Government job creation programs deliver significant (net) long-term benefits

On April 5, 1933, US President Roosevelt made an executive decision to create the – Civilian Conservation Corps (CCC) – which was a component of the suite of government programs referred to as the – New Deal – that defined the Federal government’s solution to the mass unemployment that arose during the early years of the – Great Depression. These programs have been heavily criticised by the free market set as being unnecessary, wasteful and ineffective. Critics assert that no long-term benefits are forthcoming from such programs. However, those assertions are never backed by valid empirical evidence. A recent study by US academics has provided the first solid piece of evidence that the CCC delivered massive long-term benefits to the individuals who participated in it. And these benefits considerably outweigh the dollars outlaid by the government. I discuss that research today. The results also point to the effectiveness of a Job Guarantee program.

The CCC and the other employment programs created hundreds of thousands of jobs and built valuable infrastructure.

Between 1933 and the program’s end in 1942, around 3 million young Americans were employed in the program.

The CCC was a “voluntary government work relief program that ran from 1933 to 1942 in the United States for unemployed, unmarried men ages 18–25 and eventually expanded to ages 17–28.”

Over its history, it created jobs for unskilled workers and has left a legacy from the millions of trees that were planted, the extensive works to mitigate against soil erosion and flooding in agricultural areas, the extensive development of hundreds of parklands throughout the country to name a few of the projects that were completed during the program’s tenure.

The workers received a wage that was partly allocated to helping their families back home.

The workers lived in work camps and the program gave them clothing and food during their employment.

Many participants were provided the opportunity to gain a basic education while employed – many workers who entered the program illiterate were taught to read during their tenure.

The work was deliberately designed to avoid competing with other jobs already being provided.

In his – Message to Congress on Unemployment Relief (March 21, 1933) – which introduced the CCC program, the President said:

I propose to create a civilian conservation corps to be used in simple work, not interfering with normal employment, and confining itself to forestry, the prevention of soil erosion, flood control and similar projects. I call your attention to the fact that this type of work is of definite, practical value, not only through the prevention of great present financial loss, but also as a means of creating future national wealth. This is brought home by the news we are receiving today of vast damage caused by floods on the Ohio and other rivers …

This enterprise is an established part of our national policy. It will conserve our precious natural resources. It will pay dividends to the present and future generations.

Of course, there was criticism of all the New Deal programs from inception.

At the time, the Left (particularly the trade unions) were critical because of its ‘military-style’ operation, especially given that the army was heavily involved in logistics as most of the workers came from the East to work in the West.

There were complaints that the projects were selected to satisfy the ‘pork barrel’ ambitions of local politicians.

A particular pastime of the ‘free market’ lobby in recent years has been to revise this period of history and declare that the New Deal did nothing positive.

In his 2012 book – Pity the Billionaire: The Hard-Times Swindle and the Unlikely Comeback of the Right – author Thomas Frank observes – in this period of conservative revisionism:

… it is evidently possible to listen to …. [the song] … and hear it as a call for a purified form of free-market economics, as a warning against public works projects, maybe as an endorsement of the Hoover administration, even … That conservatives are the rightful heirs to Depression culture. That the songs and books and movies of the thirties abound with lessons on the wisdom of markets and the failure of government …

The thirties, as we know them in the Internet age, are very different from the thirties we know from the canonical literature of the time or the standard histories of the period. To Google nearly any aspect of the first two Roosevelt administrations is to encounter almost immediately the obsessive loathing for the New Deal felt by conservative entertainers and libertarian economists.

I have considered this phenomenon previously, when similar criticism of government intervention arose during the GFC.

For example:

1. The non-existent but remarkable austerity-depreciation mechanism (August 1, 2012).

2. –When conservatives reinvent history to suit themselves (May 18, 2012).

In her 2007 book – The Forgotten Man: A New History of the Great Depression – which really should have been called ‘A made-up history of …’, the conservative author Amity Schlaes claimed that “the New Deal extended the length of the Depression and had deleterious effects on individuals.”

