The Employment Fetish

Politicians and pundits from both major political parties are arguing about creating more jobs. Democrats typically brag about how many jobs they've created. Republicans, who at least in their rhetoric, are not a fan of government creating jobs, criticize the Democrats for this by stating that, "government's role is not to create jobs." What does seem to be missing from the conversation is that creating jobs is not synonymous with increasing overall living standards and improving people's lives. The engine of economic growth is not jobs, but saving and investment in capital goods (in industries of which people voluntarily demand).

Employment is a cost, not a benefit. If it were possible to live in the Garden of Eden without having to work, life would be more enjoyable and easier. The fact is that humans do not live in the Garden of Eden, so labor is necessary in order to get the goods and services which both maintain and enrich our lives. But it is the goods and services people value, measured by willingness to pay, that improves people's lives, not the number of people producing the goods. It is more goods and services that enrich our lives, not more employment.

Employment is a means to an end, not the end. The end is consumption of goods and services people value, measured in willingness to pay. It is the production of goods and services that people value which make us richer. If more people need to be feed, more food needs to be produced, not necessarily more people hired to produce it.

Some say that saying that more jobs are a good thing is because more jobs create more goods. There are a few responses to this. One is that there are capital intensive jobs and labor intensive jobs. Certain jobs require more labor (i.e. more employment) in order to get more output, whereas other jobs require more capital (and less labor) to produce more output. If one focuses on employment and not saving, investment, and production, then the focus is on increasing labor intensive goods, instead of focusing on which goods give you more bang for the buck (i.e. is cheaper and more efficient to produce, or in other words, requires fewer inputs to get more outputs). If the focus is on employment then one can increase employment, not by producing goods and services that people value, but in the Keynesian way of make-work projects that simply crowd out the resources needed to actually produce the goods and services people value.

Unions are mainly about wasting resources by using more labor on the job, at the expense of investing in more productive capital equipment. According to unions, though they would probably never honestly state it, the more workers it takes to produce something the better. If it takes 20 men to produce a good that is better than if 10 men produce the same good since now twice as many jobs are created. The reality is that this is just more inefficient. More resources are used to make-work and artificially create jobs than to figure out how to make things in the most efficient manner. 

While it is true that specialization and the division of labor is essential to a well-functioning market economy, and the greater the specialization and division of labor, the greater the extent of the market, this is not synonymous with wasting resources and pointless busy work. Karl Marx believed that labor itself has value and is not a means to and end, but that the more one sweats and toils, the better. In other words, leisure was a vice, which probably helps explains why in many socialist countries they have grueling camps for workers to toil and sweat until they drop dead.

A reductio ad absurdum to expose the fallacy of "creating more employment" as opposed to letting people be free to choose how they spend their time and resources is that government could create full employment right now if they wanted to. Government could end unemployment today by drafting every unemployed person into the army. Government could nationalize all industries and force people to be employed or else get shot. But if government created such jobs what would be the result? We'd all be much poorer and starve to death since people drafted into the army or being part of some make-work project are people who are not in the market creating value.

It is not employment that increases overall living standards and in fact, in the areas where people are becoming richer there is often less employment (or fewer hours worked). People should be free to decide the appropriate trade-off between investing in labor vs. investing in capital goods. People should be free to decide how much time they want to spend devoted to working and how much time devoted to leisure. Many of us hope one day to remain permanently unemployed. The only difference is that instead of calling this unemployment people call it retirement. 

In short, it is the goods and services that people value that enrich our lives, not the number of people it takes to make the goods. Employment is a cost, the goods and services are the benefit.