Not just jobs, but the right kind

Dimitri Papadimitriou | May 10, 2010

The good news on U.S. employment is that we added 290,000 nonfarm jobs in April. The bad news is that unemployment rose as well, to 9.9%, because more people entered the labor force and many more returned to seeking work.

So unfortunately, the employment picture remains grim, with a level of unemployment we might have found horrifying just a couple of years ago. Many of us agree that the government has a role to play in creating more jobs, but nobody is paying much attention to the best kinds of jobs Washington should create.

As it turns out, they’re not the kinds of high-paying jobs most of us would want. But they are the kind that would help the most people—and get taxpayers the biggest bang for their buck.

How can the government accomplish these twin goals? My Levy Institute colleagues Rania Antonopoulos, Kijong Kim, Thomas Masterson, and Ajit Zacharias studied this question and came up with a surprising answer. The best jobs for Washington to create don’t involve repairing bridges and digging subway tunnels, worthy as those initiatives may be. Nor do they involve wind power or other green technologies, although those too are fine undertakings.

No, the best jobs government could possibly create are what we’ll call “social sector” jobs—roughly speaking, work taking care of people. We’re talking about home health-care aides, child-care workers—relatively low-skill, low-wage work that nonetheless is fantastically cost-effective, hugely important, and a highly equitable use of government funds.

How can home health care be more cost-effective than bridge-building? The answer is that we desperately need massive numbers of new jobs, fast. America right now faces a deficit—conservatively estimated—of at least 20 million jobs. Yet the government’s main recession jobs initiative—the American Recovery and Reinvestment Act (ARRA)—is expected to create or save just 3.5 million this year.

But spending on “social sector” jobs is an extraordinarily efficient way of putting people to work—one that generates more jobs per dollar than any other approach. Even Treasury Secretary Timothy Geithner—no bleeding heart—has acknowledged that social-sector job creation generates more bang for the buck.

How much more? According to our research, twice as much as infrastructure spending, and 50 percent more than green energy. If the goal is to put people back to work, there’s no better way to do it.

But is social-sector investing worthwhile, or are these just make-work jobs with no lasting value? Well as a matter of fact there is data on this, and the answer is that these jobs have enormous social benefit, which is why we don’t hesitate to call spending on them “investing.”

Home-based health care, for example, is more cost effective than putting people in a hospital or nursing home. It benefits patients. And it frees family members to earn money elsewhere. Social-sector spending also benefits children. Research shows that kids who get early childhood development care tend to pursue more education—and thus become productive members of society when they grow up.

On top of everything else, social-sector workers are very good at stimulating the economy, since they need to spend almost all of their relatively modest earnings on living expenses.

Finally, let’s talk about equity. When Wall Street was in danger of collapse, Uncle Sam rode to the rescue with hundreds of billions in aid on the premise that major financial institutions were just “too big to fail.” Some affluent bankers have lost their jobs, but overall the individuals and financial institutions that got us into this mess have done okay.

But it’s a different story on Main Street, where the unemployed and impoverished are suffering through the Great Recession with little of the coddling enjoyed by the likes of Goldman Sachs. While President Obama’s job-creation plans are laudable, investing in infrastructure and green energy will produce jobs that benefit better-educated Americans. But nobody is doing much for the traditionally disadvantaged, even though they’re doing worse than anyone else. Unemployment among single moms is 13 percent; among African Americans, it’s 16.5 percent; and among youth, a staggering 25.4 percent.

A democratic society can’t just lavish aid on the affluent while leaving everyone else behind. The original premise behind the bailouts was that certain financial institutions were too big to fail—which is why we taxpayers have sunk so much money into AIG, Fannie Mae and others.

But there is another huge sector—American households—that’s also too big to fail. If helping them is a bailout, it’s at least one we can feel good about.


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