Why can't we just create more jobs?
March 18, 2011 1:04 PM   Subscribe

How do we create jobs? I am interested in learning about how jobs are created on various levels- city level, state level and the national level. What are strategies that governments and community based initiatives use to create jobs on the small and large scale? What are the barriers to mobilizing a community or national job creation strategy? I am interested in hearing research, experience or your opinions on this issue. Thank you!
posted by tessalations999 to Work & Money (16 answers total) 2 users marked this as a favorite
What do you mean "we"?

Jobs are created when an entrepeneur has an idea for a business. He create a business plan and then gets a business loan or gets money from investors. He buys the necessities to get the business rolling whether it is a restaurant or an office and he hires employees thus creating jobs. Its pretty simple.
posted by JJ86 at 1:08 PM on March 18, 2011

Jobs are created when an entrepeneur has an idea for a business.

They're also created when existing employers have an economic incentive to hire additional employees rather than making do with the employees they have.
posted by The World Famous at 1:18 PM on March 18, 2011 [3 favorites]

Jobs are also created when the government funds things like road repair and local sewer improvements. The Put America to Work Act is such an example, which was why it was so strange that most Americans wanted the government to create more jobs, but stop spending money. Usually this isn't what is meant by "creating jobs", but that was one instance.
posted by ldthomps at 1:28 PM on March 18, 2011 [2 favorites]

Here are some of my personal experiences and opinions based on our startup (we sell software for training people about computer security in a fun and effective manner).

The main things are removing a lot of the barriers at hand, or minimizing the pain of those barriers. Some of the necessary barriers include the legal formation of the company, doing the founder's pie (ie how shares are allocated), finding space for the company, getting starting equipment, finding an accountant, and so on.

There are a lot of unnecessary complexities that cause a lot of pain as well. Health care turned out to be a major headache for us, in terms of finding what providers were available, examining the 50+ options that each offered (see Paradox of Choice), understanding what their limitations were (wait, we can only have that few people opt out? But they're already on their spouse's health care...), and then streamlining the process of paying them.

Other major sources of pain that we had to devote a lot of time to (which I acknowledge are necessary, but governments and software companies could also vastly streamline):
  • accounting (so many different terms and models to learn, software that could be easier to use, etc)
  • taxes (several kinds of local taxes, several state taxes, other state taxes if you make sales outside your state)
  • federal acquisition rules (FAR), which is roughly the size of an encyclopedia telling you what you can and can't do... we had to pay a lawyer to tell us how to comply with Equal Employment Opportunity, because the rules are so unnecessarily dense
On the plus side, cloud computing has definitely made our lives easier. It used to be the case you'd have to drop down several thousands of dollars to get a software company going, and have to worry about setting up email, your servers, the administration and so on. But with Amazon and Google, it's easy to get productive very quickly.

Having more incubators would also help. I'm sure there are a lot of people with good ideas but don't know how to get started at all. Having support for dealing with space, business plan, equipment, etc would really help.

Having more matchmaking would help too. Again, there are tons of people with good ideas and who are great at designing and/or creating a product, but don't know anything about sales, marketing, bizdev, accounting, and so on. Having a safe way for these people to do what they are good at (without getting intentionally screwed by possible collaborators) could be another opportunity.
posted by jasonhong at 1:28 PM on March 18, 2011

Mainstream economics generally says that long-run employment is (only) a function of labor market structure -- employment rates will be higher when it's easier to find and hire works, basically. From this point of view, a pro-employment policy is one that lowers legal barriers and requirements associated with taking on a new worker; that makes employment more attractive than unemployment; etc. More info.

When you hear about job creation programs, especially in a time of recession, you're really hearing about temporary stimulus policies. In a recession, we are below the "natural" or long-run equilibrium rate of employment, and policies that stimulate demand are believed to cushion the effects and perhaps cure the recession.

Economic policies are frequently couched in terms of "jobs" for political reasons: the public believes that the government can just make more jobs and give them out; politicians want to oblige.
posted by grobstein at 1:31 PM on March 18, 2011 [1 favorite]

If by "we" you mean the government, well, theoretically the government could just pay people to do things like the WPA did during the depression. However, there are a bunch of obstacles to that. For one, there are a lot of regulations around Federal hiring that have been created since the 30's, you can't just show up and get handed a shovel. For another: a large portion of country has decided that now is a great time to worry about the deficit, and the only way to fix it is by spending less, instead of raising taxes. Even though roads need fixing and litter needs to get picked up or whatever a lot of politicians aren't willing to commit to spending government money on it, because that would be socialism!

