My bias up front: I am a far left liberal with an anti-capitalist bias.
My question: I often hear conservatives talk in high positive regard for “Job Creators”. Then I hear other people talk and say, no, actually, if the economy can’t support new jobs then no new jobs are actually going to be created. I’ve also heard them say it is a matter of demand too. That demand for a certain item, let’s say pizza with crust wrapped in bacon (pick a better example if you like), that it is actually that people want more/different/better stuff that creates jobs and not the brilliance of one particular job creator. To be very clear, people first have to have the money to go to Pizza Hut (instead of being poor and staying home and eating) and also have the desire for pizza with bacon wrapped crust. If nobody wanted to eat it, Pizza Hut couldn’t sell it. If the economy is tremendously poor, people can’t go out to eat very often, even if they want too. But, I am probably not giving enough credit to the Job Creator/innovator/etc side of things. So how does this actually work?
I don’t think business-oriented conservatives would see the conflict you seem to see. Anyone who’s ever run a business would agree that if there’s a way to avoid hiring a new person they’re going to avoid it. Or that if they are going to hire someone new there needs to be enough “demand” to support the position.
It’s never simple though. Nobody thinks that if they just hire an additional carpenter, they’ll definitely get $100,000 in billable hours out of him and only have to pay him $70,000. If it was that easy everyone would run their own businesses. In reality, you think about it a lot and decide you’ll probably be able to utilize your new carpenter enough to make it a profitable hire, and hopefully turn out to be correct.
So, I don’t think any (many?) business owners think business owners are altruistic or are creating the demand that justifies a new job, but that they’re the ones risking their own wealth by investing in their own business and eventually investing in a new hire.
There’s probably a contingent of weird conservatives who don’t really know what they’re talking about and see it all as very magnanimous, but they’re just mistaken.
I used to own a business and now I work for someone else’s business. I’m not at all “grateful” that they created a job for me, because we’re both getting something equally valuable about of the deal. They make more money on my time than they pay me for it, and I take on virtually no risk. We’re even.
On the other hand, I’m at least cognizant that they’ve chosen to invest large amounts of their wealth in creating this business, and that they take on lots of risks I’m not exposed to. It mostly reminds me I don’t ever want to do that again.
Businesses and employers create jobs only when they are forced to in order to start or expand a particular venture. If they can meet the demand for labor of their company without hiring, any sensible business owner will do so for as long as practical. Many will wait until their current employees are burning out from overwork before they begin looking for new employees, because from a bottom line perspective it’s the smart move. An intelligently run business will no more expand it’s payroll beyond what is required to run the place than it will accumulate extra inventory, rent too large of a facility, or overspend on advertising- and surplus workers are easier to get rid of if a mistake is made. You would have to have some absolutely enormous and bizarre tax incentives for it to make sense to keep spare workers hanging around.
In theory, tax credits could be uses to keep a struggling business afloat and avoid layoffs, but that is either ludicrously expensive corporate welfare for deserving and undeserving companies alike, or it puts the government in the position to pick winners and losers based on criteria that will inevitably be gamed by unscrupulous actors. There are no garauntees it would work and it would only really matter in a recession, in a growing economy you’d be just protecting bad companies from their own mismanagement.
If you want more jobs, they need customers with disposable income to justify expansion. Anything else is silly. Warren Buffet has suggested further increasing the earned income tax credit to create a sort of de facto basic income for any employed person. Wages would remain low while inflation would become a concern, but it would work.
One point which no-one has made yet is that the number of jobs is essentially limitless. Broadly because jobs exist to fulfill needs and humans are never satisfied. If you think the limit is how much disposable income people have, well that’s limitless too and is related to how many jobs there are.
Of course in practice millions are unemployed, and there are various reasons for that, such as people not being skilled in areas needed by business and lack of good ideas by those with capital to invest.
But yeah, if you spot a niche, or think of a way to provide a service better than others, then sure, you create jobs. It’s not quite as simple as “We employ X people, so we created X jobs”. But nor is it the case that all those jobs are poached from elsewhere in the economy.
Do farmers grow crops or do crops grow because of soil and weather conditions? Obviously you need both. Someone starting a business is putting their capital at risk to do so, if they are good at business and conditions are right, then the business will succeed and jobs will be created. If they do not attempt to start the business then jobs will not be created. Likewise if conditions are not right, then the business will fail and no jobs will be created.
Jobs get created even when the economy is poor. The obvious example would be a company producing innovative products or services that allow people to do something that’s necessary more efficiently - these will be especially popular when times are tough.
Do Job creators create the Jobs or does a healthy economy create the jobs?
I lean towards attributing it to the job creators rather than the healthy economy.
Those with capital available for investment could choose to avoid the risk and sit on the sidelines resulting in no jobs created. They could make choices that create more or fewer numbers of jobs relative to the investment. They could make choices that create higher paying or lower paying jobs. It’s all down to their choices. They hope for a return on investment.
Let’s look at start-ups. People who found start-ups are clearly job creators. But a start-up requires a business plan, a market, and a path to making money. Once you have that - made better by a healthy economy - then a job creator who gets money will create jobs. When you have a terrible economy the number of start-ups declines, just like VC money dried up after the crash.
