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Sunday, December 11, 2011

Stop Trying to Create Jobs!

I know this heading sounds crazy. After all, everyone wants more jobs. All of the presidential hopefuls have their own jobs plan, and President Obama even created a new “Jobs Czar” position in his cabinet and appointed General Electric's CEO, Jeffrey Immelt, to the post.

But is job creation really a proper government policy goal? To answer this question, we need to ask what we want the economy to do for us. How about this: The economy should create as much wealth as possible with as little human effort as necessary.

Really, isn’t this just good common sense? Why would you want to expend any more human effort than necessary to create the products and services that people want and need? Obviously, labor-saving devices and increased worker productivity are good things, yet you might think they are bad things if you are too focused on jobs.

Too bad so many people in government make exactly that mistake. They are so motivated to protect existing jobs that they do so at the expense of job creation and wealth creation. It causes them to pursue such wrong-headed policies as import barriers, export subsidies, government make-work projects, a large standing army, a complex tax code, and burdensome regulations that divert valuable resources.

This is not to say that government is helpless to cure unemployment. It can do so by ending government policies which make it less profitable to hire workers; policies like minimum wage laws, the payroll tax, and laws making it difficult to dismiss workers or easy to be sued by workers. Also, a lower corporate tax rate would help.

Lately we have had some severe job-killing new policies, specifically, the threat of Obama-Care, restrictions on domestic energy production, impending EPA greenhouse gas regulations, the re-regulation of business accounting guidelines (Sarbanes-Oxley), and the reform of financial practices (Dodd-Frank). Maybe that’s why companies have become reluctant to hire (well duh).

According to the insight of von Mises, a free economy naturally produces low unemployment because human capital is the scarcest of all resources. That’s why excessive unemployment is always a government failure, never a market failure. Remember that next time someone complains that the economy isn’t producing enough jobs.

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