Businesses Do Not Create Jobs

Thursday 11 November 2010

by: Dave Johnson | Campaign for America's Future | Report

Businesses do not create jobs. In fact, the way our economy is structured the incentive is for businesses to get rid of as many jobs as they can.

Demand Creates Jobs

A job is created when demand for goods or services is greater than the existing ability to provide them. When there is a demand, people will see the need and fill it. Either someone will start filling the demand alone, or form a new business to fill it or an existing provider of the good or service will add employees as needed. (Actually a job can be created by a business, a government, a non-profit organization or just a person doing the job, depending on the nature of the good or service that is required.)

So a demand creates a job. A person who sees that houses on a block need their lawns mowed might go door to door and say they will mow the lawn for $10. When houses start saying "Yes, I need my lawn mowed" a job has been created!

Demand also creates businesses. The person who is filling demand by mowing lawns for people might after a while have a regular circuit of houses that want their lawns mowed every week, and will buy a truck and a new mower and hire someone to help. A business is born!

Businesses Want To Kill Jobs, Not Create Them

Many people wrongly think that businesses create jobs. They see that a job is usually at a business, so they think that therefore the business "created" the job. This thinking leads to wrongheaded ideas like the current one that giving tax cuts to businesses will create jobs, because the businesses will have more money. But an efficiently-run business will already have the right number of employees. When a business sees that more people are coming in the door (demand) than there are employees to serve them, they hire people to serve the customers. When a business sees that not enough people are coming in the door and employees are sitting around reading the newspaper, they lay people off. Businesses want customers, not tax cuts.

Businesses have more incentives to eliminate jobs than to create them. Businesses in our economy exist to create profits, not jobs. This means the incentive is for a business to create as few jobs as possible at the lowest possible cost. They also constantly strive to reduce the number of people they employ by bringing in machines, outsourcing or finding other ways to reduce the payroll. This is called "cutting costs" which leads to higher profits. The same incentive also pushes the business to pay as little as possible when they do hire. (It also pushes businesses to cut worker safety protections, cut product quality, cut customer service, "externalize" costs by polluting, etc.)

This obviously works against the interests of the larger society, which wants lots of good jobs with good pay. And businesses, while working to cut jobs and pay less, need other businesses to hire lots of people and pay well, because that is what creates the demand that makes all the businesses work.

Government To The Rescue

This is where government comes in. Government is We, the People, working for that larger societal interest. In our current system -- when it works -- we use government to come up with ways to balance the effects of the profit motive -- which pushes for fewer jobs at lower pay -- with our larger need for more jobs at higher pay for us, and for the good of all the businesses. We, through our government, create and regulate the "playing field" on which businesses operate. We set minimum wages, limits on working hours, worker safety rules and other rules designed to keep that balance between profit incentive and demand, and that playing field level. (We also provide the infrastructure of roads, schools, courts, etc. that is what makes our businesses competetive with businesses in other countries. The individual interest in paying less taxes for this has to be balanced with the larger interest that we all pay more for this, but that is another post, titled, "Tax Cuts Are Theft.")

Corrupted

Obviously businesses in our system must be kept from having any ability whatsoever to influence government decision-making in any way, or the system breaks down. When businesses are able to influence government, they will influence government in ways that provide themselves - and only themselves - with more profits, meaning lower costs, meaning fewer jobs at worse pay and not protecting workers, the environment or other businesses. And, they will fight to keep their ability to influence government, using the resulting wealth gains to increase their power over the government which increases their wealth which increases their power over the government which increases their wealth which increases their power over the government which increases their wealth which increases their power over the government which increases their wealth which increases their power over the government ...

Unfortunately this is the system as it is today.


http://ourfuture.org/blog-entry/2010114511/businesses-do-no-create-jobs

This is why the Republican agenda fails us America.

Amen. Good to know that someone is paying attention.

"Obviously businesses in our system must be kept from having any ability whatsoever to influence government decision-making in any way, or the system breaks down. When businesses are able to influence government, they will influence government in ways that provide themselves - and only themselves - with more profits, meaning lower costs, meaning fewer jobs at worse pay and not protecting workers, the environment or other businesses. And, they will fight to keep their ability to influence government, using the resulting wealth gains to increase their power over the government which increases their wealth which increases their power over the government which increases their wealth which increases their power over the government which increases their wealth which increases their power over the government which increases their wealth which increases their power over the government ... "

The inverse is also true (given our current form of 'ideology' driven government)...

Businesses (as a sector of 'commerce') must be flexible to move with the market place. When government has undue influence within the realm of business decision making imbalance occurs. Government in such an 'imbalanced' position will squeeze as much as possible from 'business', take as much of 'businesses' profits, meaning fewer jobs, more unemployed for government to support, and fewer businesses wanting to 'compete' in a fixed market place. Additionally a government that is allowed to enter that market place in such a manner will fight to keep its control, regulate to maintain power of decision making in the market, and increase taxation when the revenue begins to shrink...

Unfortunately this is the system as it is today also.

(and both sides of that coin 'spin' their stories to the masses in the hope we will land on one side or the other, never seeing the truth in the balance).

What an opinionated article. I can use his same technique to argue businesses do create jobs.
It doesn't matter if you have a demand for something if you don't have the means to pay for it. Business pay the people who have the demand which allows them to spend money and increase jobs at a different establishment. Thus the business creates jobs.

Also giving tax breaks to businesses would allow them to pay better wages or offer more benefits.

Don't try to BS a BSer

demand creates businesses and businesses create jobs
therefore demand creates businesses and jobs



businesses are made of people and need to employ a lot of
them to work well and businesses also need to be efficient
and these are not conflicting goals

if our govt is to support people then it must also support
businesses and this does not present a conflict either really
in the general sense.

of course one person's or businesses' interest may conflict
with another person's or businesses' interest and government
is supposed to support everyone and all businesses so it may
be hard to represent everyone

so what?
nobody said it was easy