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Sunday, June 06, 2010

"Private Sector 'Make Work' Jobs?"

Maxine Udall:

Private Sector "Make Work" Jobs?, by Maxine Udall: A private sector-inflated housing bubble resulted in a huge excess of housing, which Douglas Duncan, vice president and chief economist for Fannie Mae, is now suggesting might be better to bulldoze. Who will pay for the bulldozing I wonder? Not the same people who built or financed the now worthless houses, I'll bet (although it does have possibilities as a job creation program).
It seems to me that in effect this is equivalent to saying that all that private-sector housing construction (at least in some markets) was nothing but "make work." So how is this different from using public money to create jobs by hiring a million people to dig ditches that we intend to fill in later?
Oh, right, the private sector did it so it must be an efficient allocation of resources.
My point being not that it's OK to use public monies to create any old make work job just because some parts of the private sector seem to have lost their ability to deliver goods and services efficiently. I think you all know I would prefer publicly funded jobs be created to build infrastructure and to invest in future productivity by improving education and health. Rather, it's that the near religious faith that the private sector is always and everywhere efficient needs to be questioned and questioned frequently. Especially when the taxpayer costs of cleaning up after it are likely to be high and (attention deficit hawks!) lead to higher deficits. (Hello, BP! Yes, I'm waiting to see how much of that private sector debacle actually gets internalized by BP and its subcontractors).
The problems, of course, are that in some cases the private sector is not "efficient" (or ethical) and in some cases publicly-funded regulators are at best asleep at the wheel, at worst wholly owned by those that they are charged with regulating. I occasionally have apocalyptic visions in which a "sustainable" economy becomes one in which the private sector with increasing regularity imposes huge costs on the rest of us while the public sector becomes entirely devoted to cleaning up after them. Talk about "make work." And why would that be regarded as less of a waste of taxpayers' dollars than, say, providing health insurance and income security to the disadvantaged and elderly?
At present, it looks very much like segments of the private sector are as insulated from market forces as are segments of public regulatory agencies. Both sectors need to become accountable and efficient (and ethical). Drowning one of them in the bathtub while allowing the other to remain unfettered and unaccountable (except periodically when they blow up finance or the environment) is not likely to accomplish this.

I am also on record saying that government job creation programs should employ people to do the highest valued tasks available, no sense digging holes and filling the again if there are worthwhile things to do instead. But I don't like the "make work" label that is attached to some types of job creation efforts in an attempt to undermine them and block their implementation (this is not directed at Maxine).

Let me give an analogy. When I was a kid, if I was sitting around the house and complained I didn't have anything to do, my mom would always respond the same way. "I'll find something for you to do," and she would. It was make work, she was finding something for me to do on the spot to cure my unemployment problem (I couldn't find "employment" on my own, I was sitting around unable to find anything to do), but it was always work of value. The suggestions (OK, orders, at that point I had to do it, the real point was to stop me from sitting around and complaining in the future) were always for things of value, things that very much needed to be done but that she just hadn't had time to get to herself. There was always a list, a backlog of things that needed attention, and the items on the list were not just sending me outside to dig holes and fill them up to get me out of her hair (though with no "make work" available, she might have done that given how annoying I could be at that age). The jobs were things that very much needed to be done.

The question, then, is are there worthwhile things for people to do that can be implemented faster than, say, a major infrastructure projects? Infrastructure projects are good for providing a sustained increase in employment and demand, and they are easy to justify in terms of their payoff to long-run growth, so they should be part of the policy portfolio. But infrastructure projects often take too much time to put into place, especially, like now, when we've just taken advantage of the "shovel ready" opportunities. When quicker solutions are needed, as now, reliance on this type of spending may not be the best way to provide employment and create the demand needed to fuel a recovery. If you look around the city or countryside with the same eye that my mom looked around the house, you will find many, many things that need to be done, things of high value to residents in the area. There's a whole backlog of useful things that people could be put to work on, and with unemployment so high and interests rates (i.e. the required return on spending) so low, it would be a good time to pursue these projects vigorously. They may not have the same payoff in terms of long-run growth, but they are of value nonetheless and we ought to put people to work on these projects to bridge the gap until the private sector recovers. Not only will it provide employment, the extra demand that is created by having more people earning paychecks will push the recovery along and thereby shorten the time until the private sector can provide the jobs that are needed.

    Posted by on Sunday, June 6, 2010 at 01:17 PM in Economics, Fiscal Policy, Unemployment | Permalink  Comments (33)

          


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