Businesses create jobs? WTF??

There's something that's been bothering me for quite a while and I need to get it off my chest.

I don't know who first used the sentence “Businesses create jobs” (or any of its variants). Did it first appear during the Reagan campaign? Earlier? Later? It doesn't really matter, I guess. What matters is that the sentence is - how can I put this delicately? - not true. It's a lie, a falsehood, a deception. It sounds good to those people who a) don't understand the relationship between supply, demand, and society and b) want to “spin” the issue for personal gain.

How did I come to this determination? For most of my life I didn't really pay much attention to economics. I think I was like most people – I went to work, got a paycheck, and got by the best I could. With the advent of the Internet I got the opportunity to read more than just the local paper(s) and I also got the opportunity to see what other folks were saying via blogs and “chats”. And it seemed that every time that economics was brought up, there would be a conservative that would put forth something like “you liberals don't understand economics”.

While it was true that I, personally, didn't understand economics to a high degree, I was sure that not all economists were conservatives. So, I set out to educate myself.

I started with the basics, supply and demand. And, wouldn't you know it, one of the first casualties of my education was the “businesses create jobs” canard. The whole concept of “jobs” and “businesses” turned out to be a “which came first?” question.

One of the problems with the English language is that works can have more than one meaning. The on-line dictionary that I normally reference1 has 23 entries under the word “job”. The most basic of the entries is “the execution or performance of a task”. That's the definition of “job” that I'm going to use. Just about anything a person does can be considered a “job”. Mow the lawn – that's a job. Prepare dinner – that's a job. Build a house – that, too, is a job. Lots of tasks are jobs. Some are small, some are big, some are incredibly huge. Some jobs are so big that they are collections of other, smaller jobs.

There are three things that everyone needs: food, shelter and clothing. It doesn't matter your age, or your gender, or your race, or color, or creed or anything else. We all need those three things – everything after that is “gravy”. Only in the most primitive of societies does any one person take care of all his individual needs for food, shelter and clothing, if then. I would say that the only time any one person would take care of all his or her individual needs is when there is no other choice – there's nobody else around (think “Castaway” with Tom Hanks). But I digress.

However, in human societies we tend to specialize as individuals. This is not a recent occurrence. As far back as the historical record extends there have been persons that specialize in a particular task. There were millers, carpenters, masons, weavers, etc. The community needed flour for bread, so the farmer devoted his time to growing the grain and the miller devoted his time and energy to grinding the grain. The community needed housing, so the carpenters and masons devoted their time to its construction. Weavers made the cloth for clothing. Each of these people did what they did because there was a demand for their goods and services. Each received some sort of payment for goods provided or services rendered. The first businesses. The people that owned those businesses did so because there was a demand for those services.

The population expanded. Soon, there was more demand for goods and services than a one-person operation could handle. So one of two things happened: 1) more businesses started to compete with the existing businesses or 2) the existing businesses hired people to help them. As the demand for goods and services went up, so did the demand for people to fulfill the demand. But the businesses didn't create the jobs, they provided employment. It was the demand for goods and services that created the jobs.

The same holds true today. Businesses would not exist if there were no demand for goods and services.

None of you reading this, whether employer or employee, would do whatever it is you do to make a living if there were no demand for your goods or services.

So can we find a way to retire the old "businesses create jobs" canard?

and "meme" while I'm at it.

buys back stock and build factories overseas. You are right, they don't create jobs. All wealth comes from labor.

If businesses created jobs, there would be a lot more buggy whip factories in existence today.

People just don't stop and think that jobs are not created unless lots of buyers want to purchase goods or services. That is, business is driven by demand, not supply.

This is why giving tax breaks to the rich "to create jobs" only makes the rich wealthier and does nothing to create jobs.

If people went back to the basics, as you have done, they would better understand economics, and would not be taken in by pundits, propagandists, and economists. The problem is that all of the noise generated by these so-called experts confuses people about the issues.


P.S.: Instead of "canard", which seems to offend bbinacan, how about using the term "myth" or "false notion" or "false premise"?

"canard" is a bit - how shall I say it? - overused? inflammatory?

I'll consider your suggestions in my next posting (whenever that is).

.... and the supply side idiots are about to learn a big economics lesson themselves.

Where does the demand come from? From incomes and wages. Where do the wages come from? Jobs. Which come from employers. Which comes from business, which comes from sales, which comes from demand, and so on...

This chicken-and-egg cycle is both a blessing and a curse: it helps keep the economy going like a force of nature most of the time, but when things get off track, it makes it hard for the economy to correct itself. This is where government intervention comes in handy.

Employers don't create jobs, they provide employment. Jobs are created by needs and wants. Here's a simple example:

I feel the need to keep my lawn in "good order" - mowed to a reasonable height, plants tended, weeds removed, etc. Because of this "need" several jobs are created, but since they are all related we can group them into a position called "Gardener". I have several choices: 1) I can do it myself, 2) I can hire a Gardener to do it for me, or 3) I can do nothing and let my lawn run rampant. Obviously, option 3 is out because it ignores my "need". For me, option 2 is out because a) my lawn is relatively small, b) I've not planted any truly exotic plants, c) I really can't afford to hire a gardener, and d) I rather enjoy doing it myself. So option 1 works best for me.

However, someone with a very large yard or someone who doesn't enjoy tending to the gardening chores might see fit to hire someone. However, the hiring doesn't create the job - the need to keep the grounds neat does.

+++++++++++++++++++

To be sure, I think sometimes it comes down to semantics. But as Dr. Frank Luntz points out "it's not what you say, it's what people hear." Unfortunately, the word "job" has, as I pointed out in my original post, 23 entries under it in the dictionary that I reference. The folks on the right have framed "job" as employment, which is one of the entries listed. It is, however, misleading. A person may say that they are out looking for a job, but what they are really looking for is gainful employment.

No rich man ever gave a poor man a job unless he had a bunch of other poor men with money in their pockets waiting for the goods or services that job would provide.

Poor people with money create demand for goods and services.

Rich people hoard money.

Money only works when it's moving. Since poor folks spend every dime they get, it makes much more sense to scrape it off the top of the hoards and recirculate it at the bottom.