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December 12 2013

Job Creation: The Truth that Dare Not Speak Its Name

Charlotte Hays

A new election cycle is almost upon us and we can expect to hear lots of talk about “job creation.” The Democrats will propose to create jobs through government spending or direct hiring, while the Republicans will talk about prosperity.

Democrats do create jobs, but these jobs only exist as long as the taxpayer funds them. In a way, they aren’t “real jobs” because often the point of the job is simply that it exists; in this way of looking at work, the notion that  the employee has been hired to perform a valuable service for the employer is almost an alien concept.

But what about GOP claims about job creation? Sometimes GOP claims make bosses sound like pure altruists.

James Huffman of the Hoover Institution’s “Defining Ideas” blog, has an illuminating essay on this subject. He writes:

What about the Republican claim that the private sector is the true job creator? Wrong again, at least if the claim is that the private sector creates jobs for the sake of creating jobs. Only government and some private charities create jobs for the sake of creating jobs. Any private sector employer whose mission is jobs creation will not long survive in the marketplace. Indeed, success in private business often turns on finding ways to cut jobs. Only with direct government subsidies tied to job creation will the private sector even consider creating jobs for the sake of creating jobs.

It might be objected that political candidates are not really saying that the private sector can create jobs at will. But the reality is that the political rhetoric of job creation distracts elected policymakers from what needs to be done if we are to have an economy that provides ongoing opportunities for everyone seeking employment.

Although employees might view their employer as a job creator, the reality is that jobs in the private sector are a fortuitous byproduct of successful business pursuits that have nothing to do with job creation. Indeed, from the perspective of employers, jobs are a necessary cost of the pursuit of those other objectives, costs that will continue to be incurred only so long as the business is successful. What are those other objectives?

They are the provision of products and services that people want and are willing to purchase, the creation and delivery of these products and services at competitive prices and quality, and, at the end of the day, the generation of revenues in excess of expenses. A business plan that calls for job creation without explaining how the business will eventually be profitable while paying for those jobs will not attract financing by any intelligent investor.

Huffman comments that this might be obvious. But if, so, he goes on to ask, why do candidates (such as Mitt Romney) claim that because they created jobs with their successful companies, they know how to make the government create jobs?

Republicans who talk about job creating in this way are often led to support government subsidies to supposedly support job creation (especially when these subsidies go to their districts). Such programs often do create new jobs, but these jobs “generally come at the expense of, not as a consequence of, a thriving economy.”

A real job is one created by a business. Sometimes businesses also cut jobs. The Obama campaign attacked Mitt Romney because companies Bane Capital bought sometimes laid off people in order to survive. Of course, in a good economy, there is far more chance of a worker who has been let go finding a new real job.

Acknowledging the reality that jobs--real jobs--are created for business rather than altruistic reasons would put Republicans in a rhetorical bind: vote for me and let the capitalists hire or fire you, according to their needs, is not a very appealing campaign slogan. Unfortunately, it is the key to the economic growth that is necessary for the--um--creation of jobs. 

 

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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