Archived Story

Politicians don’t create jobs

Published 9:33am Tuesday, September 4, 2012 Updated 11:36am Tuesday, September 4, 2012

As I watch the hordes of speeches from politicians, the overriding theme is how they will “create jobs.”

Those of you planning on voting in November, no matter what your party, please understand this fact: politicians can do little to nothing to create jobs.

In fact, if Mitt Romney (and Barack Obama, for that matter) really wanted to create jobs, he wouldn’t bother running for President. He’d create a new company.

Private business owners, big and small, create jobs. They do so not because they get a tax break or receive a government subsidy, but because they are willing to risk their own money – or acquire the money from investors – to produce a product or provide a service which they think they can sell for more than it costs them to make or provide.

A recent technical school graduate with a plumbing license, for example, creates a job if he or she decides to go into business rather than taking an existing position from a retiring plumber. Of course, if that person is successful in finding enough plumbing jobs to make a living, it doesn’t necessarily mean a job was created. What if, for example, that new plumber takes jobs away from an existing plumber, and the existing plumber, due to the reduction in the number of jobs, lays off an employee? That’s a net zero on the jobs front. Thus, plumbing jobs can only increase if the market demands an additional plumber due to a growth in construction or remodeling.

It’s part of the reason why the construction of a new retail store does not necessarily translate to new jobs. Assuming we as a society have so much disposable income, we as a society will buy a finite amount of coffee, iPads and movie tickets, so to speak. Unless our population grows or per capita income increases, a coffee shop owner will have to take away business from someone else to be successful. The successful business will create jobs, and the “losing” business will lose jobs. You see it all the time in Fergus Falls; one restaurant opens, and soon another one closes.

It’s why sectors such as manufacturing and agriculture are so valuable. If a product can be sold to a global market, it eliminates the need for a business selling a similar product to be unsuccessful. For example, manufacturers in Fergus Falls such as Quality Circuits (circuit boards), Shoremaster (docks) and StoneL (valve sensors) can, and are sold to companies and individuals around the globe. Similarly, corn, wheat and soybeans grown here can be sold to countries around the world, especially in rapidly developing countries such as China and India.

The best way for Fergus Falls to grow jobs would be if one of the existing manufacturers in Fergus Falls came up with a new product — for example, a new dock system, circuit board, or valve sensing equipment — that could be sold to a new type of customer. For example, let’s say Shoremaster could come up with a dock that was ideal for lake property owners, so ideal that property owners almost automatically purchased it as a second dock.

Shoremaster would then need to make twice as many docks. Assuming they’re already operating at full efficiency, to make twice as many docks, they’d eventually need to hire as many as twice as many employees.

How does the government fit into that equation? The government could give them a tax break or subsidy as incentive for opening the new plant. The government also could impose stiff regulations on the new docks – requiring more costly raw materials than planned due to safety concerns, for example.

But the fact is, in a vast majority of cases, the government wouldn’t affect the outcome either way. Considering the profits it would make, Shoremaster would create the new dock plant regardless of tax breaks. Assuming they wouldn’t be so financially burdensome to destroy the profit margin, Shoremaster certainly would deal with any regulations that would come with a new dock.

I’m not asking you to vote for either political party. I’m just saying, while the economy might be our country’s largest issue, it’s also the issue that – no matter what they say or even do – politicians really can’t do anything about.

Now, about Shoremaster creating that new dock…

 

• • •

 

I want to wish my fellow competitors luck in this weekend’s Pot ‘O Golf and Labor Day Classic. I also want to encourage local residents to come out and watch the tournament. For a bunch of mortal golfers, having a gallery is always nice.

 

Joel Myhre is The Journal’s publisher. Email him at joel.myhre@fergusfallsjournal.com

  • Walt Henry

    mmmmm—not quite. When I worked in cheese production the start of the college season meant a rush to fill orders and a change from one shift 4 or 5 days a week to three shifts running 24/7. Why? Because colleges with government research grants attracted students with money from their parents, summer jobs and government student loans wanted cheese for their pizzas. Maybe it could be said pizzas were just replacements for food they would have purchased otherwise and thus not really a job creator. The well known phenomena called the “freshman 20” would support my contention new jobs were created by government.
    When working in fluid milk, the start of the k-12 school year meant the change of one production line from one shift three days a week to one running 24/7. Again it could be said this did not necessarily show an increase in jobs, but processed fluid milk increases 20 to 25% in volume during the school year over the summer months.
    Collective expenditures, whether it be from a single source such as a unit of government or from multiple individual sources such as individuals, is what makes our economy go.
    Things are not as simple as they seem for ours is a complex world.

  • Richard Olson

    Of course government creates jobs, lots of jobs. Civilian Conservation Corp, Rural Electrification, The Tennessee Vally Authority, Peace Corp, the list goes on and on. Our roads may be finished by civilian contractors, but it is government that created the jobs and the project. The interstate system never would have been built if left to private enterprise, no private contractor is/was big enough, likewise the Grand Coolie and other large dams were constructed only because government initiated them.

    Then there are the people that work directly for government at one level or another…..Police, Firefighters, Post Office, Prison Guards, etc etc.

    To say that government does not create jobs is just silly and ignores a large segment of our population and neighbors.

  • Swede

    I think what you mean Joel is government does not create wealth. Government can create jobs such as the DNR, but in doing so it consumes wealth.

    Government can however destroy jobs through regulation. One example is the law requiring phasing out incandescent bulbs at the end of 2011. Due to that law, the last incandescent plant in the US closed at the end of 2010. The replacement compact fluorescent bulbs are imported.

  • Swede

    An attempt of federal control of private industry has yielded the Chevy Volt.

    “GM is still losing as much as $49,000 on each Volt it builds… some Americans paying just $5,050 to drive around for two years in a vehicle that cost as much as $89,000 to produce.”

    http://www.reuters.com/article/2012/09/10/us-generalmotors-autos-volt-idUSBRE88904J20120910

  • Phaedrus

    “Tucked inside this 1,000+ word essay on why their outrageous headline makes sense, is this admission by their experts:

    “The actual cost to build the Volt is estimated to be an additional $20,000 to $32,000 per vehicle (nice range estimate), according to Munro and the other industry consultants.”

    So, given that the ($1.2 billion) $1.0 billion is all in a one-time development cost to begin an entirely new breed of automobile, and will be amortized over whatever the end result of production will be (perhaps in the hundreds of thousands), this figure has nothing to do with the ongoing cost of producing the Volt at all, and their statement that selling new Volts “probably isn’t a good thing for the automaker’s bottom line,” or that GM is “losing as much as $49,000 on each Volt it builds” is total nonsense.

    In actual fact according to their experts, GM may be making $7,000 to $19,000 for every new sale the company logs. That is the story they should have written.

    Now, if you want to talk about if GM makes money on the Volt after they pay for all the advertising and marketing of the vehicle they do, that is another story…but Reuters is out to lunch on this one.

    If you enjoy being frustrated at poor journalism, might I suggest reading Reuters original story here, there is lots more good stuff.

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