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Who creates jobs? Surprise- we do.

Posted by MacZad
Jun 01 2012

Those at the top are saying don't tax us, we're the job creators, and small business owners say the same. Well, there's little truth here as neither of them are the great engines of job creation that they claim to be.

The mom and pop businesses at the bottom don't create jobs because they usually don't have any employees; they're just one or two person operations often started by people laid off and unable to find new positions. In the large firms, where I have some experience, the upper managers are obsessed with headcount - how to keep it down!

If any segment of industry can claim to create jobs, it's the middle-sized companies that have the best claim. According to this Entrepreneur article from 2007 to 2010, the mid-market companies added 2.2 million jobs, while big businesses cut 3.7 million jobs.

However, even the middle-sized companies claim is weak for companies, of any size, don't just create jobs out of thin air. It takes market demand for a company's products or services to lead to job creation. At my old employer employees were added when product sales were strong and laid off when sales were weak, and that's generally the case at all companies.

So what does all this say about government policies - tax and other? To me it says that rebuilding the infrastructure would be good and that other good policies for job creation would be those that enable a broad segment of the population to purchase more goods and services. In other words, policies that reverse the high percentage of income going to the top few percent and spread it more broadly. The upper 1% aren't going to purchase many Harley-Davidson "hogs," but the other 99% will. Here's a businessman making this case much more compellingly than I ever could:

This great 6 minute Nick Hanauer TED talk on this subject is a must-watch video.

These ideas suggest income redistribution - a hot-button subject for many, but the gaming of the system in the past 30+ years that has so strongly skewed the flow to the upper end has to be reversed if our country is to ever return to its former greatness. I'll have more on this in later posts.

Update 11/01/12: Via Twitter ( @MacZad ) I have become aware of this great article which solidly debunks the myth that tax cuts for the rich create jobs; in fact they create bubbles. Read it! It makes the point much more solidly than I have done here.

Categories: Opposing Plutocracy and Corporatocracy, Seeking Better Governance