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Job Creation
Retirement from the workforce invariably requires replacement. Yet this component is not necessarily a “given.” However, to a large extent the fact of retirement creates the opportunity for job replacement, and in this sense is both a preservation of jobs, and the creation of job opportunity to enter the workforce. In this sense it does take care of a proportion of the job requirement for an expanding population Putting aside death or disability within an existing workforce which may require replacement, a constant creation of new jobs are required to generate consumer income and resultant wealth for those exiting educational facilities. The problems faced by the major Western economies, stems primarily from the concept of globalization or “free trade. No sooner does “new technology” create new jobs, but that this technology, either for its basic manufacture or for its applications, seeks to be made or “written” within cheaper labour cost countries. So while, for a certain time-span there are new jobs created, they are lost to cheaper cost economies eventually. Once manufacture moves elsewhere, then followed by ancillary labour requirement based as within the “service sector” such as “soft wear writing,” then there will be no job gain within those Western economies of any major significance or requirement. There is that faceous remark made by economists that generating the growth of foreign or competing economies creates the necessary foreign markets required for domestic “product” exports. Forgotten perhaps is the fact that the greater the drain on either job existence and/or job creation domestically, the less there will be of domestic product to export. By the same token, the drain in the domestic purchasing power precludes the growth of the ability to enhance International trade. One eventually arrives at that conundrum of which came first ---- “The Chicken or The Egg!” In this case it would be to try to answer the questions of how jobs are created and how jobs can be protected Perhaps, in looking for answers we should turn to making a short study of History. The problem is at which point to start. Perhaps the “middle Ages” would be a good point. At that time most jobs were “occupations”--- people applying a trade or even a “service.” A stonemason, a goldsmith or silversmith a scribe or a notary. A greengrocer or a farmer, a hunter or a servant. To a large extent maybe classified as “self-employed” At this moment in time, job protection was protected by the formation of “guilds” that “recognized” like or similar skills and provided protection both by recognition and membership. These were to a large extent the prelude to “Trade Unions” after the advent of the Industrial Revolution commenced. To a large extent, at this time, there was no “conscious” effort to “create” jobs. One made one’s own effort and one’s own way to make a living. When the occasion arose that someone or some business occupation required assistance or “an assistant” --- a job was created. No one asked to be born, and the mere fact of being born and “existing” was of no concern to anyone other than perhaps “family.” Other than Kings or others of Royal Lineage requiring servants or soldiers for military service, people were left to their own devices and if making a living, expected to pay taxes to King, Duke or Baron as the case may have been. The first changes came with the advent of “government.” The greater the expansion of government services supplied, the greater the need for people to undertake these services. This then was perhaps the first genuine conscious creation of jobs. The Industrial Revolution which rapidly expanded to many continents and nations, was the greatest creator of jobs the World had ever experienced, and it has progressed in many forms ever since. As a result economies expanded and international trade expanded exponentially. While rivalries had previously existed in the discovery of new “worlds” for spices, and commodities of trade, these were in the main for domestic consumption and not for international trade exploitation. There was little of economic impact until the First World War. Prior to this wars were fought for territory and/or “Empire” growth or religious reasons. Certainly not for “economic” reasons or economic rivalry or dominance as we understand it today. Which brings us to “modern times.” While the Industrial Revolution modernized a large percentage of the world’s populations, especially those one classifies as the “Western “ nations, it hardly touched rural economies or the Middle Eastern or Far East nations until fairly recently. Putting aside the discovery of oil and the resultant creation of petro-chemical industries in the Middle East, it has remained little changed for centuries in the context of job creational economies. Japan, South Korea, Hong Kong, Singapore and Taiwan economies expanded only after the Second World War, primarily because they were cheap labour cost source economies with industrious peoples. The world’s economic trade expanded as a result. One would venture to make the statement that this WAS NOT BY DESIGN --- but by RESULT OF CIRCUMSTANCE. The active concept of free trade and globalization however has an entirely different connotation. An entirely different economic concept is unfolding by design for which the Western economies have provided no job protection what so ever. The standard reply one gets from “government” and economists is that “other jobs” will be “created” to replace those lost by implementing so-called free trade and globalization The problem is ---or surely will be --- IF THEY ARE WRONG!! WHAT THEN!! The point has to be made. Who is going to make these jobs, if the very people the governments and economists are relying on for the creation of these new jobs, are those very people who are shifting production of manufacture and services to the cheaper labour economies. Are WE THAT STUPID ---- or ARE THEY THAT STUPID! Digressing from free trade and globalization as job destroyers, how can new jobs be created that stems from natural consumer growth? In other words, from undesigned circumstance. Natural growth stemming from expanding consumer demand for more goods