How Are Jobs Really Created?

Last Updated Oct 12, 2010 4:13 PM EDT

How Are Jobs CreatedElection years can really bring out the worst in people. With unemployment stuck at 9.6 percent, both sides of the political spectrum are spinning their way around the issue of job creation. The rhetoric is deafening ... and idiotic. Most of the questions - and answers - are misinformed, misleading, or just plain wrong.

In one debate, a political candidate asks her opponent, "How do you create a job?" The opponent's rambling answer essentially defends government policy for incentivizing and protecting jobs. Then the candidate who originally asked the question says, "An entrepreneur takes a risk that creates a good or service."

Wonderful. And what did that accomplish? Nothing. You can ask politicians how jobs are created all day long. They may say different things, but you can be sure that --
  • they'll all pander to voters,
  • they'll all be wrong, and
  • none of them will have a solution to the unemployment problem.
That's because the question itself is academic. You see, in the real world, tough problems have tough answers. And the tough answer to our jobless recovery is that there's no quick fix, no trendy job-creation diet, no pill to take, and no politician with all the answers.

The simple but inconvenient truth is that the engine of job creation is long-term economic growth. That means an ongoing cycle of ...
  • entrepreneurs creating new businesses,
  • some of those small businesses growing into big enterprises, and
  • government creating and maintaining a framework of laws and infrastructure.
That's right; the answer is "all of the above." Jobs come from small business, big companies, and government. You can cite whatever statistics you like, but that's how it really works. That said, our current situation isn't part of a normal economic cycle, if there even is such a thing. We're still experiencing the aftermath of a housing bubble and a near global banking meltdown.

That means we created a real mess and now we've got to slowly work our way through it. Translation? Again, no quick fix.

What I find ironic about all this is the number of people who seem to think free market capitalism is a bad thing. For example, when I get on my soapbox, as I often do, about how corporate goals should be to serve customers and shareholders first and second, and employees a distant third, I usually get a rash of angry comments from readers.

They say that's corporate greed, I'm a shill for corporate America, and other assorted nonsense. Well, I can't help but wonder how many of those people are now wondering where all the jobs are. They want it both ways: a fully employed growing populous, but without growth and profits as the priority. Well, you know what that spells? U-T-O-P-I-A. When you find it, let me know.

So, now you know how jobs are really created. As for how they're not created, let me summarize:
  1. Government spending will not create jobs. I have no problem with creating a few jobs by building some smart highways or something, but that's not going to get us out of this mess. All the massive stimulus bill did was balloon the national debt to record levels.
  2. Helping small businesses won't do it either. Singling out small businesses for tax breaks and incentives is dumb. You have to get the whole economic flywheel turning, and like I said, that means "all of the above."
  3. Political wrangling and mucking around makes things worse. All it does is create a climate of uncertainty. And when people, businesses, and corporations are uncertain, they tend to rein in spending and limit risk-taking, i.e. no jobs.
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Image CC 2.0 courtesy Flickr user Peta-de-Aztlan

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