Job creators

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Job creators is a term that usually encompasses wealthy individuals, small business owners, and corporations.

Wealthy people are job creators because they have large amounts of wealth on hand that they are able to invest in business endeavors. Corporations and smaller businesses create jobs by hiring new employees, but they only do this when they are profitable and when their business outlook is favorable.

Who Really Creates Jobs?

Economists have observed that it is not the size of a company, but rather the age of a company that is correlated to job creation. A majority of jobs are created by young start-up companies, and established companies are often net job destroyers.[1] However, failed start-ups do result in job destruction. It takes capital to start businesses, which means that the people at the heart of job creation are likely to be wealthy, but that does not necessarily mean that all wealthy people are job creators.

The debate over who really creates jobs can be thought of as an extension of the debate over the effectiveness of supply-side economics versus demand-side economics. Proponents of supply-side economics believe that reducing economic barriers (e.g. taxes, regulation) to produce goods and services leads to more supply and economic growth. This is analogous to their belief, in the context of employment, that if corporations, small businesses and individuals are able to retain as much as their wealth as possible, then their capacity to supply capital and goods will create demand and lead to job creation.

Proponents of demand-side economics and Keynesian Economics believe that the capacity for supply is not enough, and that there needs to be demand for goods and services in order to drive the need for supply and create economic growth. They also believe that money in the hands of the middle and lower classes is more effective at creating this demand because their money has more "velocity" (i.e. it gets re-spent more often). In the context of job creation, they believe that even if taxes on corporations, small businesses and wealthy individuals are reduced, these parties will not necessarily spend the extra money they retain on creating jobs, especially if there is no demand for their goods or services.[2] Note that many people claim Keynesian Economics has been disproven[3], which would mean the demand-side arguments for job creation have little credence.

Government

Governments are considered by some to be job creators. Left-leaning studies have shown that government spending has been effective in generating employment.[4] But even if the government is a large employer, that doesn't necessarily mean it is a job creator. The principles of capitalism and small government tell us that many, if not most, goods and services commonly provided by governments can be efficiently provided by the private sector. This means that the government jobs associated with these goods and services can be provided by the private sector - government spending merely redistributes existing jobs while introducing economic inefficiency.[5] On the other hand, it is difficult to argue that cutting government spending will create jobs in the short term, because government spending either pays government employees' salaries directly or it pays for goods or services supplied by the private sector.[6] It is more likely that spending cuts will destroy jobs in the short term.

References

  1. Badger, Emily. "Do the Rich Really Make All the Jobs?" September 22, 2011. Miller-McCune. http://www.miller-mccune.com/business-economics/do-the-rich-really-make-all-the-jobs-36382/
  2. Blodget, Henry. "Finally, A Rich American Destroys the Fiction That Rich People Create The Jobs." December 12, 2011. Business Insider. http://www.businessinsider.com/rich-people-do-not-create-jobs-2011-12
  3. Cook, Christopher. "Does Keynesian economics (Obamanomics) logically refute itself?" September 6, 2011. Western Free Press. http://www.westernfreepress.com/2011/09/06/does-keynesian-economics-obamanomics-logically-refute-itself/
  4. Rumberger, Russell W. "The Employment Impact of Government Spending." May 1983. Institute for Research on Educational Finance and Governence, Stanford Univeristy. http://www.eric.ed.gov/ERICWebPortal/search/detailmini.jsp?_nfpb=true&_&ERICExtSearch_SearchValue_0=ED235568&ERICExtSearch_SearchType_0=no&accno=ED235568
  5. DiLorenzo, Thomas J. "The Myth of Government Job Creation." February 19, 1984. Policy Analysis No. 48. http://www.cato.org/pub_display.php?pub_id=914
  6. Blinder, Alan S. "The GOP Myth of 'Job-Killing Spending." June 21, 2011. The Wall Street Journal (Opinion). http://online.wsj.com/article/SB10001424052702303635604576392023187860688.html
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