Businesses Do Not Create Jobs

[Quantum Windbag]

Businesses Do Not Create Jobs
Thursday 11 November 2010

by: Dave Johnson

Businesses do not create jobs. In fact, the way our economy is structured the incentive is for businesses to get rid of as many jobs as they can.

Demand Creates Jobs

A job is created when demand for goods or services is greater than the existing ability to provide them. When there is a demand, people will see the need and fill it. Either someone will start filling the demand alone, or form a new business to fill it or an existing provider of the good or service will add employees as needed. (Actually a job can be created by a business, a government, a non-profit organization or just a person doing the job, depending on the nature of the good or service that is required.)
t r u t h o u t | Businesses Do Not Create Jobs

And goods appear fully manufactured in garages.

 

[Toro]

The premise is silly. It's as mindless as saying "government doesn't create jobs" only moreso

Demand doesn't occur in a vacuum. Demand arises out of wealth creation. The more that is created, the more demand there will be.

The best way to create wealth is through innovation to create products that we don't have but need, or to create products we have cheaper. Business is critical in wealth creation because it is usually much better at allocating capital to fund innovative products than government. Of course, government plays a role, but to say that business doesn't create jobs is asinine. And the more restrictions you place on business, the less jobs business will create.

 

[loosecannon]

The premise is silly. It's as mindless as saying "government doesn't create jobs" only moreso

Demand doesn't occur in a vacuum. Demand arises out of wealth creation. The more that is created, the more demand there will be.

That much is certainly true, then you switched course 180 degrees and went batshit crazy:

The best way to create wealth is through innovation to create products that we don't have but need, or to create products we have cheaper. Business is critical in wealth creation because it is usually much better at allocating capital to fund innovative products than government. Of course, government plays a role, but to say that business doesn't create jobs is asinine. And the more restrictions you place on business, the less jobs business will create.

Neither business nor innovation empower consumers with purchasing power or "wealth creation".

Business does certainly play a role, as you said, but an exclusively secondary role. Never a leading role.

Purchasing power+ consumer demand = economic growth. It is a given that a business will fill an existing need. Just like water seeks the lowest level.

 

[Toro]

The premise is silly. It's as mindless as saying "government doesn't create jobs" only moreso

Demand doesn't occur in a vacuum. Demand arises out of wealth creation. The more that is created, the more demand there will be.

That much is certainly true, then you switched course 180 degrees and went batshit crazy:

The best way to create wealth is through innovation to create products that we don't have but need, or to create products we have cheaper. Business is critical in wealth creation because it is usually much better at allocating capital to fund innovative products than government. Of course, government plays a role, but to say that business doesn't create jobs is asinine. And the more restrictions you place on business, the less jobs business will create.

Neither business nor innovation empower consumers with purchasing power or "wealth creation".

Business does certainly play a role, as you said, but an exclusively secondary role. Never a leading role.

Purchasing power+ consumer demand = economic growth. It is a given that a business will fill an existing need. Just like water seeks the lowest level.

All economic growth over the long-run is a function of innovation and productivity growth. Purchasing power is a function of the income that arises from productivity growth. Business is the primary driver of productivity growth because it is businesses that primarily give us the new products and the current products cheaper. Governments generally don't do that, though governments play a vital role in this process through funding of education, infrastructure, R&D, enforcement of contracts etc.

Demand has always been around since the dawn of time. Yet most of the world's economic growth has occurred in the past 200 years, which is when our understanding of specialization began to take hold and be incorporated into the productive process. There has always been demand. There has not always been innovation large and adaptive enough to drive significant and widespread wealth creation and distribution.

 

[Sallow]

Under the current climate, the OP is quite correct. Business have been encouraged to embrace the concept of "synergy". In other words, bigger companies buy out smaller ones and get rid of "redundant" employees. They are replaced by either:
Consultants - With no benefits or ability to be tenured.
Near shore - Low pay no benefits.
Off Shore - Low pay no benefits.

The OP would be correct without those factors.

