We may soon have a few more clues to the answer to this much debate question. Some of the government stimulus has been used by states to pay the salaries of new hires -- working for private firms. Yet, this funding won't last forever. When federal money runs out, will the jobs disappear with it?
Catherine Rampell from the New York Times reports:
The opportunity to simultaneously benefit struggling workers and small businesses has helped these job subsidies gain support from liberals and conservatives. Congress is now considering whether to extend the subsidy, which would expire in September, for an additional year. A House vote is expected on Thursday or Friday.
To be sure, this money is being spent on actual salaries for new jobs. According to the article the pay of 247,000 new workers depends on the subsidy. But that doesn't necessarily mean that the stimulus measure worked to create permanent jobs. Rampell continues:
The effectiveness of these programs will not be clear for many months, if ever. As the stimulus money dries up, employers will decide whether to keep the workers at their own cost or cast them back into the unemployment pool. Moreover, some economists fear that people hired with government subsidies may simply be displacing other workers, rather than adding to total employment, no matter how earnestly the programs are policed.
These economists' point of view is a common complaint about stimulus spending. These firms may have hired those workers without the government support, but figured they might as well collect free money from Uncle Sam, since he was handing it out. Indeed, the only thing we can really conclude about this program is if it was a failure, but we may probably never know for sure if it was a success. Think about the two possible scenarios:
Firms Lay Off These Employees
If firms do lay off these employees in hordes, then we'll know that the jobs were, in fact, temporary. If that's the case, then the spending was sort of effective, but sort of wasn't. On one hand, the spending really did create jobs. On the other hand, those jobs weren't permanent.