The Truth About Government ‘Job Creation’

Pages: 1 2

One of the reasons for the popularity of political rhetoric is that everybody can be right, in terms of their own rhetoric, no matter how much the rhetoric of one side contradicts the rhetoric of the other side.

President Obama constantly repeats how many millions of jobs have been created during his administration, while his critics constantly repeat how many millions of jobs have been lost during his administration. How can both of them be right — or, at least, how can they both get away with what they are saying?

There are jobs and there are net jobs. This is true not only today but has been true in years past.

Back during the 1980s, when there were huge losses of jobs in the steel industry, the government restricted the importation of foreign steel. It has been estimated that this saved 5,000 jobs in the American steel industry.

But of course restriction of competition from lower-priced imported steel made steel more expensive to American producers of products containing steel. Therefore the price of these products rose, making them less in demand at these higher prices, causing losses of sales at home and in the world market.

The bottom line is that, while 5,000 jobs were saved in the American steel industry, 26,000 jobs were lost in American industries that produced products made of steel. On net balance, the country lost jobs by restricting the importation of steel.

None of this was peculiar to the steel industry. Restrictions on the importation of sugar are estimated to have cost three times as many jobs in the confection industry as they saved in the sugar industry. The artificially high price of sugar in the United States led some American producers of confections to relocate to Mexico and Canada, where the price of sugar is lower.

There is no free lunch in the job market, any more than there is anywhere else. The government can always create particular jobs or save particular jobs, but that does not mean that it is a net creation of jobs or a net saving of jobs.

The government can create a million jobs tomorrow, just by hiring that many people.

But where does the government get the money to pay those people? From the private economy — which loses the money that the government gains.

Pages: 1 2

  • davarino

    Thanks Thomas. These are facts that are lost on the populace that allows the media to spoon feed them the news. Thinking is a lost art.

  • Sprinklerman

    Thank you Mr. Sowell for making this easy to understand. The sounds coming from both sides have been confusing at times. Not the least of which is the "jobs saved" mantra.

  • Lady_Dr

    Dear, dear Dr. Sowell,

    You are one of my heros – numbers were never my strong point, so there was no way I could ever study economics – but the fact is it is basic, common sense. And you make it SO understandable. Despite being innumerate I did raise revenues 25% each year for 4 straight years in one position – it was SO easy, just apply elbow grease and common sense. Clearly, our dear leader lacks both. You however have both in abundance. (Have you ever considered running for office?)

  • Johncdavidson

    We have too many people getting paid to formulate lies into facts.

  • sedoanman

    Re: "The government can create a million jobs tomorrow, just by hiring that many people."

    Hiring a government worker does not necessarily mean a job was created.

  • nasirjo

    its absolutely true facts about jobs creation

    career building institues usa