From a simple perspective the origination of business enterprise is demand coupled with means to satisfy that demand. Businesses seldom succeed on a business model like Field of Dreams. Businesses respond to the rising prices caused by increased demand and add capacity accordingly. To meet demand.

On a similar note nearly everybody agrees that the main factor preventing businesses from expanding today and adding employees is a lack of demand.

I think we are basically on the same track. But to clarify..the strategy employed by this whole "synergy" debacle is good for short term profit but bodes badly for long term growth. What everyone seems to agree on is that lack of demand is keeping business from hiring. And if what they keep hiring is short term consultants along with off/near shoring, there will not be that demand.

 

[loosecannon]

Demand has always been around since the dawn of time. Yet most of the world's economic growth has occurred in the past 200 years, which is when our understanding of specialization began to take hold and be incorporated into the productive process. There has always been demand. There has not always been innovation large and adaptive enough to drive significant and widespread wealth creation and distribution.

Demand without purchasing power has existed from the dawn of time. What has changed in the last 200 years is of course capacity as you say, but capacity is useless unless it it is preceded by excess purchasing power.

Which is why a large % of the world has only marginally participated in the consumer economy.

Innovation drives industry, but it doesn't drive the economy. The economy is fueled by currency. As is evident by contrasting the wealthiest and poorest nations of the world in a globalized market. The same products are available to everybody, products of the same innovation. Demand is universal, but purchasing power is not equally distributed and extremely disparate results are evident as a result of purchasing power inequality.

The same is equally obvious when looking at consumption within individual stratified nations. Demand universal, supply universal, purchasing power and consumption not equal.

Purchasing power(currency) coupled with demand is the engine of commerce.

 

[MaggieMae]

The thread title is incomplete:

Businesses Do Not Create Jobs When the Government sucks all of the oxygen out of the private sector, raises taxes, and creates massive new regulations and bureaucracies with which to further burden said businesses.

The federal government has not raised taxes and the regulations are the same ones in place for a decade. So what was the excuse before now? In fact, the same regulations were in place in the roaring 90's and taxes were higher. Explain that.

If businesses are feeling pinched by higher taxes, fees, etc., it is the states who are trying to increase their own revenue because of business downturns because nobody's spending.

Bullshit. Obamacare took a job creation class that was already on its back and kept it there. That and the threat of massive new energy taxes and environmental regulation have put the breaks on anyone expanding.

So since when do businesses rely solely on "what if" instead of "what is"?? Businesses have taken risks that their expenses might rise for hundreds of years and adjust accordingly! For over a year, both the energy and environmental changes have been solidly challenged, so there was more than a 75% chance there would be no added taxes due to new policy or regulations. AND BUSINESSES KNOW THAT.

All a business needs to succeed is a good management plan developed by their CPAs and tax attorneys combined with sales plans to expand their businesses. It's not a novel concept and certainly there's no science to it. Instead, urged on by the US Chamber of Commerce, businesses simply decided to wait it out until enough Republicans got elected who would make sure they didn't pay one dime more into keeping the nation's employment situation moving along. All those dimes have now added up to a stash of around $1.3 trillion. Nice going, ya greedy bastards.

The CEOs of the 50 firms that have laid off the most workers since the onset of the economic crisis took home nearly $12 million on average in 2009, 42% more than their peers at S&P 500 firms, according to CEO Pay and the Great Recession, the 17th in a series of annual Executive Excess reports from the progressive think tank.

Combined, the CEOs at those 50 firms made $598 million and laid off 531,363 workers -- accounting for more than three quarters of the 697,448 announced layoffs at the top 500 firms. The study also found that 72% of them announced their mass layoffs during periods of positive earnings reports, and that those companies enjoyed a 44% profit increase in 2009.

See full article from DailyFinance: More Layoffs, Bigger Payoffs: CEOs Who Cut More Jobs Got Paid 42% More Money in 2009 - DailyFinance

 

[MaggieMae]

The federal government has not raised taxes and the regulations are the same ones in place for a decade. So what was the excuse before now? In fact, the same regulations were in place in the roaring 90's and taxes were higher. Explain that.

