Is military spending good for creating jobs?
War is big business in the South. Dating at least back to World War II, when Southern states saw building military bases and luring contractors as a quick way to jump-start economic growth, defense dollars have played a key role in the South's economy.
Take North Carolina. Over the last decade, state leaders have trumpeted NC as "the most military-friendly state," in 2006 launching a special foundation to encourage more military business. The N.C. Military Foundation today operates with the sole purpose of "growing North Carolina’s defense and homeland security economy."
Military jobs don't come free, of course: They are the result of government spending. This reality came into sharp relief when the Congressional "Super Committee" failed to agree to federal budget cuts, forcing $1.2 trillion in across-the-board cuts of which half will affect military programs. The Department of Defense has called this a "doomsday" scenario resulting in a less-safe country and big job losses; others see the cuts, which amount to about $55 billion a year, as not so severe.
But aside from questions of whether the military spending is needed for defense purposes, is it a good way to create jobs? It certainly used as one of the reason to keep defense dollars flowing at high levels. In 2009, when Georgia's Congressional delegation couldn't defend the production of more F-22 Rapter fighter jets -- aside from the 183 already being built, at a cost $316 million each -- they said that while the jets may be unnecessary for defense reasons, they created 2,000 jobs in Marietta, GA and even more from supplies nation-wide.
A new study finds, however, that military spending isn't a very efficient way of creating jobs. Economists at the Political Economy Research Institute compared the impact of the government spending $1 billion on the military versus other things like eduation, clean energy and health care.
Our conclusion in assessing such relative employment impacts is straightforward: $1 billion spent on each of the domestic spending priorities will create substantially more jobs within the U.S. economy than would the same $1 billion spent on the military. We then examine the pay level of jobs created through these alternative spending priorities and assess the overall welfare impacts of the alternative employment outcomes. We show that investments in clean energy, health care and education create a much larger number of jobs across all pay ranges, including mid-range jobs (paying between $32,000 and $64,000) and high-paying jobs (paying over $64,000). Channeling funds into clean energy, health care and education in an effective way will therefore create significantly greater opportunities for decent employment throughout the U.S. economy than spending the same amount of funds with the military.
In other words, spending on social programs not only creates more jobs, but better-paying ones, which also creates positive ripples throughout the economy. Health care and energy conservation create 50% more jobs than military spending; education creates about twice as much, or 100% more.
Their findings are in line with what the Institute for Southern Studies found in its analysis of the economic impacts of military spending in North Carolina.
That doesn't mean the military doesn't create jobs, some of them good ones, or that cuts to the defense budget won't put people out of work. But looking at the "opportunity cost," or best use of money -- if the discussion is about how to create jobs -- there are better ways to put people to work.