and services. Here the “Chicken and the Egg” equation arises again. Which has to come first to provide the growth. In looking for the answer, perhaps one turns to another economic expression, that being “supply and demand.” If the demand exists, jobs will be created in order to satisfy the demand. That sounds very trite as a reply, and under certain circumstances it no doubt works. However, what if that demand is satisfied by the import of those goods and services? In other words there is no guarantee that the demand for goods and services will create jobs. It did in the past ---- but that was in the past! Thus both “government” and economists should realize that by either satisfying existing demand or creating or stimulating demand, that it may not automatically create additional jobs. This fact then brings us to the point of what works when economies are retracting or are already in recession. The basic principal now being used by Reserve Banks internationally, is to lower interest rates, and to continue doing so until signs appear that consumer demand expands to the point where it is seen that jobs are being created. In the process massive new debt is created in order that consumers have the necessary funds to purchase additional goods and services. While this is undertaken, governments in turn continue to lower tax rates for the same reason. This “begs” the question; “How do we know or can guarantee that all these additional funds will be wisely spent”? How much of this is spent on additional imported goods that do not create domestic jobs. The evidence to the answer to this rhetorical question is stark. Without exception, where this is being practiced, imports have dramatically increased, and adverse “balance-of-payments” sharply higher! To this one has to add inflationary factors generated from these extra consumer funds provided, where real estate prices are sharply higher, excessive new mortgages undertaken to take advantage of lower interest rates, and finally increased speculative demand and consequently higher share price rises on stock markets. These factors are being experienced internationally. All the same ingredients that were the cause of the present recession. What compounds the issue is that both “government” and economists keep calling this phenomenon “ THE JOBLESS RECOVERY!” The very expression that belies their theories of job creation!! This massive intentional international creation of debt sows its own eventual destructive phenomena. The ingredients for deflation, stagflation, or even the birth of the next recession are created. At the same time there is a diminished consumer element created, where those on fixed incomes derived from interest bearing investments have less consumer incomes. This also is felt on a global scale. Another factor that stems from job loss is its impact on future pension expectations for those that are still in employment. Pension systems unfortunately rely on two basic factors. The first is that contributions from the present workforce sustains the payout to those already on retirement and the second is the reliance on the capital funds being used for pension payout being both wisely invested, and consequently sustained by either positive interest rates and/or enhanced values. All of this requires both the constant existence of a stable workforce and an expanding one to cover the eroding purchasing power of currencies “in the future.” The intention of this article was not to investigate “job loss,” which is primarily generated from both the movement of job capacity elsewhere, as well as from the contraction of economic activity due to being in recession, but to examine how new jobs can be created without recourse to lowering interest rates, generating debt and/or interference of the tax structure. However, one final point should be made before we move on, and that is ----it is bad enough coping with international economic activity in the global contest of expanding one’s exports, without making a gift of one’s domestic job capacity to one’s competitors. In looking for a solution different to using the present elements of job creation, we may have to expound economic theory contrary to that presently held. Before this can be done, we should examine the basic elements that constitute an economy. In most cases an economy is a complex entity, or maybe one should state that a more desirable economy needs to be diverse and/or complex. In other words, the more diverse it is, the more stable it could possibly be. For example an economy, which is basically based on agricultural output, can sustain little else. In other words there is no diversity of production for job creation, and the total proceeds of the agricultural output after taxes are paid would have to sustain the importation of all else required. So the more diverse the economy, the more the job creativity that exists. This then becomes a primary factor within an economy. No matter whether it can be made or purchased for less elsewhere, for the sake of job creation (or job protection) --- it should be made locally. Not that it be “cast in stone” as a rule, but that it be “desirable” as a factor if circumstance permits. Primarily this would apply if the local price is felt to be either reasonable and/or acceptable for “policy” purpose. Therefore the more diverse an economy, the more the opportunity exists for job creation. There are a number of other important factors as well. Take the velocity of currency circulation. This is of tremendous importance. The greater the velocity, and the more diverse its route, the more that job creation takes place, and the more sustainable those jobs will be. Apart from this, there is the added factor that requires that there be sufficient currency in circulation to keep that velocity at peak tempo. The word we use is “The Money Supply.” Perhaps another miss-understood criteria. In the “normal” economic sense, we say that money supply is generated or “governed” by the demand of economic activity. By this we mean that more money is required in the system to pay for the wage or salary of each new job created as well as to compensate for both inflation (price or cost rise), in other words to cover any increase in “Gross National Product.” However, no