By Lee McPheters
Economy@W. P. Carey
As the nation continues to endure troubled labor markets and high unemployment, critics of the American Recovery and Reinvestment Act (ARRA) have become more vociferous. Some have suggested the Recovery Act funding may have been too small to have much impact on jobs, since it was formulated when unemployment was projected to be much lower than it is now. Meanwhile, a significant proportion of the population (29% according to a Rasmussen Poll) doubts the program has had any effect at all on employment and labor markets.
Yet another issue is the cost of jobs related to the Recovery Act. Economists and the administration have estimated that perhaps 1.5 million jobs have been created or saved by the stimulus program so far. Critics have divided $787 billion by 1.5 million jobs to derive a disturbingly high estimate of about $525,000 per job.
But this approach fails to recognize that so far, only about one-third of the stimulus funds have been expended. According to the Recovery.Gov website, $269 billion in funds had been paid as of January 22, 2010. Dividing $269 billion by 1.5 million gives a very rough estimate of the cost per job of $179,000.
|American Recovery and Reinvestment Act Funding|
|Tax Benefits||$288 billion|
|Contracts, Grants, Loans||275 billion|
|Entitlements such as Unemployment Benefits||224 billion|
|Total Program||$787 billion|
|Paid Through Jan. 22, 2010||$269 billion|
It is difficult to determine the number of jobs created from ARRA tax credits or higher levels of consumer spending from extended unemployment benefits. Jobs created or saved by direct contracts, grants and loans have been recorded each quarter, but the process has required a high level of judgment by those reporting on "jobs created or saved." In the fourth quarter of 2009, the reporting guidelines were changed to emphasize jobs directly funded by the Recovery Act. Employment figures are now linked to hours worked in positions funded by the Act.
According to figures released at the end of January at the Recovery.Gov website, there were 583,820 jobs supported in fourth quarter 2009 by Recovery Act outlays to the states. It should be emphasized that this includes only the jobs associated with contracts, grants and loan spending, about one-third of the total stimulus program. Jobs created by tax credits or consumer spending due to COBRA or extended unemployment benefits are not included in this tally.
Between February and December of 2009, a total of $57.3 billion of the planned $275 billion in contracts, grants, and loans was paid out to the states (this does not include awards to other entities such as Puerto Rice or American Samoa). An evaluation of jobs supported should be based on this amount, with the expectation that additional spending in 2010 will have a further impact.
Average job cost: $117,933
Although jobs were reported only for the fourth quarter, the analysis is based on the cumulative effect of spending during the year, with results measured at year end. In brief, the $57.3 billion dollars is associated with 583,820 jobs, for a cost per job of $117,933.
California received the largest dollar funding of contracts, grants and loans in 2009 (some $7.8 billion) and Recovery Act funds supported the most jobs of any state (71,015 as of the fourth quarter). The cost per job was $109,949, compared to the average for all states of $117,933 per job (see table).
There is wide variation in the number and costs of jobs created or saved from state to state. Two smaller states, Alaska and New Hampshire, created or saved fewer than 2,000 jobs, at a cost of more than $200,000 per job. The highest cost per job was in Illinois. The state used $3.1 billion received in 2009 to create or save 11,375 jobs at a cost of $275,038 per job.
The lowest reported cost was in New York, at $47,757 of Recovery Act funding per job. New York had the second greatest number of jobs funded by the Recovery Act.
Cost of Jobs Funded by ARRA Averaged $117,933
|Source: Derived from data at Recovery.Gov website|