Thomas Frank considered her arguments in some detail and concluded that:

The larger object of Shlaes’ 2007 book … is to document the conservative article of faith that Roosevelt’s New Deal did not help the nation recover from the Depression. The author uses two measurements of the national economy to accomplish this goal: the Dow Jones Industrial Average and unemployment numbers. The first metric had little to do with the economy as average people experienced it; the second metric is actually rigged against Roosevelt – Schlaes counts people who held temporary government jobs as having been unemployed. The author thereby makes a mystery of the enthusiasm for FDR felt by the millions of people who were saved by jobs with the WPA. As for the standard yardstick of economic well-being – GDP growth – Shlaes does not even mention it at all.

On the chance that anyone gives a damn about what actually happened in the thirties, here are the numbers. GDP shrank dramatically from 1929 to 1933, then abruptly reversed course in the year after Roosevelt took office . “Real GDP increased 11% in 1934, 9% in 1935, and 13% in 1936″, writes the economist Christina Romer – and those percentages … dwarf the growth levels of the eighties, nineties and zeroes.”

Other studies of similar bent also deploy the trick of claiming unemployment didn’t really fall and reach that conclusion by excluding all the workers in the government job creation programs from the employment list.

Pretty simple really – 2 and 2 does not equal 4 if the second 2 is actually zero.

Schlaes responded to the criticisms saying the data (Wall Street Journal Article – November 29, 2008 behind paywall:

… intentionally did not include temporary jobs in emergency programs—because to count a short-term, make-work project as a real job was to mask the anxiety of one who really didn’t have regular work with long-term prospects.

So a rehearsal of the government jobs are not real jobs and provide no longer-term benefits for the individuals concerned.

I reflected on that past literature last week, when I read a new study in the Quarterly Journal of Economics, considered by the mainstream to be one of the top-ranking journals.

The article written by a number of academic researchers in the US – The Lifetime Impacts of the New Deal’s Youth Employment Program – (published in Volume 139, Issue 4, November 2024, pp. 2579–2635) – provides solid evidence backed by state-of-the-art econometric analysis to refute all those types of criticisms.

As important it provides the evidential basis to justify government job creation programs in the modern period.

It is a long article and uses sophisticated statistical and econometric techniques.

I will leave those details out of what follows and interested parties can read the details for themselves.

The study focused on:

… what New Deal programs did for individual beneficiaries, particularly over their lifetimes.

This is interesting because not much attention has been focused on the long-term effects on individuals who participated in the program.

There are many studies that focus on the aggregate benefits – more jobs etc – or the infrastructure that was generated as above.

But this study conducts:

… the first lifetime evaluation of the largest federal youth employment program in U.S. history created to address high youth unemployment during the Great Depression: the Civilian Conservation Corps (CCC) …

(it provides) … the first estimates of the lifetime effects of a New Deal program on individual beneficiaries …

The ‘lifetime’ focus is the novelty of this study and allows us to more clearly reject the revisionist claims that there were no “longer-term benefits for the individuals concerned’.

The 3 million-odd workers employed in the CCC represented “one-third of all men aged 17–24” at the time.

It was thus a highly significant program.

It was obvious that the income generated assisted the families and created valuable legacy infrastructure.

But what were the longer-term impacts on the young individuals once they entered adulthood.

That is the question this study sought to answer.

The researchers used ‘matched records’ from the CCC enrolments and later Census data to investigate the ‘lifetime influence’.

By way of summary, their results are:

1. Training – there was some training offered by the CCC although most of the work was productively completed with minimal training.

The authors found:

… no short- or medium-run labor market benefits associated with job training in the CCC. With respect to lifetime outcomes, however, we find significant benefits associated with longer training. Those who spend one year in the CCC have 5.2% higher lifetime earnings, live about a year longer, claim benefits (disability or pensions) 0.4 years later in life, and have 10% lower rates of Social Security Disability Insurance (SSDI) claims.

