Send this article to a friend: March |
How the Market Creates Jobs and How the Government Destroys Them If the media tell us that “the opening of XYZ mill has created 1,000 new jobs,” we give a cheer. When the ABC company closes and 500 jobs are lost, we’re sad. The politician who can provide a subsidy to save ABC is almost assured of widespread public support for his work in preserving jobs. But jobs in and of themselves do not guarantee wellbeing. Suppose that the employment is to dig huge holes and fill them up again? What if the workers manufacture goods and services that no one wants to purchase? In the Soviet Union, which boasts of giving every worker a job, many jobs are just this unproductive. Production is everything, and jobs are nothing but a means toward that end. Imagine the Swiss Family Robinson marooned on a deserted South Sea island. Do they need jobs? No, they need food, clothing, shelter, and protection from wild animals. Every job created is a deduction from the limited, precious labor available. Work must be rationed, not created so that the market can create the most product possible out of the limited supply of labor, capital goods, and natural resources. The same is true for our society. The supply of labor is limited. We must not allow the government to create jobs or we lose the goods and services which otherwise would have come into being. We must reserve precious labor for the important tasks still left undone. Alternatively, imagine the world where radios, pizzas, jogging shoes, and everything else we might want continuously rained down like manna from heaven. Would we want jobs in such a utopia? No, we could devote ourselves to other tasks – studying, basking in the sun, etc. – that we would undertake for their intrinsic pleasure. Instead of praising jobs for their own sake, we should ask why employment is so important. The answer is because we exist amidst economic scarcity and must work to live and prosper. That’s why we should be of good cheer only when we learn that this employment will produce things people actually value, i.e., are willing to buy with their own hard, earned money. And this is something that can only be done in the free market, not by bureaucrats and politicians. The Destruction of Jobs But what about unemployment? What if people want to work, but can’t get a job? In almost every case, government programs are the cause of joblessness.
In economics, here are also people who are relatively weak. The disabled, the young, the untrained—all are weak economic actors. But like the weak animals in biology, they have a compensating advantage: the ability to work for lower wages. When the government takes this ability away from them by forcing up pay scales, it is as if the porcupine were shorn of its quills. The result is unemployment, which creates desperate loneliness, isolation, and dependency. Consider a young, uneducated, unskilled person, whose productivity is $2.50 an hour in the marketplace. What if the legislature passes a law requiring that he be paid $5 per hour? The employer hiring him would lose $2.50 an hour. Consider a man and a woman each with a productivity of $10 per hour, and suppose, because of discrimination or whatever, that the man is paid $ 10 per hour and the woman is paid $8 per hour. It is as if the woman had a little sign on her forehead saying, “Hire me and earn an extra $2 an hour.” This makes her a desirable employee even for a sexist boss. But when an equal-pay law stipulates that she must be paid the same as the man, the employer can indulge his discriminatory tendencies and not hire her at all, at no cost to himself.
When the government passes a law saying certain jobs cannot be undertaken without a license, it erects a legal barrier to entry. Why should it be illegal for anyone to try their hand at haircutting? The market will supply all the information consumers need. When the government bestows legal status on a profession and passes a law against competitors, it creates unemployment. For example, who lobbies for the laws which prevent just anyone from giving a haircut? The haircutting industry—not to protect the consumer from bad haircuts, but to protect themselves against competition.
But as a society, we can insure that everyone who wants to work has a chance to do so by repealing minimum wage law, comparable worth rules, working condition laws, compulsory union membership, employment protection, employment taxes, payroll taxes, government unemployment insurance, welfare, regulations, licensing, anti-peddling laws, child-labor laws, and government money creation. The path to jobs that matter is the free market.
Dr. Block [send him mail] is a professor of economics at Loyola University New Orleans, and a senior fellow of the Ludwig von Mises Institute. He is the author of Defending the Undefendable, The Case for Discrimination, Labor Economics From A Free Market Perspective, Building Blocks for Liberty, Differing Worldviews in Higher Education, and The Privatization of Roads and Highways. His latest book is Yes to Ron Paul and Liberty.
|
Send this article to a friend: