Sunday, November 20, 2011

How to create jobs? Step one: don't give "handouts" to corporations

A quick lesson on how to increase demand, and thus the need for jobs, in our economy

A lot of talk is centering around how to create jobs in our state, especially in the midst of thousands of job losses Wisconsin has seen over the past few months. In October alone, Wisconsin saw a loss of nearly 10,000 jobs, mostly in the private sector, despite billions of dollars in tax giveaways and significant tort reform to corporations that were meant to spur growth.

Perhaps to assess how to better create jobs, we should re-examine the question, "Why do companies need workers?" The answer isn't terribly startling: To provide a good or service to people. Companies need capital to hire these people, it's true, but they also need a reason to hire them in the first place. Demand is what supplies that need -- if a corporation has a higher demand for their good/service, they will hire a worker, if the capital to do so is available as well. But without demand, there's no NEED to hire anyone.

So if a corporation receives a tax cut (added revenue), but no demand is created for them, where's the incentive to hire more people? There isn't any -- they'd be wasting money that they just received, using it for a reason they don't actually have. A better approach to generate more jobs is to create higher demand for a product, and the best way to do that is to provide a situation where everyday people are able to make purchases for those goods/services.

Services that are provided by the government to assist those in need do more than help the unfortunate -- they also "free up" the pocketbooks of the working class, which in turn allows them to purchase things like new TVs, or cars, or lawnmowers, and so forth. That's why tax breaks for the poor help stimulate the economy more than for the rich -- they'll actually USE that money for something to purchase. A tax break for a corporation doesn't improve the economy because (as I stated above) there's no need to spend money without a real cause.

So as we go forth in trying to think of ways to help stimulate the economy, we should focus on what works best. Will a tax break for corporations, without proper demand for their goods or services being created, encourage businesses to hire more individuals? Or will putting money in the hands of workers, through freeing up their basic needs that they'd ordinarily need to concentrate their expenses on (such as health care, as one example), work?

The latter idea more so than the former will generate job growth, since the working class as a whole will be more likely to spend their hard-earned cash on goods and services, creating both higher demand and revenue for companies to take hold of, in turn creating a need for more work.

1 comment:

  1. I couldn't agree more. Last June, I talked about the false belief the GOP has about who the real "job creators" are in this economy:

    No demand, no jobs. It's that simple. And Republican policies and both the state and federal level show that either they absolutely don't get it or they don't care about jobs.