The reason people ought to study economics more carefully is because good intentions do not always translate into "good results." In the broadband access and "green energy" businesses, though the assumption is that more broadband, and more green energy are purely positive, each could destroy some jobs, some economists note. As always is the case in real life and the real economy, choices have consequences not intended.
The general notion about broadband spending mandated as part of the national economic “stimulus” plan is that it will create jobs. To be sure, construction of the access networks will drive some direct employment.
Some 128,000 jobs (or 32,000 jobs per year) could be generated from network construction over a four year period, and each job would cost $50,000, according to Dr. Raul Katz, adjunct professor at the Columbia Business School.
Beyond that, such new broadband facilities are supposed to spur economic development as well. But will it?
Unfortunately, says Katz, research on the productivity impact of broadband indicates the potential for capital-labor substitution and consequently, the likelihood of job destruction resulting from broadband deployment, as well as some incremental job creation. So the issue is whether net job creation exceeds net job destruction, and by how much.
You might think bringing broadband access to any community can only be a plus. As it turns, out broadband creates jobs and destroys them as well.
Since broadband tends to enable the outsourcing of jobs, a potential displacement of employment in the service sector from the area targeted for deployment might also occur, says Katz.
Also, some job creation in the targeted areas could be the result of relocation of functions from other areas of the country, and therefore, should not be considered as creating incremental employment, he adds.
Still, Katz says, the study results indicate that some job creation aside from the actual construction jobs is feasible. “Our estimates indicate that over four years the network effects could range from zero to 270,000 jobs over four years (approximately 67,500 jobs per year), although anecdotal evidence would point to the lower end of this range,” says Katz.
Separately, a new study by an economics professor Gabriel Calzada of Juan Carlos University in Madrid says Spanish government spending on green energy to boost job creation kills 2.2 jobs for every green-collar job it creates. The damage could be even worse, the study says, if job destruction from companies fleeing Spain’s higher energy prices were included, he argues.
What the study says is that government spending on renewable energy is less than half as efficient at job creation as private-sector spending. Specifically, each green job required on average 571,000 euros, compared with 259,000 euros in “average capital per worker” in the rest of the economy. In other words, more jobs could have been created had the money been spent in other ways.
Some people might not consider "opportunity cost" (spending on one thing means money can't be spent on an alternative good) to be a real cost. One has to make a judgment cost about whether twice as many new jobs, were money invested another way, a better outcome.
One can always quibble, perhaps even vehemently disagree, about economic studies. But all actions in economic life do represent choices: spending one way precludes spending another way. Businesses that can't make money die. I doubt it is possible to find many, if any, people who argue we should not extend broadband to every household and business, even if doing so will cost some jobs, as well as create some others.
Few people, if any, will argue the United States should not achieve energy independence. But every positive step in that direction will have implications in other areas. Some forms of alternative energy consume vast quantities of water, a key issue in the western United States. Plants grown for energy raise food prices, globally. As there are no free lunches, there are no positive steps we can take that do not involve some negative consequences as well. Those consequences always should be part of the decision making process.
