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Economics
Jobs Versus Net Jobs
There is no free lunch in the job market.
One of the reasons for the popularity of political rhetoric is that everybody can be right, in terms of their own rhetoric, no matter how much the rhetoric of one side contradicts the rhetoric of the other side.
President Obama constantly repeats how many millions of jobs have been created during his administration, while his critics constantly repeat how many millions of jobs have been lost during his administration. How can both of them be right — or, at least, how can they both get away with what they are saying?
There are jobs and there are net jobs. This is true not only today but has been true in years past.
Back during the 1980s, when there were huge losses of jobs in the steel industry, the government restricted the importation of foreign steel. It has been estimated that this saved 5,000 jobs in the American steel industry.
But of course restriction of competition from lower-priced imported steel made steel more expensive to American producers of products containing steel. Therefore the price of these products rose, making them less in demand at these higher prices, causing losses of sales at home and in the world market.
The bottom line is that, while 5,000 jobs were saved in the American steel industry, 26,000 jobs were lost in American industries that produced products made of steel. On net balance, the country lost jobs by restricting the importation of steel.
None of this was peculiar to the steel industry. Restrictions on the importation of sugar are estimated to have cost three times as many jobs in the confection industry as they saved in the sugar industry. The artificially high price of sugar in the United States led some American producers of confections to relocate to Mexico and Canada, where the price of sugar is lower.
There is no free lunch in the job market, any more than there is anywhere else. The government can always create particular jobs or save particular jobs, but that does not mean that it is a net creation of jobs or a net saving of jobs.
The government can create a million jobs tomorrow, just by hiring that many people. But where does the government get the money to pay those people? From the private economy — which loses the money that the government gains.
With less money in the private sector, the loss of jobs there can easily exceed the million jobs created in the government or in industries subsidized by the government. The Obama administration’s creation of “green jobs” has turned out to cost far more money per job than the cost of creating a job in the private sector.
In addition to reducing jobs in the private sector by taking money out of the private sector to pay for government-subsidized jobs, the Obama administration has made businesses reluctant to hire because of the huge uncertainties it has created for businesses as regards the cost of adding employees. With thousands of regulations still being written to implement ObamaCare, no one knows how much this will add to the cost of hiring new employees.
In the face of this economic uncertainty, even businesses that have an increased demand for their products can meet that demand by working their existing employees overtime, instead of adding new employees. Many employers hire temporary workers, who are not legally entitled to benefits such as health insurance, and who will therefore not be affected by the cost of ObamaCare.
When President Obama boasts of the number of jobs created during his administration, the numbers he cites may be correct, but he doesn’t count the other jobs that were lost during his administration. His critics cite the latter. Both can claim to be right because they are talking about different things.
What has been the net effect? During this administration, the proportion of the working age population that has a job has fallen to the lowest level in decades. The official unemployment rate does not count the millions of people who have simply given up looking for a job.
If everybody gave up looking for a job, the official unemployment rate would fall to zero. But that would hardly mean that the problem was solved or that the “stimulus” worked. Creating particular jobs does not mean a net increase in jobs.
COPYRIGHT 2012 CREATORS.COM
About the Author
Thomas Sowell is a senior fellow at the Hoover Institution, Stanford University, Stanford, CA 94305. His website is www.tsowell.com. To find out more about Thomas Sowell and read features by other Creators Syndicate columnists and cartoonists, visit the Creators Syndicate Web page at www.creators.com.
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Appleby| 7.10.12 @ 7:02AM
One my sisters, and I, have been working as "temps" since January. In fact, many people at my company are temps. (Lest you be fooled by the presence of socialist medicine, be assured that it doesn't cover anything you actually need on a regular basis, and if you don't have any insurance and are under 65, you are pretty much on your own.) The other thing that is happening is that the high expense of hiring women in their prime breeding years in a country that awards a year off with pay to anybody who gets pregnant, is that most entry level jobs for women are being automated out of existence. Make it unprofitable to hire Girls, and Girls will not be hired...and those laws that make it illegal to fire someone for getting pregnant have nothing to say about not hiring her in the first place.
By the way, any advantage that Canada might have had with any lower prices has been negated by the Canadian dollar rising to virtual par, and the astronomical wages commanded by union employees who rule.
Bill Hussein O'Stalin| 7.10.12 @ 7:22AM
In a roundabout way you've explained it.