The benefits are particularly pronounced for workers once they reached 55 years of age.

The authors argue that the program not only provided work at a time of need but also improved the long-term health of the workers, which, in turn, meant they were more productive over their lifetime.

The participants also became more mobile as a result of their increased skills.

The benefits thus were biased towards longer term outcomes notwithstanding the significant income boost the workers received when they were given work.

This is why the “results confirm that the effects of the program are much larger over the lifetime than in the short term”.

2. Interestingly:

… while these gains were substantial, we estimate that they may not have been large enough to fully compensate individuals for large losses associated with the Great Depression

The Great Depression was a massive event and the income and attendent losses by families were huge.

The study finds that the CCC only partly offset these losses, which is not a criticism of the Program but a reflection on the scale of the Depression.

These results are relevant for discussions today of public sector job creation programs which would be introduced when the scale of losses facing the families was smaller.

In that case, the significant benefits of such programs would not be up against major losses.

This research thus has great relevance for justifying why a program like the Job Guarantee is worth introducing.

3. The authors find that “the longer an enrollee trained, the longer he lived … The magnitudes imply that one more year of training increased the age at death by one year (roughly 1.3% of 73.6 years of life). Given that the average duration was 9.85 months, the program increased age at death by 0.8 years for the average enrollee.”

4. One of the major benefits was improved health, which only became obvious as the worker aged.

The authors noted that “the benefits of the program in terms of mortality are not apparent until after individuals reach mature ages … health gains in childhood and young adulthood only manifest themselves in older ages when health starts to decline, and the least healthy individuals die.

5. The participants were also less likely to claim welfare benefits including disability pensions in later life “suggesting CCC men were in better health, retired later, and lived longer.”

They conclude that “Overall, we find that CCC participation improves income and health in the long run as measured by delayed benefit claiming, reduced SSDI claiming, and greater longevity.”

6. The participants also became more educated – “a combination of additional schooling completed as part of the CCC and schooling obtained after discharge from the CCC. CCC reports indicate that 8% of men obtained additional schooling during the program.”

7. The participants became more substantially geographically mobile relative to the national average.

The results show that “when CCC men moved, they moved to locations with higher paying weekly or annual wages (as of 1940) and lower mortality, measured by the median county level mortality from 1950 to 1968.”

Implications

The detailed and innovative empirical research finds considerable long-term benefits from the CCC program, which complements other research that has found similar outcomes for the modern Jobs Corps program.

As noted above they found that “those who participated in the program for 1 more year lived 0.96 years longer … and their earnings were 5.2% higher. While these benefits are substantial, they suggest that the program may not in fact have fully compensated affected youth.”

The important point they make is that:

… modern recessions have resulted in much smaller increases in unemployment, suggesting that such a program would compensate enrollees.

Further, they consider the Marginal Value of Public Funds or MVPF which is the ratio of the policy benefits to the recipients to the net cost to government.

This is a standard tool which allows policy makers assess the long-term effectiveness of their policy interventions.

The cost measure is biased because it assumes the ‘costs’ are captured by the reported public outlays.

In fact, the only relevant costs of a government program are the extra real resources that are consumed as a result of the spending.

But leaving that aside and using the author’s logic (which is mainstream) and the fact that the authors did not include benefits to the families, communities, or landscape, but only focused on the individuals involved, they find a MVPF of 6.

What does that mean?

So for every $1 outlaid the total societal benefits were around $6 over the lifetime of the participant.

This is quite a high MVPF.

Conclusion

Research such as this helps to redress the constant diatribes from conservatives who assert that government programs are disastrous, unnecessary and deliver no long-term benefits.

The facts are fairly clear in the case of the CCC program – the workers enjoyed improved lives for the duration of those lives relative to those who did not participate.

A program like the Job Guarantee could be designed to deliver even great long-term benefits that were found by the authors for the CCC.

That is enough for today!

(c) Copyright 2024 William Mitchell. All Rights Reserved.