Monday, November 24, 2008

Greg Mankiw's Blog: $280,000 per job

Greg Mankiw's Blog: $280,000 per job

This is from Washington Post
$700 billion over the next two years....Obama has set a goal of creating or preserving 2.5 million jobs by 2011.
And his brain walking as

Dividing one number by the other, that works out to $280,000 per job.

What is going on here? Logically, it must be one of three possibilities:

1. The fiscal stimulus is going to be much smaller than is being reported.
2. The new administration is setting a low bar for itself when it comes to job creation.
3. The Obama team believes in very small fiscal policy multipliers.

Let me amplify the last point with a rough back-of-the-envelope calculation. The average weekly earnings of production and nonsupervisory workers is about $600, or about $60,000 over a two-year period. Granted, labor income is only about two-thirds of national income, and we have to add a few supervisors into the mix. So let's say each job created means $100,000 of extra national income. If we are generating $100,000 of income with $280,000 of government spending, the multiplier is only 100/280, or 0.36. By contrast, traditional Keynesian models suggest a multiplier closer to 2.0.
And I burp quick: All three of them. Or it can be mix of jobs, not only production lines but lab workers, teachers, computer programmer, managerial jobs etc.. but then it has been always has been a kind of “figure” of promising jobs creation is a straight line of increase numbers rather then quality of jobs