Between the Americans with Disabilities Act, the Lily Ledbetter law and many others, certain people have become expensive to hire.
Further, if you even interview one of the special people they can sue you for not hiring them.
At that point why bother to have a job located within hostile territory?
No, it's far better to ship the job overseas (And that's precisely what's been happening since the Lily Ledbetter law was passed with much hoopla and fanfare) and reduce your risk.
The progressive movement in the United States has set up the perfect storm for long term high unemployment and until those laws are overturned or removed the number of professional positions within the U.S. borders will continue to shrink.
With the advent of the internet any operation can be managed from far away, and all those laws won't help anyone get or maintain a job.
In fact, as Mr. Sowell so adroitly points out, the government is riding a pale horse when it comes to job creation.
PolishKnight| 7.10.12 @ 9:45AM
What I see in the states is that employers don't mind paying decent wages but they usually want to squeeze a lot of overtime out of their workers. I regret not going into management because managers tend to believe that managers are necessary because they have a subconscious survival preference for that belief but there's no reason that they can't automate or outsource their position as well.
However... that may well yet change due to (in the states) the flood of Asian "guest" workers with fake academic credentials who apply for managerial and professional positions. They're huge Obama supporters. They aren't socialists anymore than most welfare and racist entitlement beneficiaries care about socialism. They're just politically cynical and in it for their special interest groups' self interests.
Ironically, socialism and feminism will be viewed in the long run by these special interest groups as superfluous (or is that the other way around, socialists when they have gained dominance will decide to try to chuck their racist special interest groups). Will be interesting to see.
Bill Hussein O'Stalin| 7.10.12 @ 7:15AM
A well composed article that explains clearly why the United States is in financial Hell. Thank you Mr. Sowell.
Lullabys Legends and Lies| 7.10.12 @ 9:20AM
Fashion: I never heard our economic problems broken down so simply, you my friend are brilliant!! This could fix everything, Thomas Sowell could learn from you!! Now go away, and don't come back!!
TLP| 7.10.12 @ 9:54AM
Leave him alone.
He sounds just as cogent as any of the Left's Talking Heads, out there.
And, if I were a Betting Man, I would wager that he's dressed a lot better, and has his Hair Combed.
As opposed to some of the other pusswads, on this site, whom I would bet the Farm, spend their whole days, in their filthy boxers, writing their drivel, while they wait for their Mothers to come home, so they can peek at them, in the Shower.
He sounds like Axelrod.
TW in SC| 7.10.12 @ 11:01AM
Yup, they did a great job up 'air in da 'burgh n'nat. Just drive along the river and note the SHUT DOWN steel mills. 5,000 jobs saved? And then, the unions continued their ultimate and inevitable demise.
But ask any Pittsburgher...it wasn't their fault.
fmm| 7.10.12 @ 11:21AM
If one wants to win the battle, one must define the terms they use exactly. This is one of the most devastating problems the conservatives have, not being able to define the issues in real terms instead of using the language of their opponents.
JD| 7.10.12 @ 11:42AM
Orwell's 1984 saw a government invent its own language for the purpose of better misleading the populace. It's debatable which Orwellian tactic the American Left emulates best - the language one or the "appeal to patriotism".
JimH| 7.10.12 @ 1:58PM
They didn’t so much invent a language as dumb down the existing one and reverse the meaning of some words. – Uh oh, sounds a bit familiar.
Who Knows?| 7.10.12 @ 12:45PM
What is a job?
Some reporter should ask Obama THAT.
Ah, good old Jude Wanniski. His “The Way the World Works”, from 1978, is still required reading.
You see, lawyers THINK they have jobs. After all, they are able to spend time creating briefs and/or otherwise diving into the cesspool of already spun laws, for their “willing” clients, AND bill them hundreds of dollars an hour. And, they get paid, too!
Technology’s gains sure have been a mixed blessing.
So many people, freed from onerous work. The free labor market in America sure has “worked” its magic.
Following the money, the best and brightest go for the lawyer gusto!
Jobs?
I take a job to mean activity called work, which is a human way to create order. Follow your dream, and get down and dirty, by planting seeds and letting nature, with a little work by you, show true physical order making.
Seeds, water, living soil, fertilizer, tender care---let time mysteriously rearrange “stuff” into succulent edible future you!
That’s a job worth spending time doing, regularly, even for only a few minutes a day.
No rhetoric needed.