Another issue might be skills mismatch. Some of the work that needs to be done might be say, environmental impact assessments. Laid off steelworkers can't do that. There probably are people out there unemployed who could do it, but they're harder to find and might not want to relocate to where jobs are. Where I work I've observed several people who were offered jobs with us but were not able to take them because they could not sell their house to move here. This is an issue of Labor Mobility

Jobs are also created when companies expand or new companies appear. Firms that are making money want to make more money so they acquire additional workers. They also may acquire more equipment, which can create jobs for the people who make equipment (possibly overseas). Private companies are probably going to create as few jobs as they possibly can, because labor is a huge part of their costs. Something that seems to have happened a lot through the recession is that companies laid off workers and then discovered that they could be just as productive with fewer employees. That's great for their bottom line but pretty bad for employment. Because the economy is still rather uncertain a lot of companies have been reluctant to take on additional workers, though temp employment has increased (it is a lower risk proposition to employers as they are easier to get rid of).

In general it's really difficult and complicated and not necessarily something politicians can fix, but they're not really trying very hard either.
posted by ghharr at 1:36 PM on March 18, 2011 [1 favorite]

Jobs are created when an entrepeneur has an idea for a business. He create a business plan and then gets a business loan or gets money from investors. He buys the necessities to get the business rolling whether it is a restaurant or an office and he hires employees thus creating jobs
Yes. Loans and investment dollars are handed out when the lender and investors believe that demand exists for an entrepreneur's or business owner's expansion plans. Then the entrepreneur hires more people to do the jobs that provide the products and services.

Governments who want to encourage this generally go in two directions: one is the "supply side"-- they'll hand out certain tax incentives or other goodies to entrepreneurs in the hopes that this will make their business plans more attractive to lenders and banks in their area as opposed to another area. Other aspects might be the government making or subsidizing low-interest loans to entrepreneurs so that their costs are lower, which makes any revenue they generate easier to cover the costs of their loans. "Community initiatives" generally revolve around getting local people involved in the possibility of starting businesses-- support and instructions on the mechanics of writing a business plan, getting a loan, and running a local business while convincing banks and investors that the neighborhood is worth investing in. The demand side of the equation is that governments will want to spend money (or at least avoid cutting money) in local economies during times of economic stress to ensure that these business plans are viable: if the economy is imploding and no one has a job and there aren't any consumers (personal or government/corporate) for products and services, the banks and investors aren't going to support any new businesses because there is no market for what the entrepreneurs are trying to sell.
posted by deanc at 1:51 PM on March 18, 2011

Why can't we just create more jobs?

More jobs? It’s astonishing that as many jobs are created as it is.

Short answer - because it’s too damn hard.

First of all, it ain’t the idea that gets thing rolling – ideas are dime a gross. It’s the execution. You have to risk the scorn and contempt of your friends, your family, your co-workers to a jump into what is, nine times from ten, likely to fail. You have to give up your personal life. You have to talk skeptical financiers into backing your nutty idea. You have to cover your own living expenses for an indefinite period of time. You have to get the supply chain and customer base sewn up. You have to deal with idiot regulations, with shady payoffs to suppliers and civil servants, with dishonest or incompetent employees, with suppliers who may go out of business. You may have to deal with competitors who are established and who will drop law suits on you with the intention of burning your capital and running you out of business. You have to live in city and a state and a country which has some respect for rule of law and a predictable tax structure, preferably non confiscatory. You have to be willing to give up a steady paycheck. You have to be willing to dedicate years of sixteen hour days for years on end and still fail, like nine out of ten.

I know a few people who can do all this. But not many, and God knows, not me.
posted by IndigoJones at 2:02 PM on March 18, 2011 [1 favorite]

I work in an economic development agency. We 'create jobs' sometimes in the economic stimulus context that ldthomps describes above: through infrastructure funding.

But we also take some credit for jobs that are created in part as a result of other programs we fund (if an access to capital program provides a high risk loan to an entrepreneur who couldn't otherwise get that capital, and that entrepreneur hires 3 people, we consider that we 'created' 3 jobs, for example). (Low interest loans (mentioned above) aren't really a priority, because interest rates aren't really the main barrier to entrepreneurs: if they can get a commercial loan at all, interest rates are that high. The bigger barrier, especially in rural areas, or new, innovative sectors, is getting a commercial lender to provide investment at all. Publically funded programs can take higher risks, however. The access to capital program I'm most familar with does actually act counter-cyclically, ramping up lending activity during recessions and ramping down in boomtimes.)
posted by Kurichina at 2:28 PM on March 18, 2011

(I might add that the entrepreneurs I know have not found any of the government's highly publicized attempts at helping them any help at all. The techy ones find that political connections help determine who gets the money, for one thing. The non-techy ones find the government remarkably uninterested in the kinds of work the people I know are working on building up.

Second data point - I know sole practitioners who could hire and expand and perhaps even get almost rich, but refuse to do so because the (largely government) paperwork is, again, too damn hard.

