A Review of Basic Labor Economics

In my entire working life, I have had only one job that was not created by someone richer than I creating the job opportunity and that one exception was the United States Navy. Thomas Sowell reiterates that matter is a very simple way:

What does it take to create a job? It takes wealth to pay someone who is hired, not to mention additional wealth to buy the material that person will use.

But government creates no wealth. Ignoring that plain and simple fact enables politicians to claim to be able to do all sorts of miraculous things that they cannot do in fact. Without creating wealth, how can they create jobs? By taking wealth from others, whether by taxation, selling bonds or imposing mandates.

However it is done, transferring wealth is not creating wealth. When government uses transferred wealth to hire people, it is essentially transferring jobs from the private sector, not adding to the net number of jobs in the economy.

It takes wealth to create jobs--even my soccer refereeing--a paid job--is created by families who spend money on the activity for their children (although most of them will not tell you they are wealthy and I wouldn't presume they were unless their kids pulled up to the soccer pitch in a limosine). What is the government, particularly the current Democratically lead government, good at--taking wealth from those who have it and giving it away to those who don't have it.

If the Obama Adminstration really wants to create jobs, the task is simple--stop taxing the rich so much. There is only so much the IRS can take from a rich person before that rich person stops investing their time and energy in creating something valuable. Tax breaks and reduced governmental mandates makes the cost of business go down, which will create wealth for rich people who will then hire poor people like me to work for them.

What strikes as particularly inane is how so many allegedly smart people in Washington don't seem to understand the basic economic principle. There is no single set of government jobs that actually creates wealth directly. Every government job must be funded by a group (and yes it is a group) of non-government workers paying taxes to support it. Hence, Sowell's point:

When government uses transferred wealth to hire people, it is essentially transferring jobs from the private sector, not adding to the net number of jobs in the economy.

I think at a gut level, most American understand this--hence the desire to start one's own business. The idea of being rich enough to employ other people is magical and inherently understood.