“I will create millions of jobs” is a phrase I have heard a thousand times from campaign halls by politicians vying for public offices in a bid to win the majority votes.
The promise to create jobs attracts a lot of supporters, and this is mainly due to the fact that a portion of the citizenry are unemployed. This unemployment often times is caused by governmental policies like minimum wage laws, unionization, or social welfare programs.
How the Government creates Jobs
When politicians try keep to their promise of creating wealth for citizens, they direct billions of dollars into infrastructure projects like construction of roads, public hospitals, or provide subsidies to private companies.
However, one must not forget the basic economic principle that resources are scarce and that labor itself is a scarce resource. Thus, every job created is inevitably a deduction from the limited, precious labor available. Work must be rationed between the different industries and not necessarily created so that the market can create the most product possible out of the limited supply of labor, capital goods, and natural resources.
The same is true for our society. The supply of labor is limited. We must not allow government to create jobs or we lose the goods and services which otherwise would have come into being. We must reserve precious labor for the important tasks that will ensure development left undone.
Government Job Creation restricts Wealth Creation
When the state creates jobs through huge infrastructure projects, the creation of jobs is what is seen. But that which is not seen² is how these projects inevitably have deleterious effects on the wealth creation and progress of a nation’s economy.
As mentioned earlier, resources in the economy are scarce. Different industries and companies of the same industry compete for labor, machinery and funds to produce their various goods and services. The allocation of these resources will go to the company/industry that the customers consider most important³. This constant competition between companies spurs innovation, which consequently increases productivity, thereby increasing wealth as well.
But when the governments launch projects, they do not compete for resources. Their income is not a result of revenue made from voluntary exchanges of goods and services, rather the government’s income is from taxation – an involuntary process where money is coercively collected from citizens.
When government spends money, it simply takes that money from one place (taxpayers) and moves it to another (state employees, roads, etc.), consequently crippling the cycle wealth creation. When private individuals spend money, that money always has the potential to create wealth as they choose the best use between competing businesses or banks.
Bureaucrats, in the bid to end unemployment, initiate huge infrastructure projects, which can actually be deterrent to the nation’s development. The solution, of course, is not to find a better way to “create jobs”, but rather heed the age-old free market mantra that the government should keep it hands off the economy and let the market process function as it should.
- How the Market Creates Jobs and How the Government Destroys Them. Walter Block
- Frederic Basriat, That which is seen, and That which is not seen
- Another major difference between the Market and the government is that in the market the consumer is truly sovereign
- Isaac MoorHouse, Government projects do not create Jobs
Adedamola Ogunbewon is a Fellow at The Libertarian Institute of Nigeria