Green Room

The Myth of Job Creation

posted at 4:23 pm on September 9, 2009 by

Among the most unforgettable statements to come from President Obama was his repeated claim to have “saved or created” some ever-changing number of jobs. He stopped making this claim when it was greeted with roars of laughter, which in turn fell silent when unemployment numbers began threatening to set off the tilt alarm on the economic pinball machine. We were all laughing at the assumption of childlike voter stupidity in the “saved” part of this statement, but the “created” part is equally absurd.

With rare exceptions, the government does not “create jobs.”

The government can certainly hire people. It has been hiring an astounding number of them, even as private-sector unemployment skyrockets. This excellent post from Directorblue provides a graphic illustration of this distressing trend. Naturally, these government jobs are among those counted as “saved or created” in the Administration’s rhetoric. This kind of hiring is not what the public has in mind when it hears about job creation. If it were, the government could make everyone happy, and achieve full employment, by simply drafting every unemployed person into the military.

Private sector jobs are created in response to economic opportunity, while government jobs are an expense, incurred by the public in response to a specific need. Every businessman knows that expenses should be minimized, not expanded. For example, fire fighters serve a vital purpose, but if an increase in fires prompted the state to hire more of them, it would not be celebrated as an economic opportunity for the fire fighting industry. No one in a peaceful democracy applauds increased military recruitment as a positive economic indicator, heralding the creation of exciting new markets for warfare. Nobody wants to be first in line to get served when the United States military opens for business.

Federal “stimulus” spending is often touted as promoting job creation. That obviously wasn’t the case with the Obama stimulus, which primarily affected employment by hiring people to put up signs proclaiming how wonderful the stimulus was. Federal subsidies don’t “create” jobs, because they absorb tax money that could have been used for honest, economically desirable job growth. The government then converts tax dollars into “stimulus” pennies with its usual efficiency, and uses them to pay business owners to hire people they didn’t think they needed. Genuine job growth requires business optimism about the future, since even in a simple job, training and payroll expenses make human resources a long-term investment. Note how the stimulus and TARP money that didn’t just vanish into thin air was used mainly to pay off debt and batten down the hatches for rough times ahead, rather than increasing staff to handle future business that might never come.

There are only four ways the government can truly “create” a substantial number of jobs in the private sector, through direct actions that would immediately prompt businesses to hire people:

1. Launch an aggressive war of conquest.

2. Release additional natural resources for private industrial development.

3. Privatize an industry that was formerly controlled by the government.

4. Create a new technology the private sector finds useful.

In the United States of America today, under the Democrat Party, the first three options are equally unlikely. The fourth option, technological advance through government funding, is usually provided by the military, as in the case of research related to space travel, or the creation of the early Internet. Of course, military spending is the last thing most Democrats have in mind when they talk about “stimulus,” and is virtually the only item in the budget they want to cut.

Broadly speaking, the government can encourage job growth by reducing taxes, lowering regulatory barriers to business creation, and taking steps to improve the confidence of consumers and investors. Hiring will also increase, and real wages will grow, when the additional costs government imposes on hiring are reduced, such as mandatory benefits and payroll taxes. Reducing the legal obstacles to terminating employees who don’t live up to expectations also stimulates job growth, since common sense tells us a business is less likely to hire people when it knows they will be extremely difficult to dismiss. Organized labor is inherently hostile to job growth, since it raises the cost of labor and greatly restricts the ability of business owners to terminate unsatisfactory employees, as well as reducing the supply of labor, by restricting it to union members. Special advantages extended to unions by government, such as the Davis-Bacon Act, will therefore tend to reduce employment.

Most of the things government can do to enhance private-sector employment are more accurately described as actions it refrains from taking. Government can do very little to “create” jobs, but it has an unparalleled ability to destroy them, far greater than even the worst natural disaster. When it does not use its destructive powers, the economy benefits. Of course, socialist government is defined by the job-destroying actions it takes. A casual glance at atrocities like the cap-and-trade bill tells us that job creation is far from the top priority of Democrats, and they insult your intelligence by claiming otherwise. Sadly, they are much more concerned with keeping jobs “green” than keeping them filled.

Job creation is the natural tendency of capitalism, which has countless ways to take advantage of the incredible resource offered by human beings. The free market sees everyone as a producer, consumer, and investment. Socialist governments see people as problems to be solved. The choice for Americans is between free, creative, exhilarating, and occasionally messy growth, or carefully managed decay. No act of political will can conjure jobs, or prosperity, out of thin air.

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Once again, perfect piece, perfectly presented. I read the whole thing and while scrolling to the top to see the author I realized it was a futile action, I knew it had to be the Doc.
Thanks again Zero. I’ve tried till blue in the face to explain this concept to Lefties, the government simply does NOT create jobs.

redneckjoe on September 9, 2009 at 5:30 PM

3. Privatize an industry that was formerly controlled by the government.

Some of my sweetest dreams are made of this.

I’ve wondered, in seriousness, how this would occur. I know that the Airline industry and airwaves were privatized in the past. I so want to have (legitimate) hope that such reversals are possible if, worse case scenario, the O admin does take over healthcare, amongst the myriad other industries he has/wants to run. But, how difficult is it to nullify an entire bureaucratic network like, say, the public school system (Oh, Lord, please…) in our massive country once it’s been initiated and intact for years? Pretty difficult. That makes me feel really tired to think about.

Another gem, Doctor.

Diane on September 9, 2009 at 5:38 PM

Dr. Zero is required reading now and so I think we can stop with the amazement of his literary gifts….I like the point about how government might be able to create jobs. Opening up oil and natural gas drilling on federal lands would be a boon for the economy. Privitizing NASA and the school system would be transformative in creative jobs in this economy. NASA in particular could really jump start the nascent private space industry in much the same way the airlines and the airways was privatized.

milemarker2020 on September 9, 2009 at 6:38 PM

As always, the Doctor hits the ball out of Wrigley Field!

Cinday Blackburn on September 9, 2009 at 6:39 PM

I hear ACORN is hiring.
Word around town is…ACORN employee’s said some things on an open mic ;)

Jed1899 on September 10, 2009 at 8:31 AM

“Dr. Zero is required reading now…”
milemarker2020 on September 9, 2009 at 6:38 PM

Wish it were so in every middle school, high school, college and beyond. By surrendering control of our schools to the insipid creep of progressive liberalism, we have failed to educate our children in American history and basic economics. Instead, our schools and universities force feed multi-culturalism, collectivism and social justice pap.

By denying American exceptionalism, the freedoms of capitalism and the power of the individual, we are denying the future of our Republic.

Thank you again, Doctor Zero, for the lesson.

publiuspen on September 10, 2009 at 8:39 AM

Brilliantly said. Now, some great respected voices must stand up and say it too. They must believe it. It must be the entire nation crying out, “Enough!” Somehow, I don’t see that happening.

WashingtonsWake on September 10, 2009 at 8:39 AM

The choice for Americans is between free, creative, exhilarating, and occasionally messy growth, or carefully managed decay.

Wow.

publiuspen on September 10, 2009 at 8:41 AM

I don’t know that I agree that the space program is military, although certainly they were and are related. It’s interesting though, that liberal politicians often push a “moral equivalent to war”.

Manned spaceflight is the only “moral equivalent to war” in history that has borne fruit.

applebutter on September 10, 2009 at 8:48 AM

This all sounds great….

Just words…Just speeches….

Words won’t cut it any longer. Something has to be done.
Just as the socialists have done, it’s time for conservatives to
slash & burn and take no prisoners.

Everytime we try to move forward the PC police come out and we stop.
Those times must end. You have to get enough people behind like-minded
candidates who will have the courage to kick some ass.

Sorry but if you want to save your country it’s time for war.
The time for talking is over. The socialists are feeling powerful and they
will continue to lie, cheat & steal to gain more power.

Call it for what it is. The hijacking of America. If you don’t have the courage
to get an Obama supporters face and ask them why they support a liar & thief then you will get what you get – or don’t get.

izoneguy on September 10, 2009 at 8:49 AM

For the most part, it’s also a myth that govt research created new technologies. Especially Nasa.

The absolute best that can be said for such spending, is that they made these technologies available a few years ahead of what the private sector would have done.

Everything that was “developed” by Nasa, was already being researched in the private sector. Govt spending accelerated the research, it did not create it.

As for the internet, private companies were already developing ways for people and equipment to communicate. Back in the early 80′s, the company that I worked for was already networking drives across the continent. I worked in Atlanta, and one of the drives on my computer was physically located in Waterloo, Canada.

MarkTheGreat on September 10, 2009 at 8:50 AM

I think at the heart of the liberal economic ignorance is their inability to understand what wealth is and what it is not. Liberals have a hard time grasping the fact that wealth is comprised of things of value, not paper money. They also labor under the delusion that wealth is a finite pie, not something that needs to be created constantly in order to sustain prosperity. Therefore, they will celebrate a million new jobs in the public sector because those workers are getting “a bigger slice of the pie,” without taking into consideration the fact that pies don’t last forever, especially when many of those who consume them aren’t helping to bake new ones.

Sharke on September 10, 2009 at 9:05 AM

Great analysis.

gonegaltinstl on September 10, 2009 at 9:09 AM

As for the internet, private companies were already developing ways for people and equipment to communicate. Back in the early 80’s, the company that I worked for was already networking drives across the continent. I worked in Atlanta, and one of the drives on my computer was physically located in Waterloo, Canada.

MarkTheGreat on September 10, 2009 at 8:50 AM

This is true. The very idea that without the government’s input, computer enthusiasts and entrepreneurs would not have come up with their own ways to make computers communicate with each other is poppycock. The computer industry is the living embodiment of free innovation and a lot of it has been fueled by individuals or small groups working in bedrooms or out of modest premises. So much of the early innovation in both hardware and software was the result of the individual efforts of enthusiasts with an obsession.

Sharke on September 10, 2009 at 9:12 AM

1. Launch an aggressive war of conquest.

Bad idea in the first place, and not gonna happen with our current administration and citizenry, who are on the brink of being too chickens–t to fight for their own survival against Islamofacism and Communism.

2. Release additional natural resources for private industrial development.

Could be done…but not a chance. BANANA-ism and its little brother NIMBY-ism are both on the rise.

3. Privatize an industry that was formerly controlled by the government.

May happen with healthcare, although the end product will be abysmal. Also the only new jobs will be paper-pushers and gov’t drones. Not exactly productive workers when all is said and done.

4. Create a new technology the private sector finds useful.

Possible but unfortunately unlikely. Spin-off technologies from NASA (just for an easy example) greatly benefited us non-astronauts, but you can only invent things once. And even on the off chance #4 DID happen, would anyone have the resources to take advantage of it in this lousy economy? Many businesses are struggling just to stay open and only the uber-wealthy have any real amount of cash sitting around.

Dark-Star on September 10, 2009 at 9:15 AM

Oops, got #3 backwards, My bad.

Dark-Star on September 10, 2009 at 9:16 AM

This is true. The very idea that without the government’s input, computer enthusiasts and entrepreneurs would not have come up with their own ways to make computers communicate with each other is poppycock. The computer industry is the living embodiment of free innovation and a lot of it has been fueled by individuals or small groups working in bedrooms or out of modest premises. So much of the early innovation in both hardware and software was the result of the individual efforts of enthusiasts with an obsession.

Sharke on September 10, 2009 at 9:12 AM

I think it’s at least arguable that government can assist in technology development, ideally by hiring private companies to develop technologies needed for the necessary expense of military defense, which has thus far included space travel.

It certainly isn’t how you want to accomplish most technological development, but as long as you’re going to develop stuff to meet the needs of the military, it’s a happy added benefit if private industry finds it useful. The military needs that led to DARPANET were helpful in getting the Internet up and running as quickly as it was – it would have been created eventually anyway, through the need for financial communication and scientific data sharing, but the military applications helped to accelerate the timetable.

Doctor Zero on September 10, 2009 at 9:19 AM

Doctor Zero on September 10, 2009 at 9:19 AM

I don’t disagree with the notion that if the military, or Nasa, needs a technology, they should fund companies to develop that technology.

My whole point was to argue against the many individuals, including some who call themselves conservative, who firmly believe that many of these technologies, would never had existed, had military/Nasa research not created it, and that 100% of the benefit of these new technologies can be counted against the cost of Nasa and the military. I’ve met some who go so far as to claim that Nasa has actually paid for itself because of the part it played in developing new technologies.

MarkTheGreat on September 10, 2009 at 9:27 AM

Thanks, Doc, for another great post. With the current Congress and administration I truly believe we have gone through the looking glass, and I don’t know how to get back! Example: your statement that “every businessman knows that expenses should be minimized, not expanded” (and I agree). Yet the Democratic Party leaders repeatedly insist that we can and should spend our way out of recession.

jwolf on September 10, 2009 at 9:33 AM

That company that I worked for back in the 80′s, also had all of it’s desktops wired together. I don’t know what the technology was, I wasn’t very involved with the IT dept at that time. We could share files with just about anyone, and had a primitive form of e-mail. I could send messages to our offices all over the world, and they would arrive within a few minutes. Delays mostly caused by bundling of messages.

The downside of such growth is that big companies each build their own networks, which are often incompatible.
The upside of this growth is that many different approaches are tried, and over time, the market picks the most efficient. It takes longer, but usually arrives at a better end product.

The military needed a system that was very robust, and could survive having much of the infrastructure destroyed in a war. The private sector did not need that level of robustness, and the techniques that created it, caused problems later on as the internet grew.

MarkTheGreat on September 10, 2009 at 9:35 AM

1. Launch an aggressive war of conquest.

?
Um, I’m usually with you on things, Doc, but wars of conquest always lower total productivity. You can increase total productivity in the long run by invading a chunk of land that was given over to chaos (or other governmental problems that prevent productivity) and imposing the kind of order and property rights that encourage production. You can also temporarily (and moderately) increase your productivity by invading a chunk of land to loot resources that were previously unavailable to you (or destroy a competitor, reducing total production so that you gain a larger share of it). Either way, the benefits to you may not out way the costs. But a ‘war of conquest’ generally isn’t going to yield more production.

Count to 10 on September 10, 2009 at 9:37 AM

“How do you solve a problem like Obama?”
( apologies to Rogers and Hammerstein)

bbz123 on September 10, 2009 at 9:38 AM

By denying American exceptionalism, the freedoms of capitalism and the power of the individual, we are denying the future of our Republic.

publiuspen on September 10, 2009 at 8:39 AM

True words spoken publius. This problem is–I think–the saddest product of Liberal thought.

You can’t build up the other struggling nations of the world by tearing the greatest nation of the world down. The other nations, however, can build themselves up by following our example.

Words won’t cut it any longer. Something has to be done.
Just as the socialists have done, it’s time for conservatives to
slash & burn and take no prisoners.

Everytime we try to move forward the PC police come out and we stop.
Those times must end [why?]. You have to get enough people behind like-minded
candidates who will have the courage to kick some ass.

Sorry but if you want to save your country it’s time for war.
The time for talking is over. The socialists are feeling powerful and they
will continue to lie, cheat & steal to gain more power.

Call it for what it is. The hijacking of America. If you don’t have the courage
to get an Obama supporters face and ask them why they support a liar & thief then you will get what you get – or don’t get.

izoneguy on September 10, 2009 at 8:49 AM
[emphasis mine]

Amen brother! I don’t care what the Frums, Friedmans, and other squishies say. Now is the time for fighting! There’s a war going on here and many of us aren’t willing to fight it! It is our sacred duty (and in many ways our priviledge) to fight! To not only fight ourselves but to warn our ignorant bretheren and sisters of the republic to the danger around us.

They are comming! They come for us! Our Homes! Our families! Our neighbors, friends, and loved ones! We should raise our voice like Paul Revere of old, and warn our neighbors of the danger that lies before us–even at our very doorsteps–today we risk our good name and time. Will we yet risk tomorrow the lives of ourselves and families? Shall we not fight now–while the evil lies in it’s crib–or wait until the coming evil is too strong for us?

The war cannot be won without fighting, and it is a noble cause we fight for. By resisting this tyrrany, we bind ourselves to the very spirit of the universe and of God! We fight along side those who have fought for freedom in every nation and on every shore! We fight against George III, the Kaiser, Pol pot, Hitler, Stalin, Mao, the whole lot of them, for it is their spirit that drives this coming catastrophe.
We also fight along side Washington, Grant, MacArthur, Eisenhower, and Patton, for they would do the same!

Those who do not see this coming are either ignorant, fools, or unspeaking traitors to this nation. Let us separate the wheat from the tares, and fight to preserve the republic!

Chaz706 on September 10, 2009 at 10:02 AM

My whole point was to argue against the many individuals, including some who call themselves conservative, who firmly believe that many of these technologies, would never had existed, had military/Nasa research not created it,

This is a gripe of mine, too. Just because a government built something of value doesn’t mean that something similar wouldn’t have been built if it had refrained from doing so. One of my original cyberfriends grew up in KY, and believes that the TVA was one of those great things that only government could do. He therefore thinks anything government wants to do must be great too.

WTF?

The Monster on September 10, 2009 at 10:34 AM

Those who do not see this coming are either ignorant, fools, or unspeaking traitors to this nation. Let us separate the wheat from the tares, and fight to preserve the republic!

Chaz706 on September 10, 2009 at 10:02 AM

One video I shot last night – More coming

http://www.youtube.com/watch?v=TfgBpPeZlT8

izoneguy on September 10, 2009 at 10:44 AM

One video I shot last night – More coming

http://www.youtube.com/watch?v=TfgBpPeZlT8

izoneguy on September 10, 2009 at 10:44 AM

That Obama supporter is an ignorant fool.

Chaz706 on September 10, 2009 at 11:00 AM

With rare exceptions, the government does not “create jobs.”

Maybe not, but this administration is really good at killing both jobs and peoples will have them.

Tommy_G on September 10, 2009 at 11:01 AM

Gee, didn’t Algore create jobs when he invented the internet?/s

Ghostbuster on September 10, 2009 at 11:59 AM