I think the question comes from the claim from some that giving those with enough money to fund job creation more will create more jobs. As has already been mentioned, that doesn’t usually happen without a business plan, a path to profitability, and a decent economy.
When it does happen without these things - like during the Bubble, the jobs created are not sustainable.
And it is true that some jobs get created even during down times - but more jobs get destroyed.
First off, job creators don’t have to be startups or small businesses; plenty of big companies grow and create new lines of business, which creates jobs, thereby being job creators in their own right. Same for school districts that grow, governmental agencies with new responsibilities, etc…
As far as the OP’s question, it’s the chicken or the egg, just with jobs. In a sense, one doesn’t work without the other, in that job creators can’t just create jobs without a healthy economy for their businesses to flourish in. But healthy economies don’t happen without relatively low unemployment and plenty of robust businesses to hire people and lower that unemployment as well as pay them so they can spend their money…
Both work together to employ people, and one can’t really work without the other. Unhealthy economies don’t incentivize job creators to invest and hire like healthy ones do, and unhealthy job creators can’t invest and hire, regardless of how healthy an economy is.
I think the recent difference in rhetoric is that there’s more explicit recognition of the job creator role, and not just the healthy economy role. Before recently, the emphasis of political rhetoric centered around healthy economies and keeping people employed, with the job creator role (that of business) seen as being more or less taking care of itself if the economy was doing well.
In a sense, it’s correct, in that you can’t really implement a bunch of anti-business policies without having it impact that job creator role, and the recent recognition of job creators as generally positive economic actors (at least in that sense) is good, in that it highlights the potential fallout from some policies.
I’m confused: are the investors making choices based only on rationally expected returns, or are they making decisions based on personal, even whimsical factors? Because if it’s the first, then the individuals shouldn’t matter at all (all rational people should make the same decisions, right?), and the biggest determinant of their choice should be the business fundamentals and the overall state of the economy, right? Which, to me, kind of argues the investors themselves aren’t important (they’re just rationally filling their role in the economic system).
Thing is, all the rhetoric about ‘job creators’ is based on two ideas:
People are perfectly rational competitive economic actors, and therefore The Market in a Capitalist system is the perfect and only way to maximize wealth.
“Job Creators” are special unique beings who cannot be replaced by mere mortals, but are very sensitive and fragile; they must be coddled and treated carefully lest they throw a childish tantrum and wreck the economy (and their own businesses, but they’re happy to cut off their nose to spite their face).
People can act rationally but make different decisions based upon risk tolerance or upon their preferred goals. And some people have the money to invest but don’t act rationally at all.
Joe has $20 million and decides to put his money into researching a cure for cancer. It has a low chance of success with potentially high rewards. And it creates just a few jobs for well educated scientists. The jobs pay well and have good benefits as the market demands good pay for PhD researchers.
Kevin has $20 million and decides to put his money into franchised fast food restaurants. He assumes lower risk, but stands a good chance of having a successful business. He creates many more jobs than Joe, but they jobs are mostly low paying and with poor benefits in line with market conditions.
Larry has $20 million. Larry doesn’t care about job creation and just uses his money to buy gold coins which he puts in some coffee cans and buries in the back yard because he doesn’t trust the banks.
And what drives Joe to invest the way he did? His brother died of cancer when he was young. It’s personal for Joe. He will pour everything he can into the fight, even if he goes broke in the process.
And what drives Kevin to invest the way he did? Kevin likes the color of the pants the chicken wears in the logo for the restaurant chain he bought a franchise in. It’s whimsical for Kevin. Kevin will keep running his restaurants until the next flight of fancy catches his eye. Oooh… shiny bead <wanders off>
I would argue that Joe and Kevin are making rationale decisions based upon their risk tolerance and personal preferences. And Larry is off his nut, totally irrational.
Many of this responses seem to equate “business” with manufacturing. Milt Romney, to pick out a name, made money by *eliminating * jobs. Buy a company, strip it of assets, throw away the husk. Trillions of dollars are moved around Wall Street without any job creation - for example, with mortgage bonds. “Job creators” is a term used by Republicans to defend the rich - many of whom have no part in any increased employment. Companies strive for *increasing value for the stockholder *which can often be achieved without any increase in their workforce.
When politicians use the term job creators it is usually with the intent of advocating giving them money, with which they will be able to expand their business. This is the primary idea behind supply side economics. Of course this presupposes that the only reason the job creators are not expanding their business is that they don’t have the money. There are certain economic conditions under which this is reasonable, such as if interest rates are high and credit is particularly tight. However this is not the situation we are currently in, where interest rates are at an all time low. In the current climate, rather than using additional capital to expand, businesses are more likely to return surplus capital to investors in the form of dividends or to buy back their own stock to raise their share price, none of which actually creates jobs.
However, the real question is what this thread is doing in GQ rather than GD.
People create jobs when they need someone to do the work. No one hired because they have extra money lying around.
Now, in theory, they can use the extra money to grow the business and thus create new jobs. The problem with that is that there’s no guarantee they will want to grow the business. They may just take the money and keep it as salary. Also, if they get money due to a tax cut, it makes just as much sense to lobby for a bigger tax cut instead of risking things by expanding.
Those who talk about tax cuts on the rich creating jobs are just like communists: they try to fit the square pegs of their theory into the round holes of reality.
