ECONOMIC MYTHS #3 – WE NEED MORE JOBS!
During an economic malaise one of the endless reams of statistics to which pundits glue their eyes is the number of jobs that are either created or destroyed. The state makes “job creation” a central plank of its economic policy to put people back to work, and the impression that more people are being hired and fewer fired buoys their hubristic impression that we must be on the road to recovery.
In the first place, we might as well point out that, for as long as humans strive to create more wealth, there will never be a shortage of demand for productive work. Labour is the ultimate scarce commodity – however much machinery we have and whatever our state of technological progress there is no production process that does not require an input of labour (any such process which did not require labour would essentially be producing free goods). Thus, the phenomenon of involuntary unemployment is made possible only by the artificial costs and restrictions that the state places upon employers – such as minimum wages, health and safety laws, working time restrictions, taxes, compulsory national insurance contributions, etc. – which mean that employers and employees cannot work together on terms that are acceptable to them. This is on top of the distortions and upheavals of state-induced business cycles which create clusters of bankruptcies and redundancies in the first place.
That aside, however, the obsession with jobs is another example of the error of looking at an isolated aspect of economic achievement rather than at the entire picture – much like trying to boost consumption in order to further growth which we explored in myth #2.
Jobs (or work, or labour) are not the end result of economic progress; rather they are the means towards achieving our valuable ends with the scarce resources available. They are the toil and suffering that we have to undertake in order to get what we want because we do not live in the Garden of Eden.
Our ideal situation would be to have everything we want without having to have any jobs at all. How wonderful life would be if we could just sit back and have anything we desired at the touch of a button! Economic progress fuelled by greater capital investment moves us closer to this nirvana – it permits us to have more and more of what we want for less effort. Our focus, therefore, is not on jobs per se but, rather, on what these jobs can produce – the outcome of our labour and not that labour itself. We should not be aiming to create more jobs and more work without a view as to how they will increase our welfare.
The state, however, does not tend to take this view and ends up, instead, engaging in useless job creation programmes that waste resources rather than create them. The most deliberately ridiculous example of such a programme is the state paying people to dig holes in the ground and then fill them up again. This would cause the official unemployment figures to go down; the stock market would probably rally; the currency would strengthen. And yet these “jobs” have produced absolutely nothing whatsoever because no one has gained anything from those holes being dug and refilled. All of the time and effort put into administering and fuelling these jobs simply depleted the world of valuable resources rather than added to them.
In the real world, such programmes take the form of the state providing artificial stimulus or subsidies to industries that are not otherwise economically viable; state “job creation” programmes; and not to mention, of course, the endless ream of bureaucrats that the government employs directly. Creating artificial jobs – funded by the state’s payroll – that create no wealth whatsoever simply papers over the cracks of an unsound economy. Yes, more people feel better as they have more pounds in their pocket and are probably not worrying about where the next meal will come from. However, all that has happened is that those who were already working productively are now subsidising those whose employment creates no productivity.
A related fallacy is that if somebody somewhere is carrying out some kind of economic activity and the more of that activity there is then the better the economy must be doing. To the central planners it doesn’t matter whether there is a housing boom, a construction boom, a tech boom or a stock market boom as long as there is lots of stuff going on, regardless of whether people actually want the products that are churned out by those enterprises. It is for this reason why we have the business cycle in the first place. Obsessed by creating some kind of “output” the artificial stimulus of credit expansion pushes the economy onto a path which, while brimming with activity, is ultimately not in harmony with the desires of consumers.
Job quality is more important than job quantity. The correct focus of any economic policy should be to ensure that we are labouring to direct the scarce resources available to the ends that we desire – and not simply on wasting those resources by doing some kind of fundamentally useless activity just to make the state look good. “Full production” and not “full employment” should be our mantle. The only way forward, therefore, is to reduce the stranglehold of the state over the economy so that businesses are free to invest more money to create more jobs that will produce more wealth.
Next week’s myth: “Profits are Evil!”