I can't believe I'm responding to this, but here goes....In the 90's the the Repubs forced Billy to balance the budget...and there was a dot.com boom...the balanced budget lowered interest rates, which balanced out the higher taxes...And those regulations from years ago, are what brought the housing market down today...see, if you do something now, it may cause bad things to happen in the future...Only problem is that now our Pres is doubling down instead of trying something different from the last three years...Yes...W. got the ball rolling...Is this thread for real? hahaha

If you don't want to participate unless it's something you agree with, then **** off. I couldn't care less if you respond to me. I probably know more about the myriad reasons for the economic tsunami than you will in your lifetime. You obviously haven't been closely following the progressively damaging reasons for the housing bubble, one of which was NOT the CRA regulation which every economist from Kingdom Come acknowledges by now, but the repeal of the Glass-Steagall Act.

 

[MaggieMae]

Bullshit. Obamacare took a job creation class that was already on its back and kept it there. That and the threat of massive new energy taxes and environmental regulation have put the breaks on anyone expanding.

but there haven't been any new energy taxes or regulations. Duh!

They were all but certain except for the events of November 2nd. Nobody makes business plans not knowing where and when government will kneecap them next.

Cap and trade was taken off the table by the Senate. Pay attention. As for any "environmental" changes, I have no idea what you're talking about other than campaign promises to invest in alternative energy sources. You got a problem with that? Or should we continue subsidizing the already enormously profitable oil companies for only God knows what?

 

[MaggieMae]

Obama intended to implement cap and trade through the EPA, and still might.

"Clean coal" would be made too expensive to make a difference.

Where did you see that? He cannot just do whatever he wants, fool. The Senate still may consider some other formula for cap and trade as part of the ENERGY BILL but the debate will be tougher, and if businesses plan on holding out until there's something enacted, I guess they'll just have to continue investing their stash overseas instead of America as more and more Americans are added to the unemployment lines.

 

[MaggieMae]

There will be permanent 10% unemployment in this country as long as the most anti-business administration in the last 80 years is in charge.

That's such a lie. The Obama administration gave businesses huge incentives, from tax breaks and credits to allowing depreciation on capital expenditures to be taken THIS year instead of the following. New health care laws that will affect businesses won't even go into effect until 2014, if then. So what else "anti-business" are you talking about?

 

[MaggieMae]

Businesses don't creat jobs when liberals in power loot their investments and risks.

How have their investments been looted?

 

[MaggieMae]

Under the current climate, the OP is quite correct. Business have been encouraged to embrace the concept of "synergy". In other words, bigger companies buy out smaller ones and get rid of "redundant" employees. They are replaced by either:
Consultants - With no benefits or ability to be tenured.
Near shore - Low pay no benefits.
Off Shore - Low pay no benefits.

The OP would be correct without those factors.

From a simple perspective the origination of business enterprise is demand coupled with means to satisfy that demand. Businesses seldom succeed on a business model like Field of Dreams. Businesses respond to the rising prices caused by increased demand and add capacity accordingly. To meet demand.

On a similar note nearly everybody agrees that the main factor preventing businesses from expanding today and adding employees is a lack of demand.

I think we are basically on the same track. But to clarify..the strategy employed by this whole "synergy" debacle is good for short term profit but bodes badly for long term growth. What everyone seems to agree on is that lack of demand is keeping business from hiring. And if what they keep hiring is short term consultants along with off/near shoring, there will not be that demand.

There won't be a demand until people can afford to buy; they can't do that if they don't have jobs or are trying to pay off their accumulated debt; they won't find jobs or earn enough until businesses do their part. So when does the standoff end? When those businesses suffer such huge losses that they can no longer hold their own just because they've been waiting for the Republican Fairy Godmothers/fathers to, er, bail them out by promising to remove all perceived government roadblocks? Or when unemployment continues to rise as a result of those businesses closing their doors too. Or when government welfare programs become so overburdened because of the unemployed that taxes would need to be raised just to cover the huge hole that continued to grow.

 

[Big Fitz]

Lilolelunatic links to someone who doesn't understand basic economics.

