The figure has also come up in the White House briefing room, with a reporter asking April 6: “I think that works out to something like $850,000 per job. Given that, are you open to ideas about a more targeted way — a cheaper way of achieving the same goal in terms of number of jobs created?” (Press secretary Jen Psaki did not address the figure.)
It’s easy to see how this number was calculated. The plan is estimated to add between 2.6 million and 2.7 million jobs to the U.S. economy over 10 years. Divide the cost of the plan by 2.6 million and voila, you end up with $850,000.
Sounds simple. But according to Moody’s Analytics chief economist Mark Zandi, who originally produced the jobs figure, it’s simple-minded math.
Regular readers will recall that Biden got in trouble when he stated, “Independent analysis shows that if we pass this plan, the economy will create 19 million jobs — good jobs, blue-collar jobs, jobs that pay well.”
But Zandi said that if you are calculating a cost per job, you would not just use the overall gain in jobs in the last year of a 10-year period. You would also have to look at how many additional jobs were added each year and then were carried over into the next year.
This is an economic term known as “job-year.” A job-year means simply one job for one year.
For instance, a person who was hired in 2024 because of the infrastructure plan and stayed hired through 2030 would have worked for six “job-years.”
When you look at Zandi’s spreadsheet of the difference in the number of jobs each year between implementing the infrastructure plan and not implementing it, you end up with this calculation:
- 2021: zero difference in jobs
- 2022: zero difference in jobs
- 2023: zero difference in jobs
- 2024: 1.4 million more jobs
- 2025: 2.5 million more jobs
- 2026: 2.8 million more jobs
- 2027: 2.9 million more jobs
- 2028: 2.9 million more jobs
- 2029: 2.8 million more jobs
- 2030: 2.6 million more jobs
So, when you add that up, you end up with 17.9 million additional job-years over the decade. The last year, 2030, may have added 2.6 million more jobs to the economy, but many more people were working year after year, so it’s a different calculation if you want to know the cost per job.
The RNC’s calculation is “seriously misleading,” Zandi said. “Take the ratio of the 10-year cost to the additional jobs created over the 10 years and the cost per job comes to $128,000,” he said. “And even this overstates things, as it doesn’t account for the increase in hours worked that would occur or inflation.”
Zandi added it was “more appropriate … to divide the $985 billion in cumulative budget deficits over the 10-year period by 17.9 million jobs. This results in a cost of $55,000 per job-year.”
We should note that focusing on the cost per job created obscures the fact that the infrastructure plan is intended to create a better mix of high-quality jobs. Some economists would argue that it would not matter whether any additional jobs were added to the economy if the end result was better-paying, more sustainable jobs. “There is also the higher quality of the jobs created by the plan,” Zandi said.
In 2009, President Barack Obama’s Council of Economic Advisers calculated that $1 billion worth of transportation spending would create 13,000 job-years — in other words, $76,923 per job-year. Adjusted for inflation, that would be about $96,500 today. Not all of Biden’s plan is for transportation spending, but that number falls right in the middle of Zandi’s estimate of $55,000 to $128,000 per job-year.
Sometimes politicians have blithely ignored job-years to inflate the number of possible jobs from a project. President Donald Trump, for instance, used to claim that the Keystone XL oil pipeline would create 28,000 construction jobs. In part he came up with that number by counting each construction worker as working a full year, even though they only were expected to be engaged for four- or eight-month periods. The State Department said that the 10,400 construction workers on the pipeline would work for a total of 3,900 job-years.
“The facts are clear. Moody’s estimate says Biden would spend $2.2 trillion and only create 2.6 million jobs, something that Biden and his Administration repeatedly lied about ,” Zach Parkinson, RNC deputy communications director, said in a statement. “Other independent studies have already found Biden’s plan would cut workers’ wages and shrink the economy, while his business tax hike would kill American jobs and tax U.S. businesses at a higher rate than communist China does. Mark Zandi is claiming Joe Biden would spend ‘only’ $130,000 per year for each new job, and that’s hardly a good defense of Biden’s plan.”
The Pinocchio Test
We realize that the concept of “job-years” may be difficult to grasp, as the result is different from the total number of jobs added to the economy over time. But it’s an accepted method to calculate how much impact spending can have on employment, year after year. As the Keystone example shows, it’s also a way to express part-year jobs in annual numbers that are more easily compared.
The RNC came up with $850,000 by taking a one-year number — the number of additional jobs added to the economy over 10 years — and dividing it into 10 years of spending. But that spending has an annual impact on jobs for most of the decade, which is why using job-years is a more appropriate figure — and greatly reduces the “cost” per job.
The RNC’s number is not entirely out of whole cloth, but we agree with Zandi that it’s seriously misleading. The RNC earns Three Pinocchios.
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