There are many individual stories of job creation and better services based on open data and collaborative innovation.
One aspect is Public Sector Information: for instance in NL, the decrease in prices of Weather information has led to the creation of 100 FTE in the private sector (weather information industry), and the reduction of 20 FTE in the public sector.
When it comes to social media and collaborative innovation, the key outcome is improvement of quality of services, rather than cost reduction. The Finnish National Library digitized its catalogue of ancient magazines through an online game where 8.000 citizens participated for free.
Governments should invest in collaborative innovation. In the governments of UK and USA they are creating centres of excellence on collaborative innovation exclusively dedicated to create internal competences able to manage collaborative innovation.
In summary: collaborative public services get better the more people use them.
http://egov20.wordpress.com/2011/11/03/collaborative-e-government-public...

The change that society is undergoing is not so much about social media as it is about working through platforms and new ways of organising and collaborating. By organising online we create the possibility for people to work together, perform tasks, and distribute workload regardless of distance and boundaries.

This means that a lot of government tasks can be performed (completely or in part) by citizens or companies. That way government can become smaller and hopefully more agile while at the same time stimulating groups, organisations, and companies to come up with innovative solutions to improve services.

The second way to stimulate jobs is by creating platforms to build upon. Providing open data / PSI is one way, but countless other activities can benefit from online platforms, e.g. government services, market places, administrative tools, etc. These can bind Europe closer together.

Government could invest in an infrastructure (platform, app store, market place) where (personal) data can be safely stored and equal rules are guaranteed (for commerce and financial transactions, but also open standards). Companies can then invent new services based on this infrastructure and these data.

Social media has to move from just being a social 'chatting' platform to being the way we communicate and collaborate: in business, in politics, in administration, in everything. Remember: speech is also a social medium ... but first we had to decide on the language we were going to use.

Disempowerment destroy value creation and I have yet to see an implementation of a social network that did not disempower citizens involved in favor of some commercial or bureaucratic interest.

The "free" model based on abuse of persondal data and control of market processes is the main market problem - not a solution to further push.

When that is said - we can make peer-to-peer based social networks that work - it start with the simple understanding that you should NOT/NEVER identify the person involved as that shifts the power from people to system.

I think whats interesting (from an outsider(of govt) point of view) are social media projects like KindredHQ https://www.facebook.com/kindredhq which is from people leaving civil service for a life of consultancy, but the thing they know is that social media is the tool that they couldn't use within govt, but which they knew was perfect outside of it!