account is taken of the volume of stagnant currency. Money that performs no creation of jobs or wealth creation. Sterile money. A great deal of this exists and it is a factor, which in itself would require an article other than this one to pursue at length. To name but a few examples of its existence; there is no limit to the availability of funds for new mortgages; no limit to the availability of funds to subscribe to new bond issues or the flotation of new share offerings, or for that matter rapid price increases of shares on stock markets. It seems that there is an endless supply of monetary funds, which does not require the sale of one factor in order to subscribe to another. In a sense this possibly means that there is an excess of money in “the money supply.” Or is it evidence that money has been continually printed in excess of requirement. There is of course another explanation, in that it could be foreign funds invested within the economy, continually looking for new investment. Whatever the answer is ---- it exists. Yet despite that very evidence of its existence, this is the EXACT CURE, which we intend advocating to generate new job creation. Before pursuing this line of thought, there are a few more comments to be made. “Disposable income” is the driving force of any economy. Be it the private income of wage earners after all taxes are paid or that of the after tax income of companies. The more disposable income available, the greater the consumer capacity within the economy. Thus there is a fine balance required between what is needed by “The State” at all its levels (municipal, state/provincial and federal) and what is left as “disposable income” to drive the economy. Within a thriving and expanding economy, so-called “market forces” dictates where new jobs will be created and at what velocity it takes place. Disposable income and its direction and velocity of flow will dictate the fate of any economy in normal times. In other words it does not require government interference or direction. But it certainly may require protection against job loss dictated by companies pursuing sales and profit to the detriment of domestic job health. One has to understand the paramount importance of domestic job protection for the COMMON GOOD. There is a corollary to this. It requires a quiescent and understanding Trade Union movement as well, for job protection does not require a free-for-all increase in wages because this element may exist. The amount of disposable income, where, when and how spent, will dictate the health and virility of the economy. It is impossible to quantify how many and how diverse the job creativity and sustainability stems from any one or many peoples consumer expenditures. Suffice it to say, the greater the variety of purchases made, the greater the variety of jobs that will be created and sustained. Having said all of this at length, it is time to return to how we can create jobs without succumbing to debt creation, lowering interest rates and lowering taxes. We express our comments purely to deal with a factor of creating jobs lost purely through economic retraction or recession. Before this is undertaken, an explanation may be required to bolster our “argument.” An apology is given “in advance” if this explanation be longer than thought to have been necessary. Generally speaking, one would think that all taxes levied are both necessary and at the same time wisely applied. This may not be the case, but one hopes that it applies. However, in order to supply goods and services at whichever level required, taxes are required to pay for these. In this case we have to assume that we have not been “over-taxed” and that everything we were asked for by way of taxation, was needed. If this is the case, then there really is no reason to lower the tax take, as surely we all will suffer a lower volume of goods and services and/or the quality of the goods or services rendered to us. If this not be so ---- THEN WHY IN THE HELL WERE WE TAXED AT THIS RATE IN THE FIRST PLACE! Our next question would be why were interest rates so high for all these years, if it now were that important to lower them to well nigh zero! When the economy was at its strongest, interest rates found their own level “of comfort” and were no hindrance at all to the accumulation of personal wealth creation or led to any signs of price inflation. Finally we come to the excessive debt creation, which future generations and we will have to cope with, all of this ostensibly to create new jobs. With less of a tax take, government at all its levels will be saddled with new debt to replace the lower tax income, which will have to be repaid with new and higher taxes at some stage. Balance 0f Payments deficits generated by the excess of imports over exports increases the National Debt and we will have to pay this down as well. And finally that entire additional excessive private debt load generated by negligible interest borrowing in order to fuel consumer spending. While this private and corporate debt is being repaid, where will the consumer have the same volume of disposable income to sustain the economy, let alone enhance its quality? THE ANSWER LAY ELSEWHERE! WE SHOULD HAVE PRINTED THE MONEY! To bolster our argument, we need to go into more detail by way of explanation. Bridges have been built, and tolls charged to pay for its cost and maintenance. Highways and “Freeways” built and tolled to pay for their construction. Reservoirs and their water reticulation built, water purification plants erected, sewer treatment plants erected and Hydro –electricity generation and power lines erected ---- and subsequently paid for either by a charge levied for consumption or services, and/or paid for out of taxation levied. On a number of occasions debt instruments are created for these, and repaid via taxation and/or service charge. BUT THE POINT WE HAVE TO MAKE IS ----- WHY? Why does this have to be paid for by either taxation or debt creation? We are not advocating that the printing of money replace taxation, but that it is an instrument applied in addition to existing taxation for specific purpose for a specified period of time and quantified in volume. Additionally, it should have specific objectivity (direction) in order to obviate inflationary factors while jobs are being created. The purpose would be to replace the formation of debt in its many forms, and to leave as undisturbed as possible, taxation and interest rates. At this point we have mentioned four factors; these being : Purpose: Period: Volume: And Direction. So let us deal with each of these in turn. PURPOSE: To create the type of jobs that least affects the existence of present jobs, whereby the income generated will filter through into the economy in the least inflationary manner. Work that would normally not be done because of a shortage of the necessary funds. PERIOD: The period shall be until there is the evidence that 50% of the job loss has been replaced by either new jobs, or the re-instatement of people into their previous occupation type. The absorption of the other 50% should be expected to take place as the economic momentum gathers speed. VOLUME: The volume of new money should be at the discretion of the Reserve banks or Federal Reserve Banks. Purely as a suggestion 1% of Gross National Product per year could be a good guide. In other words an economy whose GDP is valued at 500 Billion (of any particular currency) would print 5 Billion addition currency per year for specific job creation over and above the volume of currency value that entered the economy in the past year One would think that a minimum of .75% of GDP at least per year may be needed. What should clearly be understood is that these funds are under the control of the Reserve Banks, and are either not intended for repayment --- or at worst repayable at no interest charge over an extended period of time, such as 50 years. This is done on the “economic” premise that natural economic growth and the subsequent increase in the value of the GDP would absorb these extra funds over time without any danger of inflation resulting from this exercise. At its worst it might result in a slight diminishing of the value of the currency as perceived by other nations. However this is not expected to happen or be of any consequence, as it will in all probability have been done by most of the other main trading nations as well. In any case, it may be the desired effect for some of those nations. Another point to this line of thought is that it has been a fairly common practice to grant (non repayable) monies internationally to economies requiring capital assistance, and these funds, while assisting those economies, were not a detrimental factor to their existing money supply. In other words a domestic increase in the money supply would be the same as giving “oneself” a monetary “gift.” DIRECTION: This possibly may prove to be the most difficult decision of all. If the choice was left to us, we would choose the following, giving our reasons for these choices as well. The basic factors would be infrastructure as our first concern. In dealing with these, two criteria would apply. The first of these would be structures that produce income, and the second criteria would be need and “longevity” (usefulness to future generations). However a possible solution to choice and fulfillment may be for all levels of government from Municipal to Provincial (State) to Federal (Central) government would submit recommendations to a Reserve Bank Committee for consideration. Thus diversity of application and priority of execution is kept out of the political system. The
examples we give are purely a “for instance” factor, and our reasons for
those choices. While the basic concept relies on the building and construction industry to kick-start the economy, there is an immediate “trickle-down” factor to the suppliers of the materials, goods and services needed for these activities. Added to this is the factor that the tempo of speculative home and office building will be kept in bounds, while the building and construction industries are quite fully occupied elsewhere. Hospitals, schools universities and laboratories require qualified personnel so there are job creation possibilities created, and should there be a shortage of desired experience, then funds can be provided to correct this situation. For this reason, it is important not to place too high an emphasis on tax reduction to generate added consumer demand. Invariably most budgets are so structured, that there is very little “unnecessary” income that can safely be said to be as “not required.” However, where there previously had been budgetary provisions for hospitals, schools etc. those funds could either be spent elsewhere, and/or in such areas as could generate job creation. Only as a last resort, should there be either a budget shortfall in income, or budgetary overruns creating new debt. These should apply to budgets at all levels of government. This exercise brings us back to that “chicken and the egg” factor. Lowering interest rates and lowering taxation, relies on added debt creation to fuel demand and hopeful job creation as an end result. Our philosophy is the exact opposite. Create THE JOBS FIRST, then that will result in creating consumer demand! This envisages no creation of unnecessary new debt, which leaves a burden, which has to be repaid, and whose direction in consumer expenditures in any case cannot be forecast or controlled. While we acknowledge that more money in the hands of the consumer will generate some job creation, it then becomes a choice as to whether the creation of more consumers should have preference over the creation of a higher debt load in their hands. If the economics of an economy is the presence, enhancement, advancement and preservation of jobs, then we feel our choice of job creation has merit. THIS IS LEFT TO THE READER TO DECIDE.
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The
two words “job creation” are either the most maligned two words, or the most
miss understood two words ---- or both! No global economy can exist without
job creation; or said another way, can be sustained without protecting
existing jobs or creating new jobs. This is not to say that the type or function
of existing jobs cannot change, for they continually do just that. A stagnant
economy may not require the creation of further jobs, but an expanding
population within any economy requires the creation of jobs.