376. BCA challenges: jobs
Here is the third video extract from my workshop called “Benefit-Cost Analysis: Traps, Challenges and Best Practice” presented on 7 February 2022, as part of the Australasian Agricultural and Resource Economics Society Annual Conference. It is about how to account for job creation resulting from the project you are evaluating using BCA. Should jobs count as a benefit, and if so how and how much?
In this extract from the workshop, I look at various options and perspectives on the inclusion of job creation as a benefit. The options range from assuming that the benefits are zero to counting the salaries paid as the benefits. In the end, I suggest that including a small benefit from job creation is likely to be reasonable in many cases. The benefits are probably much less than governments generally assume, but they are unlikely to be zero.
Like all of the presentations in this series, it draws on my 12-week online micro-credential course on Applied BCA. It is about 15 minutes long.
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A question sent to me by email: The way I usually think about employment is that if my proposed project does not proceed, the funds will be spent somewhere else. This may employ more or less people than my proposal. So if my proposal proceeds, it may even lead to a net decrease in employment. Can you see problems that arise with my way of looking at it?
My response: Your approach seems consistent with a clear focus on comparing with-project and without-project scenarios. Even if taxes are raised specially to fund a particular project, something similar would be in play: the act of taking money away from taxpayers (of all types) would in itself reduce jobs, which need to be netted out from any calculation of job increases. Thinking about it, I should have included this in the video. This would also need to be thought about in the context of a dynamic job market, but especially in the short run, there could be offsetting gains and losses.
There is a policy context where this aspect would not be relevant: where we are evaluating a new policy that isn’t funded from tax revenues but imposes obligations on businesses, say. In that case, there might be gains in jobs that are not offset by losses in jobs as a result of collecting taxes, but the issues in the video would still come into play.