over to the next project. That is another 21 jobs “saved or created”.

If this happens four more times, on paper it looks like 124 jobs have been “saved or created” when in reality 21 people have been fully employed for six months. But if you judge jobs through a “man-weeks”/”job-years” lens, you have 10.5 jobs.

This is how the Blooming Grove Housing Authority in San Antonio, Texas can run a project titled “Stemules Grant” to create 450 roofing jobs for only $42 per job. My educated guess is that they hired day-laborers, paid them minimum wage or below and only worked them for a single day. Each new day brought new workers which meant more jobs “created”. Either that or they simply lied on the form. (UPDATE: USA Today interviewed the owner here. He says that he used only 5 people on the roofing jobs but that a federal official told him that his original number wasn’t right, so he adjusted it to count the number of hours worked, not the numbers of jobs created.)

Rational people can see that this kind of behavior skews the data upward. How much upward? It’s hard to say, although it is a safe bet that any project that manages to create a job for less than $20,000 is probably telling you some kind of fib.

My ultimate conclusion from looking at the jobs data is that:

  • The jobs numbers reported on recovery.gov are heavily exaggerated
  • The jobs numbers reported are not subjected to any scrutiny or auditing whatsoever; they are a simple data dump and therefore be seen with heavy skepticism
  • The jobs numbers are a laudable transparency effort. I’m impressed that so much work has gone into trying to measure the results of the stimulus funding. Normally, these kinds of numbers would be shrouded in mystery and a normal Joe like myself would be unable to investigate them. Kudos to the Obama administration for implementing this data gathering and display initiative. However, they put too much faith in the data and statements like “The stimulus has saved or created 640,000 jobs” are uttered with a profound ignorance in the nitty-gritty details of what the data actually says.

For more interesting stimulus jobs data, you can see Paul Krugman getting angry about it here and Greg Mankiw responding to that anger here and Brad DeLong calling Allan Meltzer a shameless partisan hack about the topic over here and a story of how $900 worth of boots became 9 jobs over here. Or you can just download the jobs data and look through it yourself. There’s lots of interesting stories in there.