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Wednesday, December 16, 2009

Job Stimulus Program

Tuesday The Lowell Sun ran an article on the Federal Stimulus effort, by Reporter Dennis Shaughnessey. The article was "Tsongas, Patrick tout stimulus impact at Lowell forum".

For me, the key paragraph was:
The event took place in the third-floor offices of the Career Center of Lowell, where just one floor below more than 4,700 job seekers have received training for new jobs and employment has been found for 593 people.  Stimulus funds coming into the 5th District have totaled more than $350 million and more than 1,600 jobs have been retained or created, Tsongas said.
So, I opened up my Microsquish Excel Spreadsheet and ran the numbers.  I wasn't so sure about the outcome.  So, today I call the Office of Congresswoman Niki Tsongas and talked to a nice young woman who explained to me that these numbers were approximations and one could not draw specific conclusions from them.  That sounded like some Tea Party accusation that the Obama Administration numbers were fuzzy, so I thought I would press on with my analysis.

First thing I did was take 1% off the top for "profit" for the firms involved in this stimulus spending.  One percent isn't really very much, but it is a Government program and firms should not be making a killing off this.  My two Brothers might correct me, but I think that something like 5% might be equitable for this kind of work.  The 1% is to be on the conservative side and to account for the fact that some of this money may be going to governments to finance existing or expanded services to the public.  Let it be noted that profit is a good thing.  It is from profit that entrepreneurs create new jobs, which means new salaries being paid to new workers.

That leaves me with $346,400,000 to play with.  I took the amount and divided it by the 1,600 jobs.  But, that is the money to the organization.  To account for salary I factored in a burden rate to account for things like office space and the security guard and health insurance and all the other things that go into making a company work.  In a way, the money that goes into the "burden" is money that goes to hire additional people.  The rate I picked for "burden" is 120% of the value of the salary of the employee.  A ball park number that is surely wrong, but probably close.  In some firms it is less and in some it is more.

At any rate, that gets us down to a salary of $98,438 for each of the 1,600 jobs listed.  That is a pretty good salary, but well above what I was expecting the analysis to show.  So, the good news is that this stimulus money is probably for more than a year and that these 1,600 jobs will run into 2011.  And, with the jobs paid for by the burden that means maybe 3,200 people actually benefiting from the original $350 million.

And, then those 3,200 people are going to spend money in the local economy, keeping more people employed.  Maybe Keynes was right.  I don't think so, but it at least puts some flesh on those numbers.

The long range problem is that we cannot sustain that rate of public subsidy of jobs over a long term.  We can't sustain it with the Federal debt that we currently have.

Regards  —  Cliff


Lynne said...

My personal testament to the stimulus company got a very good contract for a local nonprofit for a large web project. What we're doing is the web component of their larger training program they are developing. This meant a) the organization hired someone to be the trainer and developer of content (for the web and other media) and of curriculum, but it also meant that b) I could take the chance and finally hire my "part timer sort of intern" as a web developer and expand my business.

So, at least in our case, the stimulus worked REALLY well. Granted it's anecdotal, but it's one that affects me personally. :)

C R Krieger said...

Lynne's story demonstrates how the stimulus should work and how it should filter down from the initial contract to subcontractors and maybe even allow not only a trainer to be hired (or retained) but someone in the graphics area (I use that term loosely) to be hired and thus to buy food or pay rent or do other things to speed the money through the economy.  And, of course, people being trained for new jobs.  Those new jobs are the key to sustaining the recovery here in Middlesex County and in our own City of Lowell.

Now, if the White House staff can just decide if the Recession is over we can decide if the Stimulus is working for not only Lynne, but for all of us.

Regards  —  Cliff

C R Krieger said...

A reader who wishes to remain anonymous notes:

Not if it is used to pay salaries for non-productive jobs a while longer.  Barbers, grease monkies, floor sweepers are not going to help the Nation's economy by working a few months longer.

The investment must be in productive jobs, ones that create wealth.  Of course, the best is companies (jobs) that dig gold out of the ground.  Petroleum production, steel mills, manufacturing are all good because they leave something of value behind.

Regards  —  Cliff