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Jobs are a Means, Not an End

from Kevin Williamson in National Review, The Social Machine:

The purpose of an automobile factory is not to “create jobs,” as the politicians like to say. Its function is not to add to the employment rolls with good wages and UAW benefits, adding to the local tax base and helping to sustain the community — as desirable as all those things are. The purpose of an automobile factory is not to create jobs — it is to create automobiles. Jobs are a means, not an end. Human labor is valuable to the extent that it contributes to human prosperity and human flourishing, not in and of itself as a matter of abstraction.

There are cases in which this is so obvious that practically everybody understands it. When we talk about building new pipelines (and good on the Trump administration for getting out of the way of getting that done), our progressive friends sometimes sniff that many of the new jobs associated with that work are “temporary.” (“Temporary jobs” is a phrase usually delivered with a distinct sniff.) Here is a little something to consider: Unless you are building the Second Avenue Subway in New York City, all construction jobs are temporary — buildings get built. Projects come to completion, and work gets finished. It is in the nature of construction jobs to come to an end. And it is not only construction: A technology-industry friend attending the recent National Review Ideas Summit in Washington bluntly shared the view from Silicon Valley: “All jobs are temporary.”

HKO

Every job that is “created” by government  comes at the expense of another job that is not.  We see the job that is created, we never see the one that is not. This is the essence of Bastiat’s broken  window fallacy made immensely popular by Henry Hazlitt; another great economics writer I compare to Kevin Williamson.

Jobs are created by ideas that increase productivity and wealth.

Five Reasons the Jobs Bill Will Fail

The president’s jobs bill is a non starter, a desperate attempt to do something by doubling down on failed policies.

Point  one- He offers tax breaks to workers by extending the reduction in FICA taxes, and making up the deficit with higher taxes to the general fund.  He promotes  incentives to get employers to hire the chronically unemployed and to raise wages, yet plans to fund this effort by raising taxes on the same employers.

Point two-  While he demagogues about the millionaires and billionaires, the truth is that there is not enough of them to fund his programs and thus he has to define ‘rich’ down to include the small business people which he cherishes in rhetoric but clearly knows nothing about.

Point three- Businesses do not create long term jobs with short term incentives.  After the ‘tax breaks’ wear off, the business is left with the full fare for the new jobs.  Often creating such jobs  requires investment in new equipment and those pieces of machinery still cost after the incentives have expired.

Point four- The bureaucracy required to utilize these tax credits, and the conditions are so onerous that few of the small business will be able to use them.  If you are only able to hire a few workers it just isn’t worthwhile to ramp up and learn how to comply with an incentive that will only last a few years.  Like most other regulations it is an advantage to larger companies with the infrastructure and the mass to justify the expense of compliance.

Point five-  By giving incentives to hire the chronically unemployed we are creating a perverse incentive to penalize the workers who have NOT relied on the largesse of the extended unemployment benefits.  If I have a choice between two workers and one has been unemployed for a month and the other has been unemployed for a year, I will lean more toward the one who has not been out of the work force for so long.  I will question the work ethic of the worker who has managed not to work for a year.  The advantage of the proposed tax break will not offset the natural incentive to hire a worker with a better motivation. This may seem unfair, but  trust me- this is how most small business employers will think.

At a recent business conference owners and employers from several different small businesses told similar tales.  I could sum it up with two observations: Generous unemployment benefits have made it hard to hire low level jobs such as dishwashers and busboys, and the uncertainty of pending regulations and tax increases has stifled business incentives to expand.  For the amateur economists in the room (and there were several professional economists there as well) it seems obvious that if you create incentives such as generous unemployment benefits not to work, and you also create incentives not to hire (Obamacare, Dodd-Frank, NLRB, higher taxes pending) then you should not be surprised if unemployment remains high.

Jobs in the Sand

While we restrain oil production in this country, Canada is tapping their resource with new found vigor.

Mary Anastasia O’Grady writes in the 9/12/2011 Wall Street Journal, Canada’s Oil Sands Are a Jobs Gusher.

Excerpt:

Having spent an hour the day before with Ron Liepert, the energy minister from the Canadian province of Alberta, I found it especially disturbing to hear nothing in the speech about reversing the administration’s anti-fossil-fuels agenda. Canada has recovered all the jobs it lost in the 2009 recession, and Alberta’s oil sands are no small part of that. The province is on track to become the world’s second-largest oil producer, after Saudi Arabia, within 10 years. Meanwhile Mr. Obama clings to his subsidies for solar panels and his religious faith in green jobs.
U.S. unemployment is high because capital is on strike. Short-term offers to coax investors into taking new risks aren’t going to cut it when they have been forewarned that the president intends to pay for it all by raising taxes in the out years. The market dropped over 300 points the day after Mr. Obama’s speech.

