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Government can create only government jobs

During the election campaign the need for jobs got attention, but neither candidate took the trouble to explain how, exactly, jobs are created. Contrary to what politicians claim, jobs start not with government but investors. In the wake of election rhetoric, the realities of investment need restating.

Investors are people in a position to invest money in a business endeavor. They could be owners or managers who want to grow their companies, and must invest in order to do so. Whatever the case, the investor intends to create output, to increase productive capacity, and to make money. The jobs come as a result of the investment, which is expensive activity.

Everything takes time, and many projects face government obstacles. On top of that, the risk is very real. In fact, most investments fail and many fall short on the profit side. Even so, human creativity and the entrepreneurial spirit can produce useful products that people are willing to buy. That generates profits and jobs, but it all begins with investors, not government.

With apologies to Governor Romney and President Obama, the government can create only government jobs that must be paid for out of taxes. Government works projects may employ independent contractors, but such jobs are temporary, and this has nothing to do with creating jobs in the long run. There is, however, plenty the government can do to help the job-creation process.

For example, the government can avoid punitive levels of taxation that reduce the potential after-tax reward accruing to the investor. Punitive taxes can drop the potential reward below the point where it balances the perceived risk. When that happens, investments don’t get made and jobs don’t get created. To aid job creation, the overly complex tax code should be changed in favor of something simpler and more uniform.

The government should also consider how every regulatory decision impacts investment. Regulations may be completely necessary but they needn’t be punitive. Regulatory agencies need not be staffed with zealots eager to control industries they despise. When onerous regulation discourages investment, jobs will not be created.

Choosen excerpts by Job Market Monitor from

forbes

via Can The Federal Government Actually Encourage Job Creation? – Forbes.

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