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Obama plan won't mean jobs right away

By Amitai Etzioni, Special to CNN
  • Amitai Etzioni: Obama wants to fund what the U.S. needs and create jobs at same time
  • But infrastructure repair and research don't create great numbers of jobs, he says
  • Etzioni: U.S. needs investments in education and a jobs bill that creates work right away

Editor's note: Amitai Etzioni is a sociologist and professor of international relations at George Washington University and the author of several books, including "Security First" and "New Common Ground." He was a senior adviser to the Carter administration and has taught at Columbia and Harvard universities and the University of California, Berkeley.

(CNN) -- President Obama has a noble idea. He argues that if the government is going to spend money to give a boost to the economy, whose growth is slow and anemic, why not use those funds to buy goodies we want anyhow?

The goodies, laid out by the president during the State of the Union address, are funds for infrastructure, a fancy word for bridges, dams, roads, pipelines and such; for research, and for education.

The trouble with this idea is that at least two of these "investments" will generate relatively few jobs. Creating jobs is President Obama's No. 1 human, economic and political priority. The real unemployment rate is more than 17%, which includes the unemployed, those who stopped looking and those who work part time but need full-time jobs.

Unfortunately, the last two recoveries, in 1992 and 2003, produced relatively few jobs and the same seems to be the case for the current one. Stocks are doing well. Banks have recovered. Wall Street bonuses are again sky high, but the unemployment rate continues to stay near its high mark.

When you try to generate employment through infrastructure work, you find that that kind of work is what economists call "capital intensive" rather than "labor intensive." In plain English, a good part of the money goes not to hiring workers but to purchasing raw materials.

You can see the point by looking at construction. If you divide the construction costs of an average home in 2010 between material and on-site labor costs, you find that the cost of materials is nearly $90,000 and labor costs are only half that -- around $45,000. The rest of the monies go to profits for the builder and sales. One may argue that if much of the money goes to buying steel and cement, somebody has to make those capital goods, meaning more work and jobs. But many of these goods are made overseas. Only money that goes directly to hiring American workers is sure to generate employment here.

Obama: America home to dreamers

Moreover, infrastructure construction is slow to take off. As of August 2010, less than one-third of the nearly $230 billion in stimulus money allocated to infrastructure projects had been spent. Of $182 billion that had been awarded, only $66 billion was paid out.

This is a problem for the president and the economy. The economy needs more of a boost. It is supposed to be up and running by the next year or two, a point at which we can cut back on government spending and reduce the deficit. All agree that we cannot go year after year spending much more than we take in. But most of the infrastructure boost will come only down the road, when it may not be needed or may even add to inflationary pressures.

As for research, it is a wondrous thing. It is the source of new medications, energies and other innovations that keep our economy growing. But it takes even more time than infrastructure construction. For instance, it takes seven years for a new medication to go from clinical trials to approval for sale in the U.S. And the kind of people who do research are not those found in great numbers among the unemployed.

Investment in education comes much closer to what needs to be done -- if the president changes his tune. In the last stimulus package, the funds for schools were often dedicated to construction projects such as making schools more energy-efficient and introducing wireless technology. For education funds to help reduce unemployment, they must -- as some did -- go to states, so states can fire fewer teachers and maybe hire some back. In short, trying to get two for the price of one may get you none.

Yale economist Robert Shiller put it well: "Big new programs to create jobs need not be expensive.

"Suppose the cost of hiring a single employee were as high as $30,000 a year. Hiring a million people would cost $30 billion a year. That's only 4% of the entire federal stimulus program, and 0.2% of the national debt. Why don't we just do it?"

What would these people do? Send them to the conservation corps to clean up toxic dumps, to serve as assistants to schoolteachers and to teach English to new immigrants.

The opinions in this commentary are solely those of Amitai Etzioni.