Flashback – Job Creation Basics

[Every two or four years we hear tales from federal and state candidates about who has or who is going to create the most jobs. In reality the only jobs governments create are government jobs. The best any government can do is to minimize regulations that stifle job creation and not try to micromanage the job market. 

I wrote a reminder of this in August 2011 when the job market was just recovering.]

There has been a lot of talk about jobs in the past two or three years, but I think it requires strong economic understanding and critical thinking to draw accurate conclusions.

Jobs are not created; they are purchased. You don’t work for the boss; you work for the customer. Conversely, jobs don’t go away, customers go away. My experience is that many bosses don’t understand this important concept and fail to pass it along to their workers. When a company is growing or downsizing, it is usually based on matching the number of jobs to the needs of their customers.  (Sometimes, though, they economize by passing along their work to their customers, think self-service check-outs and those irritating phone menus).

When we work at jobs, making goods or delivering services, there must be a market for those goods and services. People should say to themselves, ”Wow, this is better and cheaper than the other comparable alternatives. I’m glad I made that particular purchase.” Everyone in the organization, whether it be a single proprietor or a global corporation, is working together to make that sale successful. Then customers continue to buy and more customers arrive. By buying more products or services, they essentially create more jobs. This is the motivation for a company to focus on customer satisfaction.

When a governor decides to “create green jobs” by mandating that a portion of electricity be generated by renewable sources (wind, solar), who purchases these jobs? Since they are created, they must be additional to jobs that already existed and the additional wages for these additional jobs must come from somewhere. Because there is no magic money tree, utility customers pay more. These jobs are created not because there are voluntary customers; instead the customers are forced to buy these new jobs with money they would have spent on other things (i.e., other jobs). Then we are paying more to support a wind farm that no one asked for, with a much bigger ecological footprint than conventional generation, that requires a back-up system anyway because it is only 35% efficient as the wind blows only part of the time and more at night, when less electricity is consumed. It doesn’t improve customer satisfaction or attract new customers. It merely creates jobs by displacing other jobs.

When we hear of jobs being created, we must be very wary. GM, GE, General Mills, and Geico don’t create jobs. When they have something we want, we, as customers, create those jobs voluntarily by our buying decisions, not because of new laws or regulations, but because we believe the output of those jobs makes our lives better.

No One Really Creates Jobs

There has been a lot of talk about jobs in the past two or three years, but I think it requires strong economic understanding and critical thinking to draw accurate conclusions.

Jobs are not created; they are purchased.  You don’t work for the boss; you work for the customer.  Conversely, jobs don’t go away, customers go away.  My experience is that many bosses don’t understand this important concept and fail to pass it along to the workers.  When a company is growing or downsizing, it is usually based on matching the number of jobs to the requests from the customers.  (Sometimes, though, they are just passing along their work to their customers, think self-service check-outs and those irritating phone menus).

When we work at jobs, making goods or deliver services, there must be a market for those goods and services.  People should say to themselves, ”Wow, this is better and cheaper than I could have done it for myself.  I’m glad I made that particular purchase.”  Everyone in the organization, whether it be a single proprietor or a global corporation, is working together to make the sale successful.  Then customers continue to buy and more customers arrive.  By buying more product or service, they essentially buy more jobs.  This is motivation for a company to improve customer satisfaction.

When a governor decides to “create green jobs” by mandating that a portion of electricity be generated by renewable sources (wind, solar), who purchases these jobs?  Since they are created, they must be additional to jobs that already exist and the additional wages for these additional jobs must come from somewhere.  Because there is no magic money tree, utility customers pay more.  These jobs are created not because there are voluntary customers; instead the customers are forced to buy these new jobs with money they would have spent on other things (i.e., other jobs).  Then we are paying more to support a wind farm that no one asked for, with a much bigger ecological footprint than conventional generation, that requires a back-up system anyway because it is only 35% efficient because the wind blows only part of the time and more at night, when less electricity is consumed.  It doesn’t improve customer satisfaction or attract new customers.  It merely creates jobs by displacing other jobs.

When we hear of jobs being created, we must be very wary.  GM, GE, General Mills, and Geico don’t create jobs.  When they have something we want, we, as customers, purchase those jobs voluntarily, not because of new laws or regulations, but because we believe the output of those jobs makes our lives better.

Keeping Perspective in a Green Economy

Sometimes keeping perspective means challenging our beliefs or carefully considering the information presented.  Advertisers and others use words like green, all-natural and organic to describe products with the understanding that everyone will accept them as better.  But just labeling something green does not improve it and there are many all-natural substances that can kill you.  Beware the hype!

I read an article yesterday from a local newspaper about the growth of “green jobs” in a particular state and the state’s ranking nationally.  The industry that supplied the most green jobs was waste management and disposal.  Gee, trash collectors are now considered as working in a green industry.  Many years ago there was a joke about garbage men (as they were often referred to at the time) listing “sanitary engineer” as a job title on a resume, but now the media and whoever tracks such things categorize them as green-collar workers.  Now I don’t mean to demean the job in any way.  It’s not right that the only time we seem to appreciate trash collectors is when they are on strike, but relabeling the job to be trendy or popular does not do anything to change the work done or its importance.  Incidentally, one of the other jobs to top the list was public mass transit.  Can you say bus driver? 

Oh, for a simpler time when we just had bus drivers and trash collectors and no one was trying to use them to impress us with how environmentally minded we were.  Oh for a simpler time when people could shop at the grocery store and pick up nice fruits, vegetables and other products without insisting on paying more for all-natural or organic products without an iota of evidence that they were better tasting or better for you – but that’s a subject for another day.