Where do Jobs Come From?
Where do jobs come from and why do they disappear? For a simple question the answer gets complex. Jobs come from employers, entrepreneurs and successful businesses. To earn a profit, you need help. A job exists for the employer to earn a profit. Many politicians treat profits as something bad or something to be ashamed of, but the rest of us know how wrong they are. Profits are what made this country great and profits are something we all strive for.
A wealthy person invests money (through a bank, equity firm, or directly in a business) and hopes to earn a return on that investment. Money makes money. This may be a good time to remind everyone that the money available to invest and put at risk to earn more money has already been earned and had taxes paid on those earnings.
When the politicians who don’t understand economics chastise the rich for being rich and demand that the rich pay a higher percentage of their profits, we must remember that the rich paid the highest percentage when they earned the money the first time, and when they earn money on the second or third life of that money it is taxed at a lower rate as a Capital Gain. It makes sense to encourage rich people to put their money at risk to create jobs, it doesn’t make sense to chastise them as slackers and selfish and require them to pay a higher rate against their profits. That higher rate on their gain is part of the calculation an investor will make to determine if it makes sense to put their money at risk. A higher tax rate on a capital gain will prevent some investors from investing.
Without the investments companies will not hire or expand. Jobs come from those investments. Chastising the rich for being successful and attempting to tax them at a higher rate because they have more money causes them to sit on their money in safe ways and not earn much income from the money. When you invest your money it is at risk. You may earn a profit or you may lose your investment. Wealthy people want an adequate reward when they put their money at risk.
Profits create jobs. Investments create jobs. Taxes, regulations, and government are obstacles to jobs. Employers have to be able to gain a benefit from hiring, they do not want to lose money on hiring. Employers do not create jobs just to put people to work. Employers do not create jobs because people need them. They create jobs because they want to earn a profit.
A company making medical devises had multiple locations, each performing different parts of the process. Step one was blank metal pieces purchased from Germany were imported and sent to one location for part of the processing. The facility with approximately 150 employees, operating as a separate company processed the pieces to about 85% completion and sent them to the Main facility for completion, testing, packaging and order processing.
As costs rose, and efficiencies achieved it was determined that the small increase in price when purchasing the blank metal pieces from Germany would save the company the cost of the entire second facility and all 150 employees would no longer have a job.
The benefit from the medical devise manufacture was to stay competitive by managing the cost of its products. Improving profits by saving the cost of the 150 employees and selling off the equipment and buildings associated with them. The correct business decision was to close the second facility down and save the costs. The company as a whole was better off by cutting the 150 loose.
The expense of maintaining the facilities and employees did not match the savings possible by paying a little more for the German company to perform the tasks and ship the metal blanks to the United States 85% compete. The second facility could not compete with the German company. Was it a bad decision because the jobs went overseas when US employees lost their jobs. The answer is that it was a very good decision.
The company is stronger and more competitive because of the decision. We can’t make decisions based on what we want to be, such as keeping the jobs in this country. Germany in this case did it better and cheaper and with better quality than they did themselves.
We have far fewer buggy whip employees and fewer bank tellers because of the advance in technologies today than years ago. The vacuum tube manufacturers no longer make tubes for radios and TV because of technological advances, things change and jobs change. Efficiency will reduce the number of jobs as well. Why pay 5 people to work when you can get the job done with 4 or even 3. Each job must add value to the company or it is not worth having.
We must all stay competitive and have a reason we are a value to our employer. Each of us must add to the profits of the company. Employers don’t hire people just to give them jobs and add to the overhead and costs of the company. Profits are responsible for the jobs. Success creates jobs.
Government, taxes, regulations and politicians do not create jobs. Jobs stimulate the economy. Employees have families and buy things. When a family buys goods and services to support themselves they spend money and other business and employees make more money. The ripple effect is the product of profits not government. Job creation happens in spite of government no because of government.
Profits create jobs in spite of government. Politicians do NOT create jobs, let’s hope for a great deal of unemployment for politicians cone this November.