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Lesson For Stimulus Critics: Employment Is Fungible

The right-wing Mercatus Center has a new gotcha study about the American Recovery and Reinvestment Act. It finds that not all the workers hired by firms that received stimulus funds were unemployed:

Hiring isn’t the same as net job creation. In our survey, just 42.1 percent of the workers hired at ARRA-receiving organizations after January 31, 2009, were unemployed at the time they were hired (Appendix C). More were hired directly from other organizations (47.3 percent of post-ARRA workers), while a handful came from school (6.5%) or from outside the labor force (4.1%)(Figure 2). Thus, there was an almost even split between “job creating” and “job switching.” This suggests just how hard it is for Keynesian job creation to work in a modern, expertise-based economy: even in a weak economy, organizations hired the employed about as often as the unemployed.

Let's ponder this. Suppose Company A creates a new job, and fills it by hiring a worker away from Company B. What do the authors suppose think happens to the job at Company B? Do they say, well, that's it, we lost Joyce, nothing we can do about that in an economy with unemployment at only 9%.

I read the paper in the vain hope of finding the authors' explanation of what they think happens when a new job is filled by moving a worker from another job. I did not see one. Nor did I see any attempt to demonstrate, or even suggest, that the newly-opened jobs of workers moving into stimulus-created jobs were going unfilled. They genuinely seem to assume that "job shifting" is simply the opposite of job creation. (They also seem to think that hiring half of new workers from the ranks of the unemployed, when some 90% of the potential workforce has jobs, is a wildly low figure.)

Suppose the authors of this study, Garrett Jones and Daniel Rothschild, lost their jobs (though I can't imagine any circumstances that would allow such a thing to happen.) Now suppose the Koch brothers announced they were pouring another $100 million into new think-tanks devoted to cranking out anti-government tracts, but that these new organizations would only be allowed to hire staffers who were already employed in the anti-government tract-cranking industry. None of these new jobs could hire unemployed persons such as themselves. Would Jones and Rothschild view this development as worthless for their chances of securing employment?