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The Yin and Yang of Job Creation
Wednesday, November 7th, 2012 11:16 amDuring Mitt Romney's concession speech, as he was thanking all his classes of supporters, he euphemistically said "job creators." Something about the way he said it gave me a flash of insight:
The political dialog about how to grow the economy and reduce unemployment has been largely focused around people who hire other people. But a political economic policy which focuses only on employers ignores the balance of economic activity. You can give all the corporate tax breaks and hiring incentives you want, but if there's no demand for the company's products, they're not going to create any jobs. In order to create American jobs, we need to foster an environment of a demand for products and services that Americans are best fit to provide.
Romney engaged in a lot of anti-China economic grandstanding during the election. Instead, China's vast stockpile of dollars could be a boon to American job creation if we can start selling more things that China wants to buy.
Both parties positioned themselves as in favor of private sector "job creators." Yet government has an immense role to play in job creation. Most directly, government hires a lot of people. The Department of Defense is the world's largest "job creator" with over 3 million employees and probably hundreds of thousands of indirect contractors. Government also creates jobs indirectly. Changes in regulation can increase or decrease demand for products and services. Strong public health leads to more productive people with more disposable income. Transportation projects help get products to places where people want to buy them. Taxes and government regulation can get in the way of economic growth and job creation. But so can reckless cuts to taxes (and therefore government activities) and regulation. When you consider the balance of supply and demand, even prisoners are job creators: by locking up millions of our citizens, we create jobs for tens of thousands of prison guards.
There's a final irony in the focus on job creation. The default political view is that the United States is no longer a manufacturing leader. In fact, the U.S. makes and exports more stuff than any other country in the world, including China. But in the last 40 years or so, American manufacturing has become very automated. A couple people and a few complicated machines today do the work of a thousand factory workers in the 1960s. Neither a hiring incentive nor a corporate tax break will lead to the factory rehiring all 1000 people: there wouldn't be enough for them to do. In many industries, "job destruction" has led to major gains in productivity and profit.
The contradiction of modern America is that we're an incredibly prosperous nation with an uncomfortably high unemployment rate. Our first challenge is to find a new way to productively engage millions of people. Our second challenge is to structure society such that you don't have to keep busy just to keep alive. In the 20th Century we learned that everyone can eat even if most people aren't farmers. In the 21st Century we need to learn how to help everyone thrive even if robots and programs do most of the work.
The political dialog about how to grow the economy and reduce unemployment has been largely focused around people who hire other people. But a political economic policy which focuses only on employers ignores the balance of economic activity. You can give all the corporate tax breaks and hiring incentives you want, but if there's no demand for the company's products, they're not going to create any jobs. In order to create American jobs, we need to foster an environment of a demand for products and services that Americans are best fit to provide.
Romney engaged in a lot of anti-China economic grandstanding during the election. Instead, China's vast stockpile of dollars could be a boon to American job creation if we can start selling more things that China wants to buy.
Both parties positioned themselves as in favor of private sector "job creators." Yet government has an immense role to play in job creation. Most directly, government hires a lot of people. The Department of Defense is the world's largest "job creator" with over 3 million employees and probably hundreds of thousands of indirect contractors. Government also creates jobs indirectly. Changes in regulation can increase or decrease demand for products and services. Strong public health leads to more productive people with more disposable income. Transportation projects help get products to places where people want to buy them. Taxes and government regulation can get in the way of economic growth and job creation. But so can reckless cuts to taxes (and therefore government activities) and regulation. When you consider the balance of supply and demand, even prisoners are job creators: by locking up millions of our citizens, we create jobs for tens of thousands of prison guards.
There's a final irony in the focus on job creation. The default political view is that the United States is no longer a manufacturing leader. In fact, the U.S. makes and exports more stuff than any other country in the world, including China. But in the last 40 years or so, American manufacturing has become very automated. A couple people and a few complicated machines today do the work of a thousand factory workers in the 1960s. Neither a hiring incentive nor a corporate tax break will lead to the factory rehiring all 1000 people: there wouldn't be enough for them to do. In many industries, "job destruction" has led to major gains in productivity and profit.
The contradiction of modern America is that we're an incredibly prosperous nation with an uncomfortably high unemployment rate. Our first challenge is to find a new way to productively engage millions of people. Our second challenge is to structure society such that you don't have to keep busy just to keep alive. In the 20th Century we learned that everyone can eat even if most people aren't farmers. In the 21st Century we need to learn how to help everyone thrive even if robots and programs do most of the work.