Having spent an hour the day before with Ron Liepert, the energy minister from the Canadian province of Alberta, I found it especially disturbing to hear nothing in the speech about reversing the administration’s anti-fossil-fuels agenda. Canada has recovered all the jobs it lost in the 2009 recession, and Alberta’s oil sands are no small part of that. The province is on track to become the world’s second-largest oil producer, after Saudi Arabia, within 10 years. Meanwhile Mr. Obama clings to his subsidies for solar panels and his religious faith in green jobs.
U.S. unemployment is high because capital is on strike. Short-term offers to coax investors into taking new risks aren’t going to cut it when they have been forewarned that the president intends to pay for it all by raising taxes in the out years. The market dropped over 300 points the day after Mr. Obama’s speech.

Alberta is now producing two million barrels per day but expects that number will grow to four to five million within a decade.

Alberta’s oil and gas industry supports more than 271,000 direct jobs and hundreds of thousands of indirect jobs in sectors such as construction, manufacturing and financial services. The province has an unemployment rate of 5.6%. There are also some 960 American companies involved in Alberta energy, supplying equipment and technology, among other things. As an example, Mr. Liepert says, “dozens of Caterpillar tractors, made in Illinois and Michigan and costing $5 million a piece” work the oil sands. He says the region is on track to create more than 400,000 direct American jobs by 2035. The Bakken region of North Dakota, where private land ownership gives drillers relief from federal obstructionism, shares a similar, if smaller, story. Oil production there is booming, and North Dakota unemployment is 3.3%.

The Job Creation Myth

I am constantly amazed at how sitting political leaders and naive citizens think that the government can create jobs. If the government could create jobs why would we ever tolerate any unemployment?  Either the leaders are economically ignorant or liars.

If you only read one economics book I recommend ‘Economic in One Lesson’ by Henry Hazlitt. Hazlitt was not an economist, but a reporter and he wrote this book in 1946.  This passage explains why the government is incapable of creating jobs without sacrificing at least the same number of jobs from the private sector.

This is what is immediately seen. But if we have trained ourselves to look beyond immediate to secondary consequences, and beyond those who are directly benefited by a government project to others who are indirectly affected, a different picture presents itself. It is true that a particular group of bridgeworkers may receive more employment that otherwise. But the bridge has to be paid for out of taxes. For every dollar that is spent on the bridge a dollar will be taken away from taxpayers. If the bridge cost $10 million the taxpayers will lose $10 million. They will have that much taken away from them which they would otherwise have spent on the things they needed most.

Therefore, for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $10 million taken away from the taxpayers. All that has happened, at best, is that there has been a diversion of jobs because of that project. More bridge builders; few automobile workers, television technicians, clothing workers, farmers.

This sounds so logical and obvious that I fail to understand why anyone would swallow the government promises to create jobs.

The Economy’s Ball and Chain

Team Obama has missed the reason for high unemployment and slow growth in spite of low interest rates and seemingly endless stimulus.  In the Wall Street Journal Gary Becker, Steven Davis and Kevin Murphy writes “Uncertainty and the Slow Recovery”.

Excerpts:

Several pieces of evidence point to extreme caution by businesses and households. A regular survey by the National Federation of Independent Businesses (NFIB) shows that recent capital expenditures and near-term plans for new capital investments remain stuck at 35-year lows. The same survey reveals that only 7% of small businesses see the next few months as a good time to expand. Only 8% of small businesses report job openings, as compared to 14%-24% in 2008, depending on month, and 19%-26% in 2007.

The weak economy is far and away the most prevalent reason given for why the next few months is “not a good time” to expand, but “political climate” is the next most frequently cited reason, well ahead of borrowing costs and financing availability. The authors of the NFIB December 2009 report on Small Business Economic Trends state: “the other major concern is the level of uncertainty being created by government, the usually [sic] source of uncertainty for the economy. The ‘turbulence’ created when Congress is in session is often debilitating, this year being one of the worst. . . . There is not much to look forward to here.”

Government statistics tell a similar story. Business investment in the third quarter of 2009 is down 20% from the low levels a year earlier. Job openings are at the lowest level since the government began measuring the concept in 2000. The pace of new job creation by expanding businesses is slower than at any time in the past two decades and, though older data are not as reliable, likely slower than at any time in the past half-century. While layoffs and new claims for unemployment benefits have declined in recent months, job prospects for unemployed workers have continued to deteriorate. The exit rate from unemployment is lower now than any time on record, dating back to 1967.

According to the Michigan Survey of Consumers, 37% of households plan to postpone purchases because of uncertainty about jobs and income, a figure that has not budged since the second quarter of 2009, and one that remains higher than any previous year back to 1960.

These facts suggest that it was a serious economic mistake to press for a hasty, major transformation of the U.S. economy on the heels of the worst financial crisis in decades.