The Corner

Lockheed Martin Hugely Overstated the Jobs the F-35 Would Create

During the sequestration debate, defense contractors were extremely vocal about the damage the cuts would do to economic growth and job creation. The aerospace industry produced some academic research that showed that over a million jobs would be lost if the cuts were implemented. The U.S,’s biggest defense contractor, Lockheed Martin, argued that the development and construction of its troubled F-35 combat aircraft was a significant source of economic growth that had created 125,000 jobs: 32,500 direct and 92,500 “indirect” jobs, in 46 states. The company, in fact, describes the F-35 as “the single largest job creator in the Department of Defense program.” 

Considering that the $392 billion F-35 program has been widely criticized for its vast cost overruns, its performance problems, and its potential usefulness, maybe it’s not surprising that the company would resort to advertising its stimulative effect. The role of the Department of Defense is to protect the country rather than create jobs, and yet job creation is a huge part of the case against defense cuts. For instance, when the very flawed Fuller report came out two years ago, media and political candidates uncritically repeated the potential job-loss numbers and the damage to the economy that defense cuts would do. (When it comes to defense spending, even the Republicans become Keynesians.) They were all credulous despite the many articles and studies written to correct the Fuller study – including one by Harvard University’s Robert Barro and me last March, showing that the Fuller multiplier was much larger than the ones reported in most academic studies.

Now a new report by William Hartung of the Center for International Policy just came out showing that Lockheed Martin is vastly exaggerating the number of jobs supported by the F-35. The key point in the report is the following:

The ratio of direct jobs to total jobs in the Lockheed Martin estimate far exceeds the ratio suggested by other studies in the field.  Lockheed Martin claims that the 125,000 jobs created by the F-35 include 32,500 direct jobs and 92,500 indirect jobs. So the 125,000 total jobs are nearly four times the 32,500 figure for direct jobs (3.85, to be exact).  By contrast, a 2011 analysis by Robert Pollin and Heidi Garrett-Peltier of the University of Massachusetts estimates total jobs per billion dollars generated by Pentagon spending at 11,200, with 6,800 of those being direct jobs.  That puts total jobs at 1.6 times direct jobs, far lower than Lockheed Martin’s figure of 3.85.  Even an Aerospace Industries Association-funded study by Dr. Stephen Fuller of George Mason University suggests a ratio of direct to total jobs that is considerably less than the figure used by Lockheed Martin in its study.5

Applying the less generous ratio from the University of Massachusetts study to the figure of 32,500 direct jobs would put total jobs generated by the F-35 program in the range of 50,000 to 60,000 jobs, or less than half the 125,000 jobs claimed by Lockheed Martin.  The number of F-35 jobs per state claimed in Lockheed Martin materials would come down by more than one-half as well.  The distribution of the reductions is hard to specify without knowing more about how Lockheed Martin came up with its numbers.

So Lockheed Martin’s claimed jobs number is double the likely number of jobs actually sustained by the program. The report makes other interesting points:

‐ Similarly, the company’s claim that there is significant work being done on the F-35 in 46 states does not hold up to scrutiny.  Even by Lockheed Martin’s own estimates, just two states – Texas and California – account for over half of the jobs generated by the F-35.  The top five states, which include Florida, Connecticut and New Hampshire – account for 70% of the jobs (see appendix Table 2 for further details). . . . 

‐ This study identifies 138 major F-35 contractors operating in 231 separate locations.  Well over half of the contractors identified – 88 – were foreign companies conducting F-35 work outside of the United States.  This does not necessarily indicate that a majority of the work on the plane is being done overseas, but it does suggest substantial outsourcing of F-35 work (for details see appendix tables 3 and 4).  Countries with the most identified production sites include Italy (36), Australia (30), the United Kingdom (24) and Turkey (12).  The United Kingdom is the largest participant in terms of sheer amount of production, but the work is concentrated in fewer sites than in some other countries mentioned.

In other words, Lockheed’s numbers cannot be trusted. More important, this evidence, even if it were reliable, doesn’t show that we shouldn’t cut money from the F-35 program or any other weapon system. There may be some good national-security reasons why (despite all the waste and cost overruns) defense spending, or a particular program, shouldn’t be cut. But Keynesian arguments or claims that rest on the notion that Department of Defense is a job program aren’t realistic and aren’t relevant.

The Hartung report is here.

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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