Full story at 11.

 

[Toro]

Demand has always been around since the dawn of time. Yet most of the world's economic growth has occurred in the past 200 years, which is when our understanding of specialization began to take hold and be incorporated into the productive process. There has always been demand. There has not always been innovation large and adaptive enough to drive significant and widespread wealth creation and distribution.

Demand without purchasing power has existed from the dawn of time. What has changed in the last 200 years is of course capacity as you say, but capacity is useless unless it it is preceded by excess purchasing power.

Which is why a large % of the world has only marginally participated in the consumer economy.

Innovation drives industry, but it doesn't drive the economy. The economy is fueled by currency. As is evident by contrasting the wealthiest and poorest nations of the world in a globalized market. The same products are available to everybody, products of the same innovation. Demand is universal, but purchasing power is not equally distributed and extremely disparate results are evident as a result of purchasing power inequality.

The same is equally obvious when looking at consumption within individual stratified nations. Demand universal, supply universal, purchasing power and consumption not equal.

Purchasing power(currency) coupled with demand is the engine of commerce.

The disparities in income around the world are a function of productivity. American workers are extremely productive and are paid as such. Congolese workers are much less productive (as defined by output per time worked), and are paid much less. Countries that have been poor and become relatively well off - particularly those in Asia - have done so through technology transfer.

I said earlier that all economic growth is a function of innovation and productivity growth. That's not true. All real per capita economic growth is a function of innovation and productivity growth. This can be demonstrated with a simple example. If one earns $20 and spends $10 on food and $10 on clothes, if someone creates a new way of making those same clothes for half the cost, the consumer now spends $10 on food, $5 on clothes and now has an extra $5 to spend in the economy, which is spent elsewhere on other goods or saved, which increases economic growth.

Demand does not operate independently in a vacuum. What was the demand for online gaming 50 years ago? What is the demand for moon vacations today? Demand, independently, is theoretically unlimited, and doesn't tell us much about economics.

The best definition of economics I ever heard was from my first economics class in high school, with the teacher defining economics as "the study of the allocation of scarce resources to meet unlimited wants and needs." "Wants and needs" is demand. "I demand to have sex with Victoria's Secret supermodels every day." Yeah, well, who doesn't? But on my opportunity set, that is unlikely to happen. People can demand cars that cost $5, but that is irrelevant since it costs much more to make a car.

Demand is a function of income, which is a function of productivity, which is a function of innovation. Productivity creates new products and lowers the cost of existing products. New products displace old products, shifting utility curves outwards, which creates wealth, given that income is the monetization of utility. Lowering cost curves frees up income to spend elsewhere, which creates wealth because it increases total utility, given that the individual can now obtain more goods. Real long-term per capita economic growth, which means an improvement in living standards, is always a function of productivity growth.

 

[hortysir]

Businesses Do Not Create Jobs
Thursday 11 November 2010

by: Dave Johnson

Businesses do not create jobs. In fact, the way our economy is structured the incentive is for businesses to get rid of as many jobs as they can.

Demand Creates Jobs

A job is created when demand for goods or services is greater than the existing ability to provide them. When there is a demand, people will see the need and fill it. Either someone will start filling the demand alone, or form a new business to fill it or an existing provider of the good or service will add employees as needed. (Actually a job can be created by a business, a government, a non-profit organization or just a person doing the job, depending on the nature of the good or service that is required.)
t r u t h o u t | Businesses Do Not Create Jobs

 

[CMike]

Businesses hire people and pay them. If people don't have money there is no demand. Thus, businesses create demand, demand creates businesses to exist and hopefully flourish.

If businesses flourish there is greater demand, yadda yadda yadda.

 

[loosecannon]

The disparities in income around the world are a function of productivity.

No they are not. The evidence of this is that even while American productivity has been climbing rapidly over the past ten years at no time in the last 10 years have wages even begun to keep pace with our productivity increases.

When China finally becomes as productive as the US workforce is today, they won't realize our former salaries.

