The Myth of "Shovel Ready" Jobs

September 8, 2011

While government and the media promised that the American Recovery and Reinvestment Act (ARRA), or stimulus package, would create "shovel ready" projects that would almost immediately create new jobs and develop the nation's infrastructure, the reality on the ground after the bill was passed did not match the political rhetoric surrounding it.  According to a report by researchers at the Mercatus Center, several bureaucratic entanglements created inconsistent measurements of the benefits of ARRA on job creation.

One major issue was with the way the jobs were being calculated.  For example, because employers thought about questions regarding job creation in different ways, their responses varied dramatically.  Additionally, there was a lack of consistency in the way questions were asked and the way value was measured across the federal government and throughout time.

Some of the report's findings include:

  • Some reported that the government formula counted every 520 hours of work within a quarter as one stimulus-funded-job. However, this formula does not ask whether the worker quit another job to take the ARRA job or whether the job would have existed but for ARRA. Thus, this is not an opportunity cost calculation -- it is a mere arithmetic sum.
  • Some respondents were at least initially told by federal officials to take the amount of stimulus funding they received and divide it by a figure (in one case, $92,000 per job) to determine the number of jobs their funds created. This method was job creation by assumption. Additionally, the methods by which ARRA recipients were to calculate and report jobs saved and created changed over time.
  • Other firms were given few if any instructions on how to calculate the number of jobs they saved or created. Instead they based the number they reported to the federal government on historical trends or simple head counts. Some respondents included as jobs created positions that existed for a matter of days or weeks, such as jobs for plumbers or painters.

The result was unclear and distorted reporting of how many jobs were actually created.  Confusion with government reporting and expectations means that the high number of "shovel ready" jobs was a myth.

Source: Garett Jones and Daniel M. Rothschild, "No Such Thing as Shovel Ready: The Supply Side of the Recovery Act," Mercatus Center, September 2011.

For text:

http://mercatus.org/sites/default/files/publication/No_such_thing_as_shovel_ready_WP1118.pdf

 

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