—Biden, in a tweetAugust 11
We’ve learned from experience that when a president utters a lot of job openings, he’s ripe for fact-checking. So we were curious how the president’s jobs forecast for the Chips and Science Act – which will provide nearly $53 billion for research, development, manufacturing and workforce development of semis. -drivers in the United States – has been developed.
During the signing ceremony, Biden cited “analysis” as the source of the claim that 1 million construction jobs would be created. In the tweet, which garnered more than 5,000 retweets and 31,000 likes, the president treated the number “over a million construction jobs” as a fact. But we were puzzled when we didn’t see the figure in the White House “fact sheet” on the bill.
It turns out that this number is greatly exaggerated.
The first clue that the number is fishy is because the number is so big and round – 1 million.
President Bill Clinton rightly and wrongly said in 1993 that the North American Free Trade Agreement would create 1 million jobs in five years. But that only happened because his staff accidentally provided him with an early draft of remarks that included a made-up placeholder number. The White House quickly acknowledged the error.
The second clue is that Biden was accurate – 1 million construction jobs in six years. Before the pandemic slumped jobs, the U.S. economy took four years to add 1 million construction jobs, according to data from the Bureau of Labor Statistics — from all industries, not just the semi- drivers.
When we requested documentation from the White House, we were directed to a 2021 report published by the Semiconductor Industry Association. This report touted the contribution of the semiconductor industry and examined the potential impact of a $50 billion federal investment program, similar to the Chip Act.
This is the third clue – this is a report published by an industry advocate. With all due respect to the SIA, it is not neutral on the matter. It would be unusual for a trade group to publish a report that did not highlight the industry’s economic contributions.
Moreover, when we searched the report, we found no reference to the creation of one million construction jobs. Instead, the report predicted that such an investment — roughly equivalent to the Chips Act — would create “an average of 185,000 temporary jobs per year across the entire U.S. economy from 2021 to 2026.”
Six times 185,000 adds up to over a million. But note that these are not all construction jobs. In fact, few are construction jobs.
“The statement of around 1 million construction jobs is not accurate,” said Sarah Ravi, spokeswoman for the association. She pointed us to a table in the report that indicated that a $50 billion investment would create an additional 6,200 construction jobs.
Hamilton Galloway, head of Americas consulting at Oxford Economics, who analyzed the report’s figures, said the million jobs would be created during what he called the six-year “construction phase” of the Chips Act investments. He said most of the jobs expected to be created come from capital spending – the purchase of semiconductor manufacturing machinery and other capital goods. In other words, no construction.
Note that the report says the jobs would be “created across the U.S. economy.” This means that it is a calculation that includes direct jobs created, as well as indirect jobs (through the supply chain) and induced jobs (people spending the wages they earn). These figures were created through economic impact software developed by IMPLAN, an economics firm, derived from input-output tables from the Bureau of Economic Analysis (BEA) of the Department of Commerce. These tables are used by economists to understand how industries interact with each other and with the rest of the economy. Depending on the industry, job creation can impact the economy differently.
IMPLAN provides the example of how the impact of a new vehicle manufacturing plant can be traced through the economy. Indirect effects would include the factory buying tires, electricity, advertising and paint – then the tire company buying rubber, the electric company buying coal, the advertising company paying a rent and paint manufacturer buying chemicals. The induced effects would be factory workers paying rent, buying groceries, getting haircuts – then real estate workers, grocery store workers, and hair salon workers paying rent , buy groceries and get a haircut. (The calculation must also take into account the impact of taxes, profits and wages placed in savings, which would reduce job creation.)
In the case of the semiconductor industry, the SIA report states that the job multiplier for the semiconductor industry was 6.7, or 5.7 indirect and induced jobs for every direct job. created.
During the 2011 debate on the number of jobs created by the Keystone XL pipeline, we revealed how a report touting the benefits of a wind farm project calculated such indirect and induced impacts to an absurd degree. Among the list of jobs that would be created by a wind farm investment project: 51 dancers and choreographers, 138 dentists, 176 dental hygienists, 100 librarians, 510 bakers, 448 clergy, 154 stenographers, 865 hairdressers, 898 reporters , 136 manicurists, 110 shampooers, 98 public relations people, 65 farmers and (our favorite) 1,714 bartenders.
The SIA report does not go that far. It transparently states that about half of the jobs assumed to be created come from induced effects: “531,000 jobs will be supported as workers spend their wages on consumer goods and services, such as groceries, utilities and transportation”.
Going back to Biden’s focus on construction jobs, Galloway noted that “construction-supported” jobs, such as cement manufacturing, would top the 6,200 figure. 56,000 direct construction jobs would be created, with a total of nearly 120,000 through indirect and induced effects. That’s still far less than Biden’s million.
There is another problem with such calculations. They do not take into account the state of the economic cycle at the time of the investment. The Federal Reserve is currently raising interest rates and the economy could be heading into a recession. “Input-output models do not directly model a net change in jobs across the economy, only the gross number of new jobs resulting from spending,” Galloway said.
Wendy Edelberg, a former chief economist at the Congressional Budget Office and now a senior fellow at the Brookings Institution, doubted the jobs multiplier in the report.
“These numbers seem implausible,” she said in an email, because the semiconductor industry does not operate in a vacuum. “Equipment manufacturers could make other things if orders from chip companies did not increase in the United States or abroad. Or, if no one wants to buy equipment, the workers who would have made the equipment could work elsewhere,” she said. “In that sense, it is absolutely important that we are in a recession. In the current economic environment, there is probably sufficient demand to employ workers either in related industries, or to do something else, or simply in different industries. .
Edelberg added, “There are undoubtedly positive benefits to expanding the United States’ ability to manufacture chips, now and in the long term. But this benefit does not include the increase in the number of jobs.
The White House initially defended the figure but eventually admitted it was false. “There has been confusion and this should have referred to the total number of jobs resulting from the legislation, but that does not take away from the historic nature of this decision to rebuild our manufacturing and supply chains here at home. and win the competition. with China in the industries of the future,” a White House official said.
There is often a temptation for a politician to quote the highest possible job creation for a new policy. But the president stumbled badly here. In public remarks and then in a tweet, he claimed that one million construction jobs would be created through the Chips Act.
The actual number was just 6,200, according to the industry-commissioned report cited as the source. If you wanted to be generous, you could say that the report says 56,000 jobs would be supported by construction. If you wanted to be very generous, you could say that 1 million jobs would be supported in the “construction phase” of the law. But that would be overly generous, given that the White House amplified Biden’s statement in a tweet; it was not a simple error of language.
There is also the separate question of whether indirect and especially induced jobs should be part of these political talking points – especially in uncertain economic times when the number of jobs may not increase.
But in any case, there is no reason to be wrong so badly – twice. While White House concedes ‘confusion’, tweet has not been deleted; nor has the official transcript been corrected. The President wins four Pinocchios.
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