Does government create jobs?
It seems like a no-brainer. Pretty much everyone recognizes that government does not create jobs, certainly not net jobs. The best it can do is relocate them at a premium through taxes, taking from the private sector and putting in the public sector.
Even President Barack Obama recognizes this reality, writing that “governments do not create jobs” in the Times of London newspaper. Everyone seems to understand that employing people is not the same as “creating” jobs.
Well, almost everyone.
Thomas Tryon, opinion-page editor at the Sarasota Herald-Tribune, wrote recently a column headlined, “Contrary to the new mantra, government does create jobs.”
Tryon points out that, according to the Bureau of Labor, 19,000 people were employed by local government in Sarasota and Manatee counties. State and federal workers bring the number to 24,000.
“In our area, government directly provides 10% of all non-farm jobs,” he wrote.
His thesis boils down to this: Look at all the people working for government! How can you say government does not create jobs?
Here is how: The private sector creates jobs. It creates wealth. It innovates and produces products and services for more than it costs, thereby producing a profit. Most companies generally tend to reinvest some or all of their profits back into their firms, creating more jobs and opportunities — more net jobs.
By force of law, government takes a portion of those profits that could be reinvested by the company or invested in some other fashion in the private sector and spends the money on government jobs. See, that doesn’t really create jobs in any sort of “net” way. It changes the employer and most economists — even Keynesians — acknowledge the private sector is more efficient than the public sector.
See, the government doesn’t buy and sell, generate a profit and then hire more people. It hires people by taking other people’s profits, or part of their earned income or a portion of a purchase, and paying government employees.
It’s a transfer. Saying government “creates” those jobs is kind of like arguing that a mosquito “creates” human blood because, gosh, look at all the human blood in the little pest.
This is not to say that every government job is a blood-sucker, or that government work is inherently inferior.
But recognize that every one of them exists by sucking tax dollars from the productive, more efficient private sector and diverting the money to the less efficient government sector, resulting in fewer net jobs. None “created.”
An accurate way to look at those 24,000 jobs that Tryon believes government created is to see those are costing the private sector more than 24,000 jobs by limiting what efficient companies have left to reinvest. Those 24,000 are a cost, not a benefit.
Some of those jobs — cops, judges, firefighters — are necessary. But the government did not create them. The private sector did. Government is just the pass-through employer, using the wealth the private sector generated.
Consider some of the avenues by which the money is diverted: federal income tax, Social Security tax, Medicare tax, corporate tax, sales tax, property tax, gasoline tax, communication services tax, intangible tax, doc-stamp tax, unemployment tax, tangible property tax for businesses, pollution tax (which includes any petroleum product, pesticide, chlorine, etc.) license fees, impact fees and on and on.
This reflects that simple economic reality that government cannot inject money into an economy without taking it out first. It cannot “create” jobs without first taking jobs.
This is not a debate about stimulus spending — a theory for economic growth that has now been discredited at least five times (Hoover, Roosevelt, Ford, Bush II, Obama). Or about the cronyism and political pork inherent in government spending.
Those things only contribute to the public-sector inefficiency that results in the following truism:
Government just does not create jobs. In the net, it actually destroys jobs.
Rod Thomson can be reached at [email protected].
Does government create jobs?