Essay: Why Creating Jobs is the Wrong Goal

We're all job creators…

I recently saw a clip of Peter Schiff interviewing an Occupy Wall Street protester.  Schiff asked him how many jobs he creates, and unfortunately, the protester wasn't prepared for this question.  (Although it was being filmed by Drew Carey's libertarian group called Reason TV, so if anybody did raise good points against him, we'd never see it anyway.)

Contrary to Schiff's shortsighted view of the economy, common people do create jobs.  We hire orthodontists, doctors, lawyers, mechanics, plumbers, electricians, HVAC technicians, exterminators, and many other professionals.  Their careers directly depend on enough working class people being able to afford to hire them.

Less directly but just as importantly, we hire businesses (and the factories and transportation companies which supply those businesses) whenever we patronize them.  If they lose consumer demand (like they would if their customers had to cut back due to decreased income), they have to lay off employees, so the consumer makes those jobs possible as well.

So we reach the age old question: do we distribute the wealth to the top so business owners can afford to hire more people, or do we distribute it among the people so those businesses have a reason to hire more in the first place?  As I've discussed in detail in earlier writings, history overwhelmingly favors the latter.  I've examined the last several decades of trends in America, historical industrial revolution America, economies in other countries, and all the data indicates that redistributing the wealth is best for society as a whole.  I haven't found a shred of evidence to support keeping the money at the top.

…but creating value is what matters.

Furthermore, creating jobs is the wrong goal.  Natural disasters create a lot of jobs in rebuilding, but that's obviously not an advantage.  We could create more jobs ourselves by such counterproductive means as using less efficient machinery that requires more manpower, or redesigning cars to fail every six months so more mechanics are needed, but again, we all know better.  What some people don't consider is that a faulty incentive system can be just as detrimental.  The system should reserve reward for activity that creates value: introducing innovation, producing products, and rendering consumer services – but it isn't as effective as commonly perceived.

As the CEO of an investment firm, Peter Schiff himself exemplifies this.  The basis of his entire career (and the careers of his employees) is manipulating the system for the benefit of himself and his clients.  This is a useful "service" only in the same sense that robbing a bank and sharing the loot with one's friends is useful.  Even if his efforts make the entire stock market go up, the fact remains that no actual value is created, and the result is the same as printing more money with nothing to back it.  Schiff made a hundred million dollars for himself and created jobs, and yet he made no real contribution to society.  It's fashionable to complain about people abusing the welfare system, but think of how many welfare recipients it would take to equal one Peter Schiff alone – not to mention his employees and clients.

Instead of merely trying to creating jobs, the focus needs to be on engineering the system to encourage and reward activity that creates value.  If reward were more closely proportioned to societal contribution, we would naturally be more productive, which would help our GDP in the long run.

Adam Smith would have likely supported this.  His renowned publication The Wealth of Nations begins by talking about the division of labor, which emphasizes the importance of workers and specialists at all levels contributing to a team effort, the result of which could never be achieved by any lone individual.  It's unfortunate that so many of today's speakers want to make it all about the CEO (the "job creator") while marginalizing everybody else, even though management is merely a supporting role for those who directly create value.  Strangely, those who claim to admire Adam Smith the most seem to be the first to dismiss his wisdom.

Neil DeGrasse Tyson has expressed similar sentiments to my idea of creating value.  All throughout Life the Universe and Everything, he refers to the lack of real productivity as it affects the scientific community.  At a point a little past the 30 minute mark in particular, he talks about how all the smart people who would have become engineers instead become investment bankers or lawyers because that's what we reward and admire in society, and he goes on to discuss how the wrong culture can stifle productivity and innovation.  It's in equal parts interesting and alarming.

Unfortunately, I don't have a specific solution.  But I think I've at least shed some light on the right questions to ask.  If I can't come up with an answer, perhaps one of you will.