Sensitized by month after month of bogus claims of jobs “created or saved” by government stimulus, the vast mountain of misleading Labor Day bloviation about government and unions as the source of jobs and Americans’ well-being struck me as ironic. After all, the rhetoric of job creation is used to justify a host of policies that actually harm workers.
How many times have we heard the refrain that every new increase in government spending creates jobs? If only it was true (for then our economy’s problems would be almost trivial to “fix”). In fact, government spending does create jobs where it is spent. But those same resources, spent elsewhere, would have created other jobs. Government has not created jobs; it has only moved them, because the taxes (or deficits, which are deferred taxes) to pay for them destroy other jobs currently and in the future. The effect of financing the government spending is to reduce productivity and income for other American workers, in a classic illustration of Frederic Bastiat’s “what is seen and what is unseen.”
Perhaps even more important, government spending moves jobs from where voluntary, hence mutually beneficial, market choices create them to where politicians and bureaucrats dictate, where there is no assurance of mutual advantage. Even a highly paid government generated job can produce very little useful output. And it is the value that jobs produce for others that is the key to Americans’ well-being, not some arbitrary and intentionally misleading measure of jobs created ex nihilo by government fiat (perhaps we should call government-created jobs fiat jobs, with the same assurance of value that fiat currency provides).
In fact, government jobs can not only provide less in value to Americans than they cost (since those arrangements are no more voluntary on the part of individual citizens than paying their taxes), they can produce costs rather than benefits. The primary function of the vast crazy-quilt of recent new government agencies, mandates and czars, as well as the massive extent of government control to which it was added, is to interfere with, and thus undermine, the improved social coordination productive jobs represent. Hiring people to add or enforce constraints on productive arrangements creates some jobs, but it acts like a massive regulatory tax on jobs that actually benefit Americans.
Further, the massive redistributive power that comes with increasing government control triggers more of what economists call rent seeking (better described as government favor seeking through influence over the political process). More lobbyists are hired to help special interest groups benefit at others’ expense, which, in turn, leads others to hire more lobbyists to minimize the extent of robbery they, as losers , will be forced to bear as a result. The fight to control the government theft involved creates more such jobs, but it destroys wealth everywhere except in Washington.
Another rhetorical trick used to support worker-harming government initiatives is the constant recitation of the “jobs and income” that they will add. The word “and” suggests that there are two sets of benefits which must both be counted — added income and added jobs. However, to do so counts the same thing twice (several forms of which are common in sales pitches for government “solutions, such as counting direct benefits produced and the higher property values that just reflect the increased direct benefits as if they were separate benefits). Jobs may represent the benefit of the income generated to many people, but jobs are not benefits in addition to the income earned. In fact, rather than being benefits, jobs are instead the often-unpleasant efforts and inconveniences that must be borne to earn the income (Just as yourself whether you would rather have a job or not if you would have the same lifetime income, a question my university students have no difficulty answering). As a result, counting both jobs and income is more misleading than double counting, because one of the benefits it counts is actually a cost.
“Jobs and income” misrepresentations are further compounded by the use of claimed multiplier effects. Government spending supposedly generates multiplier effects, because the initial jobs and income produce additional spending and jobs, which in turn leads to still more income and jobs, etc., so that extra secondary benefits can be claimed for each dollar spend on direct benefits. However, the taxes or deferred taxes necessary to finance the spending will have exactly the same kind of effects, but in the opposite direction. Those forced to pay will be left with less disposable income, which will lead to less spending and jobs, etc. — adverse effects that are equally multiplied. But by simply ignoring the symmetry of any effects that logic requires, multiplier effects primarily multiply other misrepresentations.
The many temporary forms of stimulus further compound the misrepresentations about jobs, because they largely represent offsetting shifts over time, rather than real stimulus. For example, my son was planning on buying a car in any event, but the temporary car stimulus induced him to buy a few months earlier than he was going to. While politicians claimed the initial boost in car purchases (and the jobs and income generated as a result) of which he was a part as proof that the stimulus worked, and the predictable slump that followed (as with home purchases, as well) only demonstrated the need for another stimulus, a more accurate description would be that while activity shifted from the near future to the present, evaluated over the entire period affected, there was virtually no stimulus.
Further, in addition to the increased regulatory burdens (with more to come), the recent stimulus efforts, with their massive expansion of deficits, have been combined with claims that the government would soon get its fiscal house in order with substantial increases in tax rates. So to the extent that people take into account both the spending, which often provides benefits worth a fraction of the cost, and the much more permanent future fiscal burdens which they will bear fully, the net effect may well be to contract the economy, as worsened incentives undermine all long-term productive commitments, including investment and permanent jobs.
Because it was Labor Day, it was not just the beginning of serious campaigning for November, but also a day for similar union misrepresentations of the labor market.
Unions claimed that others’ wages were pushed up by unions, when, in fact, higher union wages reduce the number of jobs available, harming other workers by worsening their alternatives and lowering their wages. They ignored that increasing productivity and income would result in improved working conditions without coercion, to claim their coercive tactics deserve credit. They denigrated the fact that the source of increasing compensation has largely been savings, which funded investment and advances in technology, which raised workers’ productivity, in their class warfare against capital and capitalists who make higher wages possible.
Union mouthpieces pooh-poohed the obvious unemployment caused for lower-skill workers by higher minimum wages (which benefit union workers by raising the price of unskilled workers relative to union workers) and living wage laws. They pretend away the fact that once employers have time to adapt, new mandates are not free to workers, but will come out of other parts of their compensation packages that they value more (or they would have chosen a different compensation bundle beforehand). They push for protectionist measures to protect American jobs, which really protect overpriced American union jobs at the expense of other workers ‘ jobs and income prospects. They hold attempts at employer-worker cooperation hostage to union control. And they are pushing hard to make it easier to force unionization on others, to expand their influence.
It turns out that there are many ways misrepresentations about jobs are used to support policies that harm workers. Transfers of jobs from where people value them more to less valued jobs where government controls dictate are counted as job creation. Government jobs that interfere with the creation of mutually beneficial labor arrangements are counted as if they are beneficial rather than a massive regulatory tax on jobs that are productive. The lobbyists that government favoritism creates are counted as if they were socially valuable, rather than offsetting investments in mutual theft. “Jobs and income” phraseology is used to not just double-count benefits, but to count costs as benefits. All of this misrepresentation is multiplied by multiplier effects. Temporary shifts in economic activity from the near future to the present are counted as stimulus, ignoring the predictable negative future consequences. People’s anticipations of the future burdens to pay for wasteful and inefficient jobs, which may well transform supposed stimulus to its opposite, are assumed away. And the panoply of union misrepresentations are piled on top.
Labor Day rhetoric about jobs shows how hard some work to distort reality for their own benefit. But if benefitting workers (and all of us are workers) was the point, there is an easier and more logical way — relying on the fact that freely chosen arrangements between workers and employers guarantee benefits to both parties in ways further government interference only undermines. If we would just accept self-ownership and rely on voluntary arrangements, which have always been central to real human progress, we could all rest from the strenuous and many-faceted Labor Day efforts to mislead others.