New Stimulus Research: Did ARRA Create Jobs?

New Stimulus Research: Did ARRA Create Jobs?

New Stimulus Research: Did ARRA Create Jobs?

Today, scholars at the Mercatus Center at George Mason University released the first-ever empirical study with survey results examining how stimulus spending affected job creation for organizations that received money from the American Recovery and Reinvestment Act. This study is particularly relevant with the President announcing his latest proposal to boost hiring and the economic recovery next week.

“Most studies on this subject used data from the national, state and local level to determine what jobs were created,” said co-author of the study, Daniel Rothschild. “This research looked at ARRA on a micro level through interviews and mail surveys of businesses to see if they actually hired unemployed people.”

One of their key findings, says economist Garett Jones, was that the stimulus dollars created more job shifting than actual new jobs.

“We found that less than half of the workers came from the unemployment line, and instead were hired away from other firms and businesses,” says Jones. “One might think that this would still create a job opening, but during a recession it’s not really the case. It’s often one less person the employer has to fire.”

More than half of the organizations surveyed said that it was no easier to find good workers than before the crisis, and in some cases it was harder, says Jones.

“Stimulus funds went to markets with highly educated workers, and we found no evidence that funds were successfully targeted at areas of the economy with high unemployment,” says Rothschild. “In order for ARRA to be effective, economist Lawrence Summers said it needed to be targeted, temporary, and timely. One lesson we learned is that targeting needed to be improved in order to be nearly as effective as people thought it was.”

Jones and Rothschild both emphasize the need to extend this research to comprehensively understand the impacts of the stimulus. They recommend the government take the lead, as it has the resources to figure out the parts that worked and those that didn’t, like targeting, before continuing policies under which the costs seem to outweigh the benefits.

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