I suppose I'm sounding cranky. Please forgive. I know too many people for whom this is their lives, not just a policy question and a government job.)
posted by IndigoJones at 2:35 PM on March 18, 2011 [1 favorite]

I created my job as a dog walker when I became unemployed. Thus, I'm self-employed because my erstwhile employer canned me, which makes them an unemployer.

There would be more jobs, if employers stopped unemploying. But no one talks about that.
posted by BostonTerrier at 3:51 PM on March 18, 2011

So interesting that some people are still talking about jobs being created if/when financial incentives are created for companies to do so. Which doesn't make an enormous amount of sense to me, as U.S. corporations are sitting on enormous cash reserves right now (over $1 trillion cash on hand) and, if they are spending money, they are creating jobs overseas or leveraging their capital for acquisitions (which creates the need for human capital efficiencies and layoffs).

What doesn't get talked about as often is the question, "What creates market needs or opportunities for work?" You can't get job growth without consumers or markets. In order to get people to spend money, you have to put them back to work. So, I would support a WPA-like program to repair this country's aging infrastructure, as it might be a win-win for consumer creation and job creation.

The deficit? That's money that we spent on two wars. Kill that debt with taxes and move on.
posted by jeanmari at 6:01 PM on March 18, 2011 [1 favorite]

So interesting that some people are still talking about jobs being created if/when financial incentives are created for companies to do so.

I think you're thinking big business, which is not where most jobs are created. Though agreed that the financial incentive thing is a little odd - natural financial incentive is the reason Type A people start business in the first place. But it's a big leap, starting a business, and people like encouragement.

One of the disincentives I hear talked about is the still uncertain nature of Obama care. If you can't calculate what your expense is going to be, you are likely to hesitate before going forward.

WPA like program didn't really work in the thirties, not to charge the economy at least, and the cost would add to the deficit. As to the notion that raising taxes will take care of it, well, what's your time frame? Raising taxes tends to deflate economic growth. Plus the deficit for this year alone (never mind the national debt) would hit a family of three to the tune of over 10K. (Granted you might not see the bill on your 1040 as the government would likely put the tab of business, but businesses do not generate taxes, they collect them. From consumers. Which gets us back to the family of three.)

It ain't easy fiddling an economy.
posted by IndigoJones at 7:16 PM on March 18, 2011

Nobody has mentioned demand so far.

There's really no reason for businesses to create jobs if they have no additional demand, or if their demand has flagged. If anything, any revenue will probably be spent figuring out how to make the same number of widgets with fewer employees.

If, instead, you get cash into the hands of the lower 90% somehow, they will quickly go and spend it, which will mean that businesses need to hire more employees.

(Yes, I realize this is an enormous simplification and does not take into account global markets.)
posted by Gilbert at 3:27 AM on March 19, 2011

If by 'jobs' you mean 'salaried jobs offering three-week vacations and healthy retirement pensions', I'd like to know what you're smoking. Businesses have zero need or interest in funding those jobs for all but the most critical needs or the highest paid professionals.

The majority of jobs exist because someone is willing to pay someone else for a skill, a warm body, or the ability to do something that makes the first person MORE money.

If that logic holds up, then making more jobs would involve finding people's skill(s), figuring out how to sell them, finding out where those skills are needed (or if they're not, where other skills might be needed), and so on. Every cog has to add value to a product, a service, or some element of the business, otherwise it's just dead weight.

Regarding that 'adding value' proposition - there's many ways to do it. A lot of it does start with getting people off the 'the government has to take care of me' mindset and onto the 'what can I do to make money' mindset. The dog walker, the freelance writer, and the guy that makes websites can all add value to someone - it's just a matter of who, where, and when.
posted by chrisinseoul at 11:43 AM on March 20, 2011

Nobody has mentioned demand so far.

I tried to touch on it, but I feel like I wasn't clear enough. When demand is low, banks and investors aren't going to find business plans viable and won't lend/invest money to start a company.

However, under most circumstances, even deep recessions, people are more than willing to lend governments money buy purchasing government bonds. In that case, a government can borrow money in the same way a business would in order to engage in government-related expansion activities, like building a bridge or something, and the mechanics of it work the same way: borrow $X million, hire people, and build the bridge, which the government feels is worth hopefully close to $X million in assets and provides some additional recurring value. Meanwhile, the workers who would have otherwise been idle (because no other business wanted to use them) have money in their hands. The hope is that during a recession, when someone wants to start a restaurant, their business plan would say, "and we can expect $Y revenue per year in this area in part because this area has a nice bridge that people use as well as lots of construction workers with money to spend," and this would help pull the country out of the recession.

But the OP's question was kind of vague, so I didn't know where to start.
posted by deanc at 3:28 PM on March 23, 2011

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