Banner ad

Tuesday, December 08, 2009

Explaining the economics of hiring to liberals

When will liberals understand that government-provided jobs is not the way to increase employment? There seems to be a lesson in basic ecnomics that they just missed out on. They need to understand that the best thing that government could do would be to make it easier for businesses to hire people rather than harder. It's as simple as that.Thomas Sowell has a very clear explanation of what is wrong with the Democrats' approach to increasing employment.
Let's go back to square one. 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.

If that was all that was involved, it would be a simple verbal fraud, with no gain of jobs and no net loss. In reality, many other things that politicians do reduce the number of jobs.

Politicians who mandate various benefits that employers must provide for workers gain politically by seeming to give people something for nothing. But making workers more expensive means that fewer are likely to be hired.

During an economic recovery, employers can respond to an increased demand for their companies' products by hiring more workers-- creating more jobs-- or they can work their existing employees overtime. Since workers have to be paid time-and-a-half for overtime, it might seem as if it would always be cheaper to hire more workers. But that was before politicians began mandating more benefits per worker.

When you get more hours of work from the existing employees, you don't need to pay for additional mandates, as you would have to when you get more hours of work by hiring new people. For many employers, that makes it cheaper to pay for overtime. The data show that overtime hours have been increasing in the economy while more people have been laid off.

There is another way of reducing the cost of government-imposed mandates. That is by hiring temporary workers, to whom the mandates do not apply.

The number of temporary workers hired has increased for the fourth consecutive month, even though there are millions of unemployed people who could be hired for regular jobs, if it were not for the mandates that politicians have imposed.

Economists have long been saying that there is no free lunch, but politicians get elected by seeming to give free lunches, in one form or another. Yet there are no magic wands in Washington to make costs disappear, whether with workers or with medical care. We just pay in a different way, often a more costly way.

Nor can these costs all be simply dumped on "the rich," because there are just not enough of them.
I wish all the politicians in Washington would read this Sowell column. The Democrats say that they are going to focus on employment. But they have to understand that throwing in a few speeches and programs won't counteract the effect that their policies are having on business hiring decisions. And the new ruling from the EPA isn't going to help things any.

No comments: