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Myth of the defense spending as a job creator

Posted by Picard578 on March 16, 2013

Many neoconservatives in United States defend the military budget from cuts with arguments that range from “it will threaten US security” to “it will lead to loss of jobs”. In this article, I will be adressing the latter argument.

 

But, fact is that long wars always cause recession, as money flow is redirected from civilian market to less efficient military one. In fact, since 2001 on, defense sector has accounted for virtually all new jobs. Net loss of jobs is also result of money flow redirection, as military spending is very inefficient job creator. While spending 1 billion USD on defense creates 11 600 jobs in military and related areas (military industry etc), tax cuts for individuals (not for corporations) create 14 800 jobs, spending on clean energy creates 17 100 jobs, spending on health care 19 600 and spending on education 29 100 jobs. As such, if just 100 billion USD from 700 billion USD of US direct defense spending was to be redirected on clean energy, health care and education in equal amounts, net gain would be over 1 million new jobs. Even when only mid-to-high wages are counted, 1 billion USD of military spending would create 7 300 such jobs, compared to 11 500 for clean energy and 18 500 for education.

 

Further, while smaller number of people with relatively high wages will likely save some money, average-wage worker will spend greater proportion of his wage, thus encouraging circulation of money and helping the economy. And military contractors are not exempt from neoliberalization-induced differences between worker and CEO pays: at Lockheed Martin, average worker earns 58 000 USD, but CEO earns 25 million USD, a gap of 431:1.

 

While 500 000 Americans are employed in aerodspace manufacturing, only around 150 000 of these jobs are in military sector.

 

Even increased military spending does not necessarily mean more jobs. In fact, since 2006, the largest military contractor – Lockheed Martin – has cut jobs while revenues have increased . Between 2006 and 2011, it received 10% increase in revenues (from 101 billion to 113 billion USD in constant year 2011 dollars) but cut 3% of the jobs, and pattern was similar in Raytheon. While defense contracts are not only sources of revenue for these companies, this is likely main reason for why stealth fighters are becoming so popular – since they are very expensive to make, but are produced in small quantities, corporation can employ smaller number of workers while receiveing same – or larger – amount of money. Result is increased profit, which is main concern of any corporation.

 

Increased military spending does not mean better weapons either – 44 million USD Gripen is far better weapon than 200 million USD Joint Strike Fighter. Yet despite that, it creates a massive brain drain due to large military R&D budgets, causing civilian sector to loose competetivness.

 

While war spending can help to stimulate economy, it only happens in absence of other areas to spend money at, or in cases when entire industrial potential of country is mobilized. World War II, for example, pretty much wiped out unemployment. But, as shown above, that is not the case with current defense spending, and World War II defense spending also reduced other parts of the economy.

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