It seems everywhere one looks in politics there is talk of creating jobs. Politics is about job creation. In cities and towns across Canada where there is stimulus spending, there are Canadian Action Plan signs to remind people our great and benevolent state is creating work for everyone no matter how temporary and insignificant.
Governments can certainly create jobs. They could take tax revenue, create a position, and pay the salary with this revenue. Normally however, job creation takes the form of grants and investments in companies to do certain highly visible projects. But is job creation valuable? Taken to an extreme, a government could create full employment by having us build roads by hand. Most people realize this is silly, but don’t know why.
Job creation is a multi-faceted problem. There are opportunity costs. Once money or resources are spent you have lost all other alternative spending scenarios. Time is a resource too, so even if shovelling a road employs more, and costs the same per road built, you still lose the time spent on inefficient practices, as well as the time of extra workers who could have been doing something more productive.
There is also the broken window fallacy. Say you are a prime minister wanting to employ glass makers, so you break the window of the local NDP party office in order to stimulate the economy. You would argue that not only are you employing glass makers, but the money the glass makers earn will be spent on other things, creating even more jobs.
The problem is twofold. First, you just destroyed something which must be replaced. This
is a waste of finite resources. Second, the solution disregards what the money and resources could have been spent on had the window not been destroyed. The people who pay to replace the window could have spent that money on other things, performing the same job-creating action. In this scenario, no matter how it plays out, there is a net-loss of one window.
This second point is of great moral importance too: next time you hear someone say “war helps the economy” ask them about all the resources and manpower hours wasted building machines that are promptly destroyed. One does not even need to consider the dead to see the thoughtlessness in that opinion.
One final note on the unseen effects of policy – the forgotten man. Every action has a
consequence. If one is looking to create jobs, they will have to tax, borrow, or print money to
achieve their result.
When one taxes, they are committing a transfer of wealth at the barrel of a gun or on threat of imprisonment. When one borrows, they are placing the burden of their actions now on the shoulders of future citizens. When one prints, they are devaluing and destroying the savings of all people by ruining the currency.
Those who suffer these misfortunes are usually ignored or forgotten. Most of the people advocating these measures try to avoid the burdens themselves, and place them with the forgotten man, the victim of their “philanthropy”. When pressed, they respond with rhetoric of collective action, and the good of society as a whole. This is fair, but we ought to be suspicious when those pushing these views always put the duty on the forgotten man’s shoulders, and we ought to seriously and honestly consider whether the above consequences are preferable to whatever mess we may find ourselves in.