The best definition of economics I ever heard was from my first economics class in high school, with the teacher defining economics as "the study of the allocation of scarce resources to meet unlimited wants and needs." "Wants and needs" is demand. "I demand to have sex with Victoria's Secret supermodels every day." Yeah, well, who doesn't? But on my opportunity set, that is unlikely to happen. People can demand cars that cost $5, but that is irrelevant since it costs much more to make a car.

Demand coupled with purchasing power is what drives the economy. If you have sufficient purchasing power sex with Victoria's secret supermodels is NOT out of the question. In fact several of them have been paid sex slaves for Saudi Princes.

Wants and needs are not demand. Demand as a economic term includes the ability to purchase according to the price the market is asking.

According to your definition of "demand" increased demand would never drive up the price of anything, because tho it was infinite it would be impotent to actually consumate transactions.

 

[loosecannon]

Definitions of demand on the Web:

* request urgently and forcefully; "The victim's family is demanding compensation"; "The boss demanded that he be fired immediately"; "She demanded to see the manager"
* necessitate: require as useful, just, or proper; "It takes nerve to do what she did"; "success usually requires hard work"; "This job asks a lot of patience and skill"; "This position demands a lot of personal sacrifice"; "This dinner calls for a spectacular dessert"; "This intervention does not ...
* an urgent or peremptory request; "his demands for attention were unceasing"
* claim as due or just; "The bank demanded payment of the loan"
* the ability and desire to purchase goods and services; "the automobile reduced the demand for buggywhips"; "the demand exceeded the supply"
* lay legal claim to
* requirement: required activity; "the requirements of his work affected his health"; "there were many demands on his time"
* summon to court
* the act of demanding; "the kidnapper's exorbitant demands for money"
* ask to be informed of; "I demand an explanation"
* need: a condition requiring relief; "she satisfied his need for affection"; "God has no need of men to accomplish His work"; "there is a demand for jobs"
wordnetweb.princeton.edu/perl/webwn

* In Lacanian psychoanalysis, a demand results when a lack in the Real is phrased into the Symbolic medium of language. ...
en.wikipedia.org/wiki/Demand_(psychoanalysis)

* Hoist is the seventh studio album by the jam band Phish. At the time of its release, Hoist was Phish's best selling album. Hoist includes guest appearances from Alison Krauss, Béla Fleck, and other musicians, as well as actor Jonathan Frakes on trombone. ...
en.wikipedia.org/wiki/Demand_(song)

* The desire to purchase goods and services; The amount of a good or service that a consumer is willing to buy at a particular price; A need; A claim for something; A requirement; An urgent request; An order; the measure of the maximum power load of a utility's customer over a short period of ...
en.wiktionary.org/wiki/demand

text book definitions

 

[Toro]

The disparities in income around the world are a function of productivity.

No they are not. The evidence of this is that even while American productivity has been climbing rapidly over the past ten years at no time in the last 10 years have wages even begun to keep pace with our productivity increases.

It is true that wages have not kept up with productivity growth this decade in America. However, over longer-periods of time, they have. There have been times when wage growth has outstripped productivity growth.

If you look at it globally, however, wages have grown closer to productivity. Not as fast, mind you, but the gap is much smaller than in America.

Also, if you stratify incomes and regress income growth to productivity growth over the past decade, you see that those who have increased productivity the most have seen their wages grow the fastest, even if in aggregate, wage growth lagged productivity growth. That's the main reason why we have seen an increase in income disparity.

Demand coupled with purchasing power is what drives the economy. If you have sufficient purchasing power sex with Victoria's secret supermodels is NOT out of the question. In fact several of them have been paid sex slaves for Saudi Princes.

Wants and needs are not demand. Demand as a economic term includes the ability to purchase according to the price the market is asking.

According to your definition of "demand" increased demand would never drive up the price of anything, because tho it was infinite it would be impotent to actually consumate transactions.

Purchasing power is income. Income is a function of productivity. The aggregate demand curve is function of income. Shifts in the aggregate demand curve are a function of several things, but if income were to collapse, the aggregate demand curve would shift downwards and to the left.