Economists, politicians, President Obama, my next door neighbor, people of all stripes talk about job creation, and how important this is. And it’s true. It is important, especially when nationwide unemployment is at a generational high and people without a job, or without steady employment are losing first their savings and then their homes.
Also, it’s no secret that more people employed means more people with more money to spend, more consumption, more productivity and more government tax revenues.
And it’s probably also true that all together all this might even mean more happiness as things get closer to just how the Declaration would have it, — our being in possession of life, liberty and the pursuit of happiness (read property if you’re a follower of John Locke, and a good job).
However, the mediocrities who frequent the halls of Congress, while they may have their constituents in mind when they talk about job creation, probably have much more in mind their own job security. For a rise in employment numbers means a corresponding rise in government revenues, resulting in their having more tax payer monies to spend, that giving a substantial boost to their own job security.
Not often mentioned in the constant chatter about job creation, especially not alluded to by the politicians, is the fact that any new jobs created result from just one of two processes, the one public and the other private.
Governments are the public source of jobs. Governments create jobs, as in the thirties by the various New Deal work projects, as in more recent times by increasing the numbers of our service men and women sent to wage war in Iraq and Afghanistan, as now and always by adding to the rolls of the present millions of federal, state, and local office workers, and as at the present time by injecting huge amounts of stimulus dollars into the economy intended to fund shovel ready and other federal and state work projects (the latter being the means most often favored and promoted by leftward leaning economists).
In the private sphere individuals can and do create jobs. They may do so either by expanding old or starting new businesses, and in the process producing additional products for market, products that people will want to buy, thereby bringing about additional hiring as greater numbers of workers are needed (somewhere, but not necessarily in this country) to meet the new demand.
Most important, and what is not often mentioned by the politicians including the President, is that the public jobs created produce no new wealth. For all the money going to finance the new positions, —mostly government positions needed to manage and maintain the new and/or expanded government programs— all of this money must either be borrowed or come from the private sphere in the form of new taxes.
This sort of job creation represents not a growth in, only a redistribution of the country’s wealth.
Now this situation is not new. For most of the country’s history this has been the normal and non-threatening way of doing things —the private sphere giving up just enough of its wealth to insure that the government is able to maintain, and when necessary create, the desired government services.
And in fact, as long as the number of people employed by the government was considerably less than the number of people privately employed things went swimmingly.
For most of our history government tax revenues did not represent a significant amount of monies taken (and not without representation) from the people, monies that might have been used for important investments and often job creation in the private sphere.
For most of our history the private economy was both large enough to go on growing itself and thereby creating new wealth as well as subsidizing without risk to itself the costs of government.
But this may no longer be the case. And hence the growing amount of chatter regarding budget deficits and out of control entitlements, the principal cause of the deficits, endangering the lives and livelihoods of future generations by leaving them huge burdens of debt.
Things have gone even further in the European Union. In these countries, many of them, the public or government created and funded positions now outnumber newly created positions in the private sphere. And more and more one looks to government to solve the problem of high unemployment.
That fewer and fewer individuals are accounting for new job creation in the private sphere might not in itself be an impossible situation. For there is no absolute limit to the number of people that one highly inventive and productive individual might support. Witness the “robber barons” of the 19th. century, and the tech giants of our own time.
Also, this is what happens in most families where only one or two members are working and bringing home whatever now-a-days is the bacon, and where the many in the family, as in society at large, eat the bread provided by the few.
The problem arises when the majority who are not growing the country’s wealth band together and use their majority position in respect to numbers not to support and grow the entrepreneurs or job creators who are out there, but to protect their own non-productive positions and entitlements.
We see this today in Greece and France when unproductive majorities demonstrate in the streets and use, or threaten to use their majorities in the polling booths to bring down the governments that try, given the size of their budget deficits, to limit if not take away entitlements, having realized finally, unlike the population, that the private sources of public revenues on which they had always depended were not inexhaustible.
Just the other day the French center-right government of Nicholas Sarkozy proposed raising the retirement age two years, from 60 to 62. That which was, as it seemed to me, a thoroughly reasonable step given the high French debt to GDP ratio and the bleak economic outlook for future GDP growth. And right away we heard that a super majority of French citizens was adamantly (violently) opposed to the proposed government action, placing Sarkozy’s initiative, as well as his government, in jeopardy.
Does all this mean that now most people, in this case in the country France (but we’ve seen that this is also true in any number of other European Union countries) rely principally on the government for their economic well-being? Furthermore, if government subsidies and other benefits and entitlements represent a growing, now perhaps the largest and certainly the most secure portion of the people’s income, why would the people ever do anything to limit the size of their government that which would bring along with it a reduction in their own benefits?
Let me conclude my comment regarding jobs and job creation with an observation along the same lines by Arthur Brooks from an opinion piece in the Wall Street Journal of June 5th.
Today, the average federal worker earns 77% more than the average private-sector worker,…. To pay for bigger government, the private sector will bear a heavier tax burden far into the future, suppressing the innovation and entrepreneurship that creates growth and real opportunity, not to mention the revenue that pays for everything else in the first place.
If these trends are not reversed, it is hard to see how our culture of free enterprise will not change. More and more Americans, especially younger Americans, will grow accustomed to a system in which the government pays better wages, offers the best job protection, allows the earliest retirement, and guarantees the most lavish pensions. Against such competition, more and more young, would-be entrepreneurs will inevitably choose the safety and comfort of government employment—and do so with all the drive that is generally thought to be “good enough” for that kind of work.
What will happen as our increasing number of state employees confront a shrinking private-sector tax base? Just look to the streets of Athens.