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Monday, August 8, 2016

What Creates Jobs?

Here's a list of items that have been promoted by one person or another as ways to create jobs in the USA.  Let's consider which would work.

1.  Raise the minimum wage to $15 per hour.
2.  Cut corporate taxes to 15%.
3.  Make pre-K education available to all kids for free.
4.  Start new federal job training programs.
5.  Create a national infrastructure bank.
6.  Penalize those companies that leave the USA.
7.  Freeze federal regulations on business for the next few years.
8.  Cut back on American production of fossil fuels.

Think about it.  If the minimum wage rate is raised, it will just make it more expensive to employ people.  Low wage jobs that require fewer skills are more likely to be replaced by automation.  Raising the minimum wage will actually reduce the number of jobs in the long term.

Cutting corporate taxes to 15% would make doing business in the USA more attractive.  America would go from the country with the highest business taxes to one of those with the lowest rates.  A multi-national company considering where to build its next facility would be more likely to locate it in the USA if the tax rates were much lower than they are now.  Those new facilities mean more jobs for Americans.  Cutting corporate taxes helps grow the economy.

Pre-K education has been studied in great detail by the federal government.  The conclusion of a massive study of the effects of pre-K education is that by third grade, there is no difference between students who attended pre-K and those who did not.  That means that certainly by the time these kids graduate from high school, there is no difference at all for those who went to pre-K.  Simply put, universal pre-K is just a waste of money; it creates no jobs at all.

New federal job training programs would join a veritable army of other such programs.  For sixty years, the federal government has been creating new job training programs.  There are now over 110 of these programs.  Frequently, politicians create these programs and then never consider them again.  It makes no sense to create new programs when we already have so many that could perform much better if they were run properly.  Indeed, if the 110 programs were merged into 3 or 4 only, the savings from getting rid of the unneeded directors, executive staffs and offices and the like would provide enough cash to be able to train a great many more workers than now.  Creating a new program won't really help create jobs.  On the other hand, properly managing programs already on the books would help with job creation.

Creating a national infrastructure bank involves two things:  (1) building infrastructure like roads, bridges and airports, and (2) creating a bureaucracy to review and approve such projects and then to try to arrange financing for them.  Building new infrastructure will create jobs.  Creating a new bureaucracy will only slow down such job creation because it will slow down the projects themselves.

Penalizing companies that try to leave the USA will not create any jobs.  For a short time, it may preserve a few jobs here in the USA, but unless there are incentives for companies to grow here rather than abroad, the jobs will eventually leave the country. 

Freezing new federal regulations on business will surely mean more job creation.  Over the last eight years, there has been an avalanche of new regulations.  As a result, companies have spent hundreds of billions to comply with the new regulations.  All that spending created NO jobs.  It's just money tossed down the drain.  If companies know that they have three or four years during which they will not have to deal with any additional regulations, then they will be able to devote their time and energy to growing their businesses and not complying with regs.

Cutting back on American production of fossil fuels like oil, gas and coal will have two main economic effects:  first it will raise the price of energy and second, it will destroy millions of jobs in the energy industry.  Most likely, such a cutback will also mean a big increase in imported energy, so that hundreds of billions of dollars will get sent to other countries rather than staying here producing American jobs.

None of what I have said above is even a bit controversial.  The strange thing, however, is that items like numbers 1, 3, 4, 5, 6 and 8 (which all will hurt job creation) are being pushed by Hillary Clinton.  Items 2, 6 and 7 (most of which will create jobs) are ideas that Trump has been promoting.  Trump wants to have a massive infrastructure construction program, but Hillary wants to add the massive bureaucracy of an "infrastructure bank", so Trump's plan will result in more jobs. 

There is almost nothing in all of Clinton's proposals that will actually help the economy grow.  Most of what she wants will slow growth and stop job creation.  The media, however, just ignores all that and focuses on polls, insults and who is endorsing whom.  It's time to pay attention to what is truly important.

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