it depends

Employment Applications Not Being Accepted

That’s a question I asked in connection with our utility’s plan to make $41 million in capital improvements in the next five years. The consultant who put together the list and the necessary funding strategies for the JWSC claimed that was a question he’d never considered.

In trying to find an answer to how many jobs are produced by a million dollar investment, I discover that it’s a question that is being asked all around the globe, but no firm answers are forthcoming. Everything’s relative and depends on local conditions. Duh!

Searching, I found the Italian Catholic Federation (ICF.org) has published a chapter 0n various aspects of the topic, but it’s largely about conditions outside the US. However, that chapter referenced an MIT article about the job creation effects of a Walmart retail establishment. A precis of the article by Emek Basker reads:

This paper estimates the effect of Wal-Mart expansion on retail employment at the county level. Using an instrumental variables approach to correct for both measurement error in entry dates and endogeneity of the timing of entry, I find that Wal-Mart entry increases retail employment by 100 jobs in the year of entry. Half of this gain disappears over the next five years as other retail establishments exit and contract, leaving a long-run statistically significant net gain of 50 jobs. Wholesale employment declines by approximately 20 jobs due to Wal-Mart’s vertical integration. No spillover effect is detected in retail sectors in which Wal-Mart does not compete directly, suggesting Wal-Mart does not create agglomeration economies in retail trade at the county level.

This is a conclusion that supports a general finding by the ICF:

While retail is ranked the highest in terms of additional jobs per million dollars of project costs, this number does not take into account job destruction in competing stores. A FAO/EBRD 2011 study on the retail sector in Poland, Bulgaria, and Romania finds both significant job creation in modern retailers and significant job losses in competitors, with the former effect being larger. Additionally, in all three countries, while employment in the retail sector clearly increased, part of it can also be attributed to shift from self-employment to wage employment. Furthermore, the FAO/EBRD study also cites a study from the United States,4 which found that for every hundred jobs added by introducing modern retail stores, fifty were lost in competing enterprises over the next five years. So the net job creation effects were still positive, but only half of what direct job numbers would indicate.

Which might account for the apparent enthusiasm with which the local government in Glynn County, Georgia is embracing the construction of ever more retail establishments, without, also apparently, registering the high vacancy rate and under-utilization of extant facilities. Meanwhile, the job creation with associated investments in infrastructure is going largely ignored. It’s as if $41 million for water and sewer lines and lift stations were a frivolity.

A study for the Portland/Milwaukee Light Rail project provides an estimate of job creation as a result of construction and comes up with the number 8.34 per million dollars spent. So the JWSC program might account for 340 jobs, and they’d be relatively well-paying jobs. Compare that to the $30 million supposedly invested in the Glynn Solar installation, which not only imported workers from North Carolina for the construction but promises only a mere 5 permanent jobs to manage the operation. Strikes me that the JWSC deserves a tad bit more local enthusiasm and support.

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Editor's Note: This story originally appeared at Hannah Blog.

Monica Smith

Monica Smith writes Hannah's Blog. Born in Germany, she came to the United States as a child, living first in California, then after an interval in Chile, in New York. Married to a retired professor at the University of Florida, where she lived for 17 years, she moved to St. Simons Island, Georgia, in 1993 and now divides her time between Georgia and New Hampshire. (New Hampshire, she says, is always interesting during a presidential election.) She and her husband have three children and five grandchildren. Ms. Smith says she "learned long ago that I am not a good team player when I got hired at the Library of Congress, fresh out of college with a degree in political science and proficiency in four foreign languages, to 'edit' library cards and informed my supervisor that if she was going to insist I punch the clock exactly on time, my productivity was going to fall from being the highest to being the same as everyone else's. The supervisor opted to assign me to another building where there was no time-clock. After I had the first of our three children, I decided a paycheck wasn't worth the hassle."