We are in the political campaign time when both sides begin to tell us that creating jobs is a first and foremost priority. A lot of lip service is paid to this idea, and it is a very important idea, but how do we create all these jobs?
Over that past few decades, we have been fed the illusion that if we give more money to the already wealthy they will create more jobs. We now have a very small fraction of our population controlling an outlandish amount of the wealth in this country, and if you add in the cash sitting in corporate coffers it is even more so.
So how much money do the rich need to create jobs? The answer to that is, it has nothing to do with how much money they have. How do jobs get created? There are two fundamental ways that create the vast majority of jobs in America, and neither have to do with how much money the rich have.
I want to put the secondary source of jobs first in this discussion. And that is by government spending. I can hear the outrage already by some segments. But, government spending on infrastructure (highways, bridges, airports, schools, etc.) and the spending on basic research for health, space exploration, weaponry, climate and a few others does create jobs that support the only real source of job creation. But the infrastructure created by government spending at all levels enables our society to function in ways to support the real creator of jobs.
And that real creator of jobs is a thing called consumer demand. When I say consumer, I do not limit that to us ordinary folks going to the local stores or online to get our latest gadget, our groceries, our cars, our clothing or other essentials of living. I also mean the consumers that are companies buying parts or raw materials and countries buying our fighter jets and munitions. What they have in common is their demand for goods or services. Demand creates jobs. Simple as that. Without that demand for what someone makes or provides, there is no need for jobs to make or deliver it.
This silly notion that getting more money into the hands of wealthy people will create jobs is insane. Let me give an example. Politicians love to say the small business entrepreneur is the heart of job creation and making money available to them is key. But think about this for a minute.
If you are an entrepreneur with a good idea and would like to start a business, you need money to do that. So you go the local banker and ask for a loan. Bankers have lots of money, but they are not quick to hand it out. They want to know if this idea of yours is well thought out. They ask who are your customers (consumers), who is your competitor for those customers (consumers) and how is your product/service more enticing to those consumers? Why will someone buy your product or service? They are not going to loan you money unless you have consumers. Because without consumers, you do not have a successful business model.
This is true of large companies who may have large cash reserves on hand. Do they spend that to create jobs? No. They ask, do we expand into new markets, do we bring on new lines, do we go international, do we understand the market, do we need new research?
Cummins is in a cyclical business and when demand from consumers (truck makers, trucking companies, mining/industrial companies, users of stationary power, etc.) drops off, the company has to layoff, cutback, reorganize or delay hiring. (We did that often when I worked there). All that is corporate talk for eliminating jobs. It all ties back to consumer demand. Without demand there is no need for jobs.
Wealthy people, no matter how much money they have, do not create jobs for the sake of creating jobs. They create jobs to make something that someone else wants to buy. That is how it works, so when politicians talk of job creation, ask them how they are going to create demand from consumers, not how they will lower the taxes on the wealthy.
The wealthy 1 percent are a small fraction of the consumers in our country. The majority of consumers are normal folks who don’t make enough to increase their spending. Increasing minimum wage, tax breaks for lower/middle class, increasing productivity and sharing it with the workers are ways to increase consumption.
Wealthy people know better than to just create jobs without demand. We need to have politicians who are willing to make changes in the system to increase demand, not just support the illusion that wealth creates jobs.
Columbus retiree Tom Lane is a community columnist and all opinions expressed are those of the writer. He served as a consultant to a number of companies in his career. He can be reached at [email protected].
