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Wednesday, June 24, 2009

Jobs are a means, not an ends.

A dangerous and disturbing trend has taken over in America. This is not a recent movement, but it is one that must be understood and stopped before it brings about the end of capitalism and liberty. I am referring to the idea of “creating jobs” as though that is the goal of a productive society. Everywhere you turn, especially during the current economic problems, you hear people talk about how we need to “create jobs” or “get people back to work.” It seems that the only thing President Obama can say without a teleprompter is some version of the above statements. This is a grand misunderstanding of economics and how to create a prosperous economy. Jobs are not an ends, they are a means to an ends and a consequence of prosperity.

People choose to go into business for one goal, to make money. Many times they will also go into business because they enjoy what they are doing and they have a passion for their craft, but if they don’t make a profit it is not a business, it is a hobby. No one starts a business to create jobs. In fact, jobs are a tremendous cost for most businesses. That is why labor tends to be one of the first things cut when I company is in financial trouble. Wages, training, taxes, and benefits are all tremendous costs for a business. So why do businesses ever hire employees if they are such a cost burden? At a certain point the marginal benefit of having the employees will outweigh the marginal costs. That means that once a company grows to a certain size (depending on the company) it becomes more profitable to hire employees and create jobs and less of a cost burden. Therefore, jobs are a result of a growing company and of profit. The less profit a company has the fewer jobs it will provide. If politicians and talking heads understood this and truly wanted to “create jobs” they would encourage companies to make profits and help them cut costs to free up resources for growth. They would cut taxes across the board, corporate, capital gains, property, etc. They would also ease regulations which increase costs and act as barriers to entry for new competitors. This would provide an environment of prosperity and productivity which would lead to more jobs and better paying jobs.

Why are these solutions not being explored by the people who claim to want jobs? One reason is economic illiteracy in this country. Most people do not think about economics or understand much of how it works. They know they want a job or want a better job and they expect the government to be able to get it for them. They believe that jobs are all that matter and that if we create jobs it will lead to prosperity. This is the thinking behind the different “stimulus” packages and other corporate welfare schemes. There was a ballot initiative in Colorado Springs which thankfully failed, that was cleverly called the “Jobs Now” bill. It was nothing more than a corporate welfare scheme which would have redistributed money from property taxes from one group of people and give it to another group (i.e. friends of the city council) with the ridiculous promises of more jobs. How does taking money from one group and giving it to another create anything? Also, how do they expect a company that depends on government handouts to last? They will shakedown the city by promising to move there and create jobs, but what happens then that money runs out? They will be running back to the city with their hands out and threatening to leave. Rather than creating an environment based on low costs of business for the companies, they make the companies dependent on the handouts, like a crack addict looking for his next fix. All of this gets sold to the voters with the promise of creating jobs.

If the goal was just to create jobs, the government could ban heavy machinery on new construction projects. Think of the number of people that would be employed building a new office building if they didn’t use bulldozers and cranes and could use only shovels, ropes, and pulleys? Not only would it take many more workers, but it would take much longer to build, which would provide job security. One man can dig a foundation for a house using an excavator, 100 men can dig it using shovels, and 1000 can dig it using spoons. So the question is, do we want to have a productive society and have one person dig the foundation with an excavator, or do we want to create jobs and have 1000 people dig it with spoons?

Whether the motive is personal gain at another’s expense, stupidity, or a conscience effort to destroy capitalism in the pursuit of power the result is the same. These actions promote corruption, rob some to reward others, and retard progress by creating a society of beggars rather than producers.