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
The economic framework that has recently defined our politics should be replaced by a new narrative writes William A. Galston, one that runs as follows: In recent decades, changes in the structure of our economy and politics have created a dramatic increase in income inequality; while changes in our tax code did not contribute materially … Continue reading »
How does a newly formed nonprofit organization tasked with helping entrepreneurs across America effectively serve startups that are in different places, in different industries and with wildly different needs? Region by region. This is the central lesson found in “The Start Uprising,” a white paper released today by the Ewing Marion Kauffman Foundation that examines … Continue reading »
‘Three years after our worst recession since the Great Depression officially ended, the U.S. economy is still very weak’ writes Mark Weisbrot. The people most hurt by this weakness are the unemployed and the poor, and of course the two problems are related. We have about 23 million people who are unemployed, involuntarily working part-time, or have … Continue reading »
The International Labour Organization and the World Bank released a joint report and new online data tool with the first comprehensive stocktaking of countries’ jobs-related policy responses to the recent global financial and economic crisis. A follow-up to a request from leaders at the 2009 G20 Pittsburgh Summit, the report, Inventory of Policy Responses to … Continue reading »
Layoffs by governments at local level hardly help job recovery and investment in education is falling by the way
Layoffs at the local level, by local administrations, we could say, by local government, are so numerous that we could post them on a separated blog. This hardly helps job recovery. Moreover, investment in education is falling by the way. Krugman thinks it is bad politics and we agree. …If it weren’t for this destructive … Continue reading »
The chart here offers one of the better recent snapshots of the American economy that you will find. The blue line shows the rate at which the government — federal, state and local — has been growing or shrinking. The red line shows the same for the private sector. Quarterly change at seasonally adjusted annual … Continue reading »
The overhaul of the Workforce Investment Act (WIA) in the late 1990s put in place a new framework to provide federal job training programs to workers and to “improve the quality of the workforce, reduce welfare dependency, and enhance productivity and competitiveness.” Reauthorization of WIA is long overdue, as the Act’s provisions technically expired nearly … Continue reading »
“Around the world, governments and businesses face a conundrum: high levels of youth unemployment and a shortage of job seekers with critical skills” writes Mona Mourshed, Diana Farrell, and Dominic Barton in a McKinsey in Its report Education to Employment Designing a system that works. (Adapted choosen excerpts by Job Market Monitor to follow) How can a country successfully move … Continue reading »