Question:
Many years ago I remember a quote that said something along the lines of "Every job at Boeing supports 3 jobs in the community" meaning that wage earners spend their wages, which in turns supports other wage earners like grocery clerks, hair stylists, mechanics, doctors, etc. Is there a formula for this? How do I determine in Seattle, for example, how many jobs each $90K job at the City (a large employers) in turn supports in the community?Answer:
It is common for industries to claim that they create jobs outside the industry, especially when they are seeking government subsidies. A few years back, a consultant for the Iowa ethanol industry claimed that ethanol was responsible for 90 thousand new jobs created in Iowa. As there were only 20 thousand new jobs in Iowa that year, the estimate was viewed as on the high side.
If the way a job creates more jobs, it does not matter what the job is. A dollar spent by a plumber is worth the same as a dollar spent by a physician. Moreover, the dollar given to the Boeing employee to spend comes at the expense of dollars extracted from other occupation that they cannot spend, and so the net gain in consumer spending is exactly zero.
The only way one could justify subsidizing the Boeing employee is if Boeing were releasing new technologies or providing public services that make people outside Boeing better off and those people received the benefits without having to pay Boeing. Such arguments were made for the space program (Tang, artificial limbs, dust busters) and have been made for Boeing in the past (more secure national defense). The external benefits justify public expenditures for the benefits the public received but did not pay for. The extra jobs argument is not a good justification.
