Thursday, July 16, 2009

You call that a bargain? 

Menzie Chinn, commenting on Casey Mulligan's Economix piece this morning:

Note that $787 [billion in stimulus] is spent over several years (a flow). 3.5 million jobs is a stock. But wouldn't we want to incorporate how long those jobs would be around? That suggests we should use job-years instead of jobs, to make the numerator and denominator comparable. The Administration estimated the number at 6.8 million [2]. That works out to a cost per job-year of $116 thousand.

From my perspective, I view the appeal to the number of jobs created and saved alone as an inadequate approach. Rather, I think the concept of focusing on output makes more sense, as it incorporates indirectly how much income goes along with that employment. And GDP incorporates the returns to land and capital, as well.

So we spend $116,000 per job-year. What is output per job-year? In 2007, $88,540. Maybe a better return than I got on my 401k last year, but not a bargain.