In these days of unemployment north of 8%, the question of job creation is a hot topic, and it should be. Below the orange thingie I want to explore this.
The topic of job creation is much misunderstood, IMHO. Republicans claim that the wealthy are "job creators". Typically, the wealthy person owns a large number of shares of successful companies. For the sake of simplicity, let's assume our rich person (a male, in this example) owns 10 million shares of GE. On this particular day in history (March 3, 2012) his holdings are worth $189.7 million. He collects $6.8 million in dividends, and pays 15% of that in federal income tax. This extraordinarily low tax rate is justified by all the jobs he creates. So, how many jobs did he create last year? Zero. The mere ownership of stock certificates doesn't create jobs.
So, how are jobs created? I think there are several ways. Let's take the production of food as an example. There is nothing new about baking bread; humans have done this for thousands of years; a human that cannot afford bread starves to death. (I am using "bread" in the metaphoric sense as a proxy for all food.) So, if I build a bakery that employs 10 bakers, have I contributed 10 jobs to the economy? No, because bakeries somewhere will lose 10 jobs. To a first approximation, humans will eat exactly the same number of loaves per capita from one year to the next, so my hiring of 10 bakers is completely neutral as far as job creation is concerned. As a job creator, I am a failure, even though I may be a huge success as an entrepreneur.
So does this mean that there is no no possibility of creating jobs in the food industry? Not at all! Back in 1948 two brothers built a unique restaurant near 13th and 'E' streets in San Bernardino, California. They sold hamburgers for $.15 each and french fries for $.10 a serving. Their names were Richard and Maurice McDonald. (I was a frequent customer of the original McDonald's in 1954 -- it was a short walk from my high school.) Of course it was Ray Kroc that saw the staggering possibilities and started the fast food business in Oak Brook, Illinois. If anybody is to be given credit for all those jobs, it is Kroc. Of corse, he did not create all the fast food jobs of today, but he showed the way. Today there are no new jobs to be created with fast food. The field is saturated; people can eat just so many hamburgers.
The notion that small businesses are the true "job creators" is just wishful thinking. Today a new fast food idea is just competing for a slice of the existing pie. Now don't get me wrong; that's competition, and it's a very good thing. But it doesn't create jobs; it merely rearranges them. The same can be said for dry cleaners, flower shops, and barber shops.
So how do new jobs get created? One way is to invent or develop something useful and new. The invention of the transistor made the microprocessor possible and spawned the personal computer industry, among many others. This invention is still creating jobs today. It follows that we should encourage basic research.
Another way -- almost never mentioned -- is to shorten the work week. But if we shortened the work week to 30 hours, for example, we would probably see more people working two jobs. We could wind up with both more jobs and higher unemployment. Maybe there are good reasons that this idea is never mentioned. Maybe the 40 hour work week is close to the optimum for human beings.
One of the greatest of American job creators was Henry Ford. His idea revolutionized American business. The Model T Ford was just a small part of that idea, as was the notion of an assembly line. The major idea of Henry Ford was a social idea -- paying a living wage to his workers. This idea transformed America; it created an affluent middle class.
Henry Ford understood this concept, but the Republican party of today does not. The Republican "solution" is to put more dollars into the hands of the ultra rich, not into the hands of the worker. But what will the rich do with those dollars? Will they buy millions of lap tops or automobiles or iPads? Or will they buy a few million more shares of stock? Does it help the middle class when the rich add to their stock portfolios? To ask this rhetorical question is to answer it.
We cannot expect government to come up with new ideas, such as Ray Kroc's idea