Lost Jobs

Has the spending on these wars created jobs?  Yes. Wars in general stimulate demand for various outputs such as aircraft, ammunition, and uniforms. Approximately 11,200 jobs are created by every $1 billion in military spending. Domestic industries that produce these goods may thrive during wartime, employing people who might otherwise be unemployed. Military spending by the federal government is therefore often considered not only a source of national security but also, a vital support to economic recovery and employment. 

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Has this military spending created more jobs than other kinds of spending?  No. In fact, public funds would have created more jobs in the past decade if they had been invested in such industries or sectors as clean energy, health care, or education.

A billion dollars of spending would create 26,700 jobs in education, 16,800 jobs in clean energy (i.e. construction work to install solar panels on homes), and 17,200 jobs in health care.  

In other words, clean energy and health care spending create 50 percent more jobs than the equivalent amount of spending on the military. Education spending creates more than twice as many jobs.                                                    

Why are more jobs created in one industry than another?  The three reasons why the same amount of spending generates differences in employment creation are: (1) labor intensity; (2) domestic versus international content; and (3) wages.  

Industries such as education and clean energy are labor-intensive. For a given level of spending, more of those dollars go toward hiring workers and less on equipment and materials. Secondly, the domestic content of industries such as education, health care, and construction is much higher than the domestic content of military spending – a greater percentage of the spending in these industries stays within the US, where it is used to hire domestic employees and buy domestic materials. Military spending presents a much bigger leakage to the economy, as military personnel spend more of their earnings abroad and more equipment and materials are procured from outside the US Finally, all else being equal, if worker compensation is lower in industry A than industry B, the same pot of money can hire more workers in industry A than in B. Since wages, and particularly benefits, are lower in education, health care, and clean energy than they are for the military, the same amount of money hires fewer people in the military.

As a result, the $1.54 trillion to $2.9 trillion that the US has spent and obligated on the wars in the past 14 years has resulted in lost employment opportunities of between 1 and 3 million jobs.

That is, if over the years 2001-2014 we had not been at war but instead had channeled our resources into expanding the clean energy industry, broadening health care coverage, and increasing educational opportunities, we could have reduced unemployment from 6.1 to 4.9 percent. (Page updated as of October 2014. Infographic updated as of June 2011)

PHOTO by flickr Paul Keheler via Wikimedia Commons