Businesses Do Not Create Jobs

[Joanne98]

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.)

davej's diary :: ::
So a demand creates a job. A person who sees that houses on a block need their lawns mowed might go door to door and say they will mow the lawn for $10. When houses start saying "Yes, I need my lawn mowed" a job has been created!

Demand also creates businesses. The person who is filling demand by mowing lawns for people might after a while have a regular circuit of houses that want their lawns mowed every week, and will buy a truck and a new mower and hire someone to help. A business is born!

Businesses Want To Kill Jobs, Not Create Them

Many people wrongly think that businesses create jobs. They see that a job is usually at a business, so they think that therefore the business "created" the job. This thinking leads to wrongheaded ideas like the current one that giving tax cuts to businesses will create jobs, because the businesses will have more money. But an efficiently-run business will already have the right number of employees. When a business sees that more people are coming in the door (demand) than there are employees to serve them, they hire people to serve the customers. When a business sees that not enough people are coming in the door and employees are sitting around reading the newspaper, they lay people off. Businesses want customers, not tax cuts.

Businesses have more incentives to eliminate jobs than to create them. Businesses in our economy exist to create profits, not jobs. This means the incentive is for a business to create as few jobs as possible at the lowest possible cost. They also constantly strive to reduce the number of people they employ by bringing in machines, outsourcing or finding other ways to reduce the payroll. This is called "cutting costs" which leads to higher profits. The same incentive also pushes the business to pay as little as possible when they do hire. (It also pushes businesses to cut worker safety protections, cut product quality, cut customer service, "externalize" costs by polluting, etc.)

This obviously works against the interests of the larger society, which wants lots of good jobs with good pay. And businesses, while working to cut jobs and pay less, need other businesses to hire lots of people and pay well, because that is what creates the demand that makes all the businesses work.

http://www.dailykos.com/storyonly/2010/11/12/920030/-Businesses-Do-Not-Create-Jobs

[SCRUBDASHRUB]

1. They sit on the money and continue to do so.

[dkf]

4. As do you and I probably.

[SCRUBDASHRUB]

12. I'm unemployed (since getting laid off in Jan.), and have no money to sit on.

[leveymg]

2. Tax policy could address this by rewarding jobs creation and severely taxing profits from offshoring

But, would this Congress and President even consider doing that? N-O-0-0-0-0

[Better Today]

7. Taxes aren't going to solve shit, because it doesn't increase demand.

We need more and bigger stimulus.

[leveymg]

8. It's part of a package of incentives and stimulus that needs to get passed

or there won't be many jobs left in this country.

This isn't an either/or issue. Major changes are needed in these and other areas, such as anti-trust and regulatory enforcement to pressure big banks and corporations to start lending and hiring again.

The demand side is essential, but that requires a rise in real middle-class incomes that will only come with jobs creation.

I think we're on the same side here.:hi:

[RaleighNCDUer]

10. And increaseing demand through stimulus spending does next to nothing

if the business then meets that demand by outsourcing and importing, rather than local hiring.

We need both stimulus AND increased taxes on outsourcing, to make it cheaper to meet the demand with local personnel resources.

[dkf]

3. This is why insisting that businesses use their cash to hire people is a fools errand.k

[jtuck004]

5. Demand Creates Jobs. Kick and REC. n/t

[Tippy]

6. K&R

[unblock]

9. exactly. and spare money gives employers zero incentive to hire more people.

additional DEMAND encourages employers to hire more people, whether they have the money to pay them or not. if they don't have the money, they have an incentive to borrow, raise capital, or just hope that revenue comes in in time and amount to meet the additional payroll.

but a company with extra money in the bank, or facing a lower tax rates, has ZERO incentive to hire more people.

in fact, they have an incentive to dividend away the money to shareholders (so owners can take out profits at lower tax rates). with enough cash on hand, they have an incentive to invest in capital equipment to improve efficiency and/or to go shopping for a competitor -- to eliminate jobs.

at every stage of business, jobs are created by increasing and shifting demand.



when morans say "a poor person never gave me a job", they're simply not looking past their nose. their immediate supervisor might be better off then themselves, but their paycheck ultimately comes from the customer, who might well be a lot of rather poor people.

[R. P. McMurphy]

11. Excellent Post K&R n/t