President Obama keeps talking about the jobs his administration is “creating” but there are more people unemployed now than before he took office. How can there be more unemployment after so many jobs have been “created”?
Let’s go back to square one. What does it take to create a job? It takes wealth to pay someone who is hired, not to mention additional wealth to buy the material that person will use.
But government creates no wealth. Ignoring that plain and simple fact enables politicians to claim to be able to do all sorts of miraculous things that they cannot do in fact. Without creating wealth, how can they create jobs? By taking wealth from others, whether by taxation, selling bonds or imposing mandates.
However it is done, transferring wealth is not creating wealth. When government uses transferred wealth to hire people, it is essentially transferring jobs from the private sector, not adding to the net number of jobs in the economy.
If that was all that was involved, it would be a simple verbal fraud, with no gain of jobs and no net loss. In reality, many other things that politicians do reduce the number of jobs.
Politicians who mandate various benefits that employers must provide for workers gain politically by seeming to give people something for nothing. But making workers more expensive means that fewer are likely to be hired.
During an economic recovery, employers can respond to an increased demand for their companies’ products by hiring more workers— creating more jobs— or they can work their existing employees overtime. Since workers have to be paid time-and-a-half for overtime, it might seem as if it would always be cheaper to hire more workers. But that was before politicians began mandating more benefits per worker.
When you get more hours of work from the existing employees, you don’t need to pay for additional mandates, as you would have to when you get more hours of work by hiring new people. For many employers, that makes it cheaper to pay for overtime. The data show that overtime hours have been increasing in the economy while more people have been laid off.
There is another way of reducing the cost of government-imposed mandates.
That is by hiring temporary workers, to whom the mandates do not apply.
The number of temporary workers hired has increased for the fourth consecutive month, even though there are millions of unemployed people who could be hired for regular jobs, if it were not for the mandates that politicians have imposed.
Economists have long been saying that there is no free lunch, but politicians get elected by seeming to give free lunches, in one form or another. Yet there are no magic wands in Washington to make costs disappear, whether with workers or with medical care. We just pay in a different way, often a more costly way.
Nor can these costs all be simply dumped on “the rich,” because there are just not enough of them. Often people who are far from rich pay the biggest price in lost opportunities. A classic example is the minimum wage law.
Minimum wage laws appear to give low-income workers something for nothing— and appearances are what count in politics. Realities can be left to others, so long as appearances get votes.
People with low skills or little experience usually get paid low wages. Passing a minimum wage law does not make them any more valuable. At a higher wage, it can just make them expendable. Raising the minimum wage in the midst of a recession was guaranteed to increase unemployment among the young— and it has.
None of this is peculiar to the current administration. The Roosevelt administration created huge numbers of government jobs during the 1930s— and yet unemployment remained in double digits throughout FDR’s first two terms.
Constant government experiments with new bright ideas is another common feature of Obama’s “change” and FDR’s New Deal. The uncertainty that this unpredictable experimentation generates makes employers reluctant to hire. Destroying some jobs while creating other jobs does not get you very far, except politically. But politically is what matters to politicians, even if their policies needlessly prolong a recession or depression.