Job creators

When discussing socioeconomic principals, I often hear employers called "job creators".  I'd like to dispel that myth.  Consider Bob.  Bob is the CEO of Widgets Inc.  His company makes widgets to sell to widget users.  Every employee that he has can make 100 widgets per day.  How many people will Bob employ to make widgets for him?  Simplifying all other variables, Bob will find an equilibrium price for widgets and try to sell the number of widgets needed to bring the cost to the equilibrium price.  Let's suppose this number is 5,000 widgets per day.  This way, he will guarantee maximum profits.  If he makes fewer than 5,000 widgets per day, he will miss out on possible sales.  If he makes more than that, the price will drop too low and his profit on each one will diminish and possibly even turn into a deficit.  So he chooses to hire 50 employees and make 5,000 widgets per day.

So, we say Bob is a "job creator" because he is hiring 50 people to make widgets for him.  He pays them for their work, and they are happy to get their paychecks.  But, who really should get the credit for the jobs these people have?  Let's revisit the reasoning Bob used to determine how many workers he should have.  He determined how many widgets he could sell and still make a reasonable profit.  Then he calculated how many employees he'd need for that.  What determines how many widgets he can sell at a profit?  Again, there are many variables, but the primary one is demand.  The more widgets people want to buy, the more of them Bob can sell at a profit.  If in a year, only 4,000 widgets are needed, then Bob will lay off or fire 10 employees and cut back production.  If, however, 6,000 widgets are needed, he will hire on 10 additional workers to meet the demand.

But, Bob should not be given credit for creating those 10 jobs.  He didn't create the jobs.  The people buying the widgets did.  The more widgets people buy, the more people Bob employs and the more jobs there are.  In other words, consumption creates jobs.  When you get a haircut, you're helping create a job for barbers.  When you buy groceries, you create jobs--employees at the grocery store, farmers, and everyone else involved in making and delivering the food.  When I purchase Final Fantasy games, I create jobs at Square-Enix.  When I purchase cable and internet service, I create jobs at Comcast.  I am a job creator.  You are a job creator.  Even if you've never owned a business and never plan on owning a business, you are a job creator whenever you spend money.

Why should the consumer, not the CEO, get credit?  Think of it this way.  Bob, as CEO of Widgets Inc, wants to maximize the profit the company makes to keep his investors happy.  The shareholders may sell their stock and buy stock in a different company if his profits suffer.  So he wants to maximize the profits.  Employing people is a cost to the company, so he wants to minimize the number of employees in order to maximize profits.  In other words, if he only needs to make 4,000 widgets, he will lay off 10 employees because he only needs 40 and it's an unnecessary cost to have 50 employees when 40 will suffice.  So he is not looking to create jobs.  He doesn't want more jobs.  In fact, he wants to employ as few people as possible.  He wants to make money for himself and his shareholders.  That's how capitalism works.  In a sense, you could say he's a job destroyer.  That's probably a bit too harsh, though, because he is employing people--just as few people as possible.

However, when you buy more widgets from Bob, Bob is forced to hire more employees to make more widgets to meet the demand.  In other words, even though Bob doesn't want to spend more money on more employees than he has to, he will spend more money on employees if it will increase profits for the company.  Therefore, a higher demand in widgets translates into more employees at Widgets Inc.  That is, when you buy socks, you create a greater demand for sock manufacturers, which means more jobs for people who make socks.

One thing to keep in mind here is, how you spend your money is significant.  If you spend money at Walmart, you're creating Walmart jobs.  If you spend money on a product made in China, you're creating Chinese jobs.  If you spend money on a product made in the USA, you're creating American jobs.  If you spend money on a product made in a sweatshop, you're creating sweatshop jobs.  If you spend money on a product made in a factory with very nice working conditions, you're creating jobs with nice working conditions.  The way you spend your money has power.  It has meaning.  You influence the economy.  You have the power.  So get out there and create some jobs.  Good ones.