With unemployment numbers high, there is a continual
discussion about how to create jobs.
There are many factors for the high unemployment rate, and most of them
have to do with government interference in the marketplace. Minimum wage laws, other labor laws,
regulations against business, taxes, and central bank inflation are just some
of the major reasons for high unemployment.
With all of the talk about how best to create jobs, we
should first ask ourselves whether this is really our goal. If the goal is to increase our standard
of living, then creating jobs should not be the ultimate goal. Working is a means to an end. People are confusing work with the end
goal, which is overall production.
If we all lived in a Garden of Eden type setting where
everything was abundant, then work would not be necessary. Imagine if technology improved so
drastically that machinery could provide all of our basic necessities in life, plus
many luxurious things. Imagine you
could just press a button and have dinner served to you. You could press another button and have
all of your laundry cleaned. You
could press another button and have a house built for you.
If this were the scenario, then it really wouldn’t be
necessary for anyone to work, assuming the machinery could reproduce itself and
was accessible to everyone. People
could sit back and be served all day in this world of abundance. Perhaps some people would still choose
to work in the hopes of advancing technology more. Perhaps some would work just to keep busy. But it would not be necessary to work.
The key to a higher standard of living for a society is
production. It isn’t the demand
for production or how many people are working. At the end of the day, people can only consume what has
already been produced.
So in terms of living standards, the net production of a
society is the key, as long as it is in accordance with consumer demand. The end goal is not to create jobs, but
to create goods and services.
It has been said that jobs can be created by having people
dig ditches and then filling them back in. This is obvious to most people that it would not create any
wealth for society. It does
redistribute wealth from the people paying to the people actually digging. Usually, the people paying would be the
taxpayers. But while this
redistributes resources, it obviously creates no net benefit on the whole for
society, at least in terms of production.
It would make little difference if the taxpayers just paid the people to
sit at home rather than dig ditches.
Now let’s say that jobs are created (at taxpayer expense) to
have people clean and paint sidewalks.
This is similar to the ditch digging, except there may be a net benefit
for society. The benefit here is that
there will probably be cleaner and more aesthetically pleasing sidewalks. However, there is a problem with this
Unless having people clean and paint sidewalks is being
decided by the free market, then it is likely a misallocation of resources. When the government spends money on
anything, the politicians can only guess at what consumers want the most, and
this is assuming that politicians are even looking out for the interests of the
Perhaps some people will like the new look of the
sidewalks. But the big question is
whether they would have voluntarily spent their own money for this. Even if some answer yes, there will
still be many people who would have preferred to spend their own money
differently. For some people, they
may have preferred to save more money.
Some might have used it for new clothing for their children. Some might have used it to take a
family vacation. Some might have
used it for medical services. The
list is endless.
Whenever government spends money, it almost always
misallocates resources. Resources
are not being put to their best use, as determined by customers in a free
market. And because there is no
valid pricing system when it comes to government expenditures, there is no way
for this misallocation to correct itself through the market process. There are no profits and losses to send
signals when it comes to government.
It is impossible to know what millions of different individuals desire.
In terms of jobs, the government cannot know which jobs are
the most important for society, as determined by the people living there. So any attempt by the government to
create jobs (other than removing itself) will result in a misallocation of
resources. This means that there
will be less overall wealth in society.
It would be easy for the government to create jobs. It could hire people to do practically
anything. The problem is that job
creation does not necessarily produce any new wealth, or at least new wealth
that is in the highest demand by consumers.
Job creation is not the ultimate goal. Jobs are a means to an end. The end goal, at least in this
discussion, is more production in accordance with consumer demand. This is how living standards go
up. Working, in itself, does not
increase living standards if the work being done is not in demand.
When resources are misallocated on a grand scale, with
millions of people doing work that is not in accordance with consumer demand,
then the effects are dramatic.
Everyone suffers from these wasted resources, including those who are
employed and unemployed. Society
is poorer than it otherwise would be.
This is the reason that the middle class is suffering so much right
now. The federal government is
spending nearly $4 trillion per year on things that would not be chosen by most
individuals if they were free to spend it themselves.
In conclusion, job creation is not the
ultimate goal. Job creation should
be handled by the demands of the free market. Unemployment will decrease and production will increase, if
and when government at all levels loosens its grip and reduces spending.