The motif of job creation is back in the public debate, and this time it’s playing especially loud. Both Toronto and Ontario elections feature all sides talking about jobs, as if these were be-all and end-all of the economy.
“Vote for me”, the argument goes, “and I will create [big number here] jobs!”.
I don’t know if people are actually swallowing that, but politicians are definitely acting as if they were. Even Toronto mayoral candidate John Tory (who used to be a Conservative) no longer talks about the need to fix our Gardiner Expressway – instead he talks about creating jobs. Oh and while we’re at it, we’ll also do something about Gardiner. But why bother with that latter part? We can hire twice as many people to also dig a huge hole in the ground, and then fill it back in. Sure, we won’t get a nice new infrastructure, but hey, that was a secondary goal to begin with.
The cold hard truth is that you cannot create jobs with public money – no matter what you do. The public money comes from taxes – and that is withdrawing capital from other places.
Taxes on poor people mean they will have less money to spend on their basic needs and whatever simple luxuries they could otherwise afford. Taxes on middle class mean they will buy less gadgets, eat less at restaurants and send their kids to less summer activities. Taxes on the rich mean they will buy less boats and expensive cars, and also invest less in stocks and bonds. Taxes on corporations mean they will invest less in their business and hire less workers. And so on, and so forth.
Money is never created out of thin air (even if you print it). Money is only a representation of resources we have, and moving it from one place to another only diverts those resources.
So the workers that end up working on fixing the Gardiner will be smiling to the cameras and thanking the candidate that gave them work. But we will never hear about those that were dismissed – or even just not hired – due to the fact that the money that was supposed to pay them was instead collected by the tax man.
Some authors will try to convince us that the private market “refuses to invest“, and this is why the money needs to be taken out of their shaking hands, and given to the government that will do the right thing and “create jobs”. This claim is not true. A number of studies have shown that the mythical “pile of cash” that the companies are supposedly sitting on, either does not exist, or is a reasonable hedge against realistic risks.
To be sure, private job creation also diverts resources from other uses. But that is the main function of the free market – to discriminate between a large number of potential uses of a resource, and divert it towards the most urgent (and therefore highest-paying) one. For example, currently the jobs in Alberta’s oil patch pay very well, and that is a signal that that employment of resources is the most desirable. What can the government bring as the evidence that fixing the Gardiner (and also digging and filling in a large hole next to it) is the most urgent use of our resources? Granted, Gardiner right now is an eyesore, but so is all the unextracted oil sitting in the ground with nobody taking it out and selling – environmental concerns notwithstanding.
Ontario PC Leader Tim Hudak offers a rare bit of sanity in this entire yelling match. Sure, he is also talking about his “million job plan”: I guess you cannot hope to win an election today without promising jobs. But at least he is not suggesting to create these jobs with public money, talking about lowering business taxes and reducing regulation instead. That’s a relief, though the real benefit of this would be all the extra products these new jobs will actually produce, and lower prices due to lower cost of production. I guess it will be a while until a politician will be able to pitch that, and still hope to be elected.
So what about the Gardiner? Sure, it needs to be fixed. Just don’t try to spin it as good news. (“Good news Dad! I just broke a window in the living room, so now you have a job for the entire weekend!”) It’s a bad news – so give it to us as such. Say – “unfortunately, if I get elected, I will have no choice but to spend money on fixing the Gardiner”.
And then the sanity will be restored.