The Myth of Job Creation
posted at 4:23 pm on September 9, 2009 by Doctor Zero
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.