Jobs Created are Seen; Jobs Destroyed are Unseen

Bastiat

The utter nonsense about jobs created via government spending is never examined by the media. Whatever government tells the State Media, they willingly print and sometimes even elaborate on. Even when the news is not good, you would never guess it if all you did was read the headlines.

Some comments are in order regarding jobs in general.

Most government jobs are useless.

Government produces no product and virtually no service. In a free market, most of these jobs would not exist because there is no demand for them. The only way that these jobs are created and maintained is via coercion in the form of a tax system. There is no market demand for most of them. The few jobs that do produce a service would be created by the free market and would provide better service at lower cost. (For those who want to argue that certain jobs needed, for example the military, would not be produced by a free market, that can be exempted from this discussion, although there is a case to be made for those as well.)

The claim that government spending can create jobs is spurious.

Government has no money and produces no products. Hence they have no money except what the take from productive citizens. To argue that their spending creates a job is to argue the “broken window fallacy” of Frederic Bastiat. It is the cheap political trick of pointing to ”what is seen” and ignoring “what is not seen.” If government creates a new job paying $50,000 that is seen. What is not seen is the $50,000 taken from the productive sector to create that job.

That money would have been plowed back into businesses for hiring or investment or paid out in the form of dividends to shareholders who would have saved it or spent it. If it were saved it would provide capital for entrepreneurs to start or build businesses. If spent it would have supported existing businesses. It would be used in the manner that was consistent with the wishes of the free market. As such, it would raise the well-being of society. Instead, it is confiscated by government and spent as some political hack sees fit, whether his constituents want it or not.

The result is that society has not created any net new jobs. It likely has destroyed jobs that should exist to create jobs that should not exist. That is the best one can say for the nonsense peddled as “jobs created by government spending” or the even more nonsensical “jobs saved by government spending.”

To understand what the costs of government creating jobs , all you have to do is look at your paycheck. The difference between gross and net pay is only a part of that cost. Paul Hollrah discusses these costs:

In an August 9 op-ed column in the Wall Street Journal titled, “Why I’m Not Hiring,” Michael Fleischer, President of Bogen Communications, Inc. of Ramsey, N.J., explains why it is so difficult for today’s employers to begin hiring once again. He tells the story of just one 15-year employee named “Sally.”

According to Fleischer, Sally grosses $59,000 a year, which shrinks to less than $44,000 after taxes and other payroll deductions. The $15,311 deducted from Sally’s gross pay is comprised of New Jersey state income tax: $1,893; Social Security taxes: $3,661; state unemployment insurance: $126; disability insurance: $149; Medicare insurance: $856; federal withholding tax: $6,250; and her share of medical and dental insurance: $2,376. Roughly 25.9 percent of Sally’s income is siphoned off by Washington and Trenton before she receives her paychecks.

But then there are the additional costs
of employing Sally. In addition to her gross salary, her employer must pay the lion’s share of her healthcare insurance premiums: $9,561; life and other insurance premiums: $153; federal unemployment insurance: $56; disability insurance: $149; worker’s comp insurance: $300; New Jersey state unemployment insurance: $505; Medicare insurance: $856; and the employer’s share of Social Security taxes: $3,661.

Over and above her gross salary, Bogen Communications must pay an additional $15,241 in benefits and state and federal taxes, bringing the total cost of employing Sally to approximately $74,241 per year. Sally gets to keep $43,689, or just 58.8% of that total. And with the new Obamacare taxes scheduled to take effect on January 1, 2011, Sally can expect to take home roughly half of what it costs to employ her.

Is it any wonder that Sally’s employer makes the case for not hiring more employees? As he sees it, every time he hires a new employee his obligations to the government go up.  He says, “… the government’s message is unmistakable: Creating a new job carries a punishing price.”

Tags: Bastiat, Employment, Free market, Government Jobs, Government spending, jobs, New Jersey, pay, Real Jobs, taxes