I heard an odd little snippet of a conversation today on campus.
It happened, as it usually does, when I was walking by the library cafe to get my daily bowl of noodles.
"Well," said one student to the other, "it all sounds nice in theory, but everyone knows the government can't create jobs."
At first, I just disregarded the statement as something I misheard. For instance, a few weeks ago I could have sworn I heard someone say "I'd much rather buy a bag in Paris than some freaky mushroom-thing here in Charlotte." Probably a mistake on my part (I hope).
But this time, I heard that phrase quite clearly. "[E]veryone knows the government can't create jobs."
The implications of this statement are staggering. My first theory was that there was some Law of Conservation of Jobs I didn't know about, which states that for each unemployed person hired by a government, some private firm fires some poor schmuck to balance things out.
But that would be ridiculous.
So the only other option is that if you are paid by the government to do something, you are not actually employed. Think about it! If the government can't create jobs, and the suggestion that jobs are conserved is asinine, what other explanation is there?
This is terrifying. Suddenly, all the grad students I know who are supported on NSF grants are unemployed.
The friendly lady at the DMV? She has no job!
The construction workers I saw replacing the median barrier on the highway? Shiftless, jobless, hobos.
Oh, no.
I work for a state university.
Since my job is new, and it is paid for with public funds, and the government cannot create jobs, I myself must be uneployed! Quid pro facto! Ipso nunc ergo!
If you'd like to help me through the stress of my sudden philosophical unemployment, I accept cash, checks, and major credit cards.
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4 comments:
Your sarcastic theory on the Conservation of Jobs isn't that far off, actually. Think about it: The US has a certain amount of total income potential, which is equal to the amount of income we as a citizenry would collectively earn if each of us were at his best-paying job. This number is a function of the education and capability of our citizenry, but also of the performance of the market, since successful companies are willing to pay more and retain more workers.
The public sector requires taxpayer money to fund their jobs. Taxes levied on businesses mean that those business cannot hire as many workers or pay their workers as much (decrease in total private sector earnings). Taxes levied on individuals mean those individuals must be employed at higher-paying jobs to get paid their market value, which results in underemployment (or unemployment for the bottom echelon of earners).
Governments cannot create jobs any more than they can create money; they can only "borrow" jobs from the private sector. The true function of how many jobs can exist in an economy, private or public, is described in terms of the education and capability of the workforce.
It's not a law of conservation of jobs. It's a law of conservation of investment--to borrow your language.
The argument goes like this. When the government says it's creating jobs, what it's doing is taking money, in the form of taxes, from other people and using that money to fund the jobs they've created. Some amount of that money is lost in transaction costs, or let's say heat waste.
The money taken in taxes would have gone to pay wages, too, it would have just been more diffuse. So the net amount of jobs in the world didn't increase from government action, only the nature of the jobs and who signs the paychecks. The argument is not that government jobs don't exist, it's that they cost real money that would have paid for other jobs somewhere else.
Many economists respond to this by arguing that the government is more efficiently using that money, or that stimulus has a multiplier effect. I guess the weak chemistry analogy would be that it's like decreasing the volume so as to increase the pressure? It's not the best analogy, but the idea is that government spending moves faster than most other spending, getting money flowing quickly. The kind of jobs you cite here, like DMV jobs, aren't really stimulus spending.
Really, guys!? The argument seems to be that the government can't create jobs because to do so they take money from the private sector, thereby preventing the private sector from creating jobs itself. But that argument's not applicable to a modern money supply, and certainly not to one that functions as the worldwide currency reserve.
When the government spends money, that money was not necessarily taken from taxes. The government controls the money supply; they can borrow money from individuals and other countries, or if they're not worried about inflation they can distribute more cash. Both those monetary controls have pretty severe implications, so usually it just controls the interest rate at which banks lend money to each other overnight.
When they raise the rates banks are less willing to lend out the money they have for fear of having to borrow at a higher rate at the end of the day. When rates are lower the banks usually lend more money to individuals and businesses knowing that there's not much penalty if they turn out to have lent more than they have. (In 2008 banks became unwilling to lend to each other even at low rates because they weren't sure if the bank would be around the next day and the fed responded by lending to banks directly.)
So not only can the government create jobs through direct funding that doesn't divert private funds (take heart, Jake; you're still employed!) but they create millions of jobs indirectly through private lending.
When congress ordered the fed to distribute $750 B, a few federal reserve employees gave money to the banks and other institutions in expectations that the companies would stay afloat or make loans. To give that money they didn't collect taxes; they went to the row in a database for, say, Wells Fargo, and changed the number in their account. The next day, Wells Fargo had that much more money. (It was problematic because everyone was hesitant to lend, and some suggested the fed lend to the borrowers directly.)
Either way, the claim that the government can't create jobs is based on an economic model more appropriate to the middle ages than today.
I think this is the common problem of every nations, the poverty. One of the root cause of this problem is corruption. If there is no corrupt public official all is getting well.
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