Business Is Not The Job Creator

In the age of neoliberalism, it is guaranteed that the public will be inundated with “free market” nonsense. One glaring piece of nonsense is the errant notion that business is the job creator. The currency-issuing national government is and in turn, consumers spend that currency which results in employment.

All of us are consumers, including the national government which purchases goods and services with its own currency. When the business owner steps out of his or her’s office to grab lunch, he or she transforms into a consumer.

Business is not the job creator. It is just a supplier. If you want it to continue to supply, then you need to have consumers who are willing to purchase what it supplies. If that consumer spending increases persistently, then that business must meet the new level of demand or lose market share. How then does it do that?

It hires more workers to help it meet that increased demand. When consumer spending falls, it has no need for the extra workers and so, lays some off.

If you believe such free market notions as “business is the job creator”, then you are focusing on the wrong entity entirely. It is the national government, not business, that ultimately creates jobs through net spending. By negotiating with or providing handouts to business to create more jobs, you are, in fact, supporting policies that create more unemployment. In summary, if you want a business to hire more, then we need consumers buying more from that business. Government must put the dollars into the hands of consumers. If it merely gives dollars to a business without buying any good or service, that business will have absolutely no reason to hire more workers. So, hiring more workers is driven by the need to increase production. It is competing with other businesses for consumer dollars to stay in business.

Hiring more workers is a survival response by business caused by an increase in consumer spending. To understand that business is not the job creator, we can use a simple, everyday example.

Both Walmart and Target sell goods. Target’s prices tend to be higher overall than Walmart’s. So, consumers who prefer lower prices shop at Walmart.

Great.

Now let us assume that consumers have far more dollars in their hands to spend than ever. There’s full employment, the economy is doing great and consumers demand lots of goods. So, those who prefer lower prices head to Walmart. Soon, Walmart discovers that their shelves are emptying faster than their workers can fill them. Walmart can easily get more product, but needs to get it on the shelves. At this point, Walmart can choose to do two things:

1. It can choose not to hire more stockers to help keep shelves full.
2. It can choose to hire more stockers to help keep shelves full.

If it chooses number 1, then customers looking for certain goods will persistently see empty shelves and do what? Head to Target, where they find the goods they’re looking for on the shelf. They buy from Target. Does Walmart get the money? No, Target does and Walmart doesn’t like that. So, if Walmart doesn’t wish to lose its share, then it will choose option 2, hire more stockers and keep the shelves full.

But what is driving all of this? Tax cuts to business? Incentives?

No. Consumer spending is.

Lastly, for those who worry about wage increases, I’ve said it before and it bears repeating:

Just because a low-wage producer wishes to operate in a nation’s economy, that wish does not, in any way, confer upon that producer the *right* to success.

The currency-issuer (the national government) which is the representative of the people, can choose the minimum wage rate and thus, can determine what the nation feels is the lowest acceptable standard that it is willing to tolerate. If a producer does not wish to tolerate that minimum, then so be it – that producer can vacate the nation’s economy. What that producer must not have a right to do, is determine that standard of acceptability by setting the national government against its own people.

Wages are both a cost and demand. The federal deficit determines the unemployment rate, not business. Wages are a stable means that ensure what we produce as a nation can be sold to consumers. The worker not only helps with production, but also is a consumer and spends his or her’s paycheck on goods and services. Consumer spending drives job creation when that spending places pressure on the producer to increase its production. That increased spending becomes increased income for the producer.

Understanding this simple fact, we then also understand that persistent cries from low-wage producers of “we can’t afford to pay workers that much!” is pure nonsense designed to manipulate you into giving the producer what it wants using the fear of unemployment. The low-wage producer’s arguments and fear-mongering are nothing more than the irrelevant whining of a greedy, spoilt child.