Friday, August 31, 2012

Businesses Don't Create Jobs

Yes I know that the headline is a little controversial and it's supposed to be.  Since I watch a lot of Yankees games, I get to see lots of New York advertisements, and one of those is from the state of New York who are trying to attract business, or at least make the ones already there feel good about themselves, by a series of ads claiming that "New York works for businesses."  (I wonder if they are working for average citizens but that's another issue.)

In one of the ads, the CEO of a yogurt company (at least I think he is the CEO, I search online for the ad but couldn't find it) says that because there is less regulation and paperwork to fill out in New York that he was able to hire more workers.  Well let's face it, that's blatantly false on it's face.

First of all, if he had to do lots of paperwork then he would have to hire people to do that paperwork.  Now that's not really a good use of employees so I'm okay with less paperwork, if only the church could figure the same thing out.  But there is absolutely no way that he used the money and put it into hiring more employees.

The only reason why companies hire new employees, and the second reason why the ad is false, is because the market demands that they hire new employees.  That is, if they are not selling more yogurt then they are not going to hire more people.  They hire people when their current employees cannot meet the demand of the market for their yogurt.  No new yogurt sales, no new employees, and that is true regardless of bureaucratic paperwork.

I have never worked for an employer who has said, we made lots of money this year, lets hire more people. Nor have I ever had an company I worked for say I, or anyone else, could hire any new people without first justifying the demand and need for that employee.  And that would mean showing that we had more sales or more customer demand than we could currently meet.  There are certainly some regulations that might keep business from being as big as they might otherwise be, but removing them comes with lots of costs, oftentimes environmental in the case of yogurt makers, and does not also correspondingly lead to more jobs.

We have been fooled into calling the top 1% job creators, when the simple fact is that you and I create jobs through consumption, and if we stop consuming, which is what has currently happened, then there is nothing that can be done for the "job creators" to create more jobs.  If there is no demand for the products they might sell, although since most of the people at the top do not run actual companies that produce or sell things this is even harder, then they are not going to hire more people even if they have a zero tax rate.  They won't hire more people until we are buying more products, which means that we need to have more disposable income which comes with working, and since many companies are not hiring, and if they do it is at greatly reduced salaries, that disposable income is not to be found.

We find ourselves in a sort of catch-22 situation, which you think would encourage people to actually look at simple economics.  But the simple fact is those on the far right, who claim to understand capitalism and the markets, demonstrate with almost every statement that they make that they don't understand how they work.  Because here is the truth: businesses might employee people, but we create their jobs by our expenditures with those businesses, and if we are not buying then no new jobs will be created.  The market dictates jobs and job creation, not the business owner or their respective tax rates.

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