“The FAA [Federal Aviation Administration] bill would create within a matter of three months 270,000 jobs.”
— Senate Majority Leader Harry Reid (D-Nev.), Aug. 31, 2011
Watch out when politicians start claiming their bills will create jobs. The numbers frequently involve an extrapolation of a guesstimate of an estimate.
Sen. Harry Reid’s claim about the FAA reauthorization bill, as reported by the Las Vegas Sun, jumped out at us because the numbers were so big and the time frame so small. Even Reid’s spokesman could not quite explain the three-month period, but suggested he was talking about the period of time it would take get the bill passed and enacted.
Okay, we’ll grant Reid that, especially since we do not have a recording of his remarks. But could this bill actually create 270,000 jobs?
The FAA reauthorization bill, the subject of quite a tussle between Democrats and Republicans, would authorize $8.1 billion in spending over two years to improve airport infrastructure. A Democratic fact sheet on the bill cited a 2008 letter from the American Association of Airport Executives as saying the spending could “sustain or create up to 280,000 jobs.”
The letter, which pleaded for $1 billion in infrastructure spending in the stimulus bill, actually does not make this claim. Instead, it said, “By providing $1 billion in additional AIP funds, Congress could expedite the construction of critical safety, security and capacity projects at airports around the country and create approximately 35,000 high-paying jobs.”
Reid’s spokesman said that he came up with his figure by multiplying the jobs figure by eight, since it was an $8 billion bill.
Sean Broderick, a spokesman for AAAE, said its number was based on a Department of Transportation formula “that says every $1 billion spent in infrastructure investment coupled with a 20 percent local match supports just less than 35,000 jobs.” He said he did not have a figure for how many jobs were actually created by the $1 billion in stimulus funding.
But then it turned out that the DOT formula is not about airport spending, but a Federal Highway Administration estimate of employment impacts of highway capital expenditures. Moreover, the formula is only partially about creating jobs.
Only about one-third of the jobs are directly “created,” mostly in construction. Other people may shift from part-time to full-time, or get higher wages. The estimate is further boosted by calculating how many people benefit from the spending by the newly-employed construction workers. The actual number of people affected by highway spending has declined each time FHWA has recalculated the estimate — and the numbers are lower if there is no local match.
The FHWA, in fact, includes a very large caveat when it discusses these figures:
Cautions about the use of the job employment and income figures
The estimated jobs figure should be used carefully --
The FHWA analysis refers to jobs supported by highway investments, this includes ‘new jobs’ to the extent unemployed labor is hired; ‘better jobs’ as currently employed workers move into jobs with better compensation and/or full time positions; and ‘sustained jobs’ as current employees are retained with the expenditure.
The distinction needs to be made between jobs directly related to highway construction — about one-third of the total jobs — and the supporting industries’ and induced employment jobs.
The estimated job support utilizes the national average mix of construction materials and labor inputs. Specific projects and local utilization ratios will alter the actual employment supported.
For this employment estimate, a “job” is counting “person years.” For example, 100 person-years may translate into 50 jobs supported for 2 years or 100 jobs supported for 1 year. The temporal aspects of the jobs will correspond to the nature of the construction project.
Stephen S. Fuller, director of regional analysis at George Mason University, has closely studied this issue, and he estimates that 28,500 jobs are supported per billion dollars of construction outlays. But he noted that the jobs do not continue after the spending is done, so if outlays occur over two years, one can only count $4 billion as supporting jobs, cutting the number of claimed jobs in half. And he says about half of these jobs are indirectly supported by the spending of the payroll dollars that construction workers have earned, so they aren't “new” jobs.
“Everyone overcounts these things,” he said.
So there you have it. An estimate of how many jobs were supported by highway spending was translated into airport spending, which then was magically transformed into hundreds of thousands of jobs that were created — not even just sustained by the spending. Even being generous to Reid, the number of jobs possibly created under this DOT formula would amount to maybe 50,000.
There is some evidence, in fact, that the $1 billion in stimulus spending affected many fewer jobs than originally estimated, since according to ProPublica, most of the spending went to small, little-used airports. In other words, these kinds of estimates rarely meet the test of the real world.
Both parties, incidentally, play these games with figures. A February news release by the House Transportation Committee, touting the GOP version of the FAA bill, claims it “creates and protects more than 600,000 U.S. jobs over four years, according to estimates.” At least it included a caveat--but it is no less wrong.
The Pinocchio Test
Reid’s fanciful figure barely passes the laugh test. He would have done better if he had said the FAA bill “might support an estimated 135,000 jobs” but overall, any of these guesstimates should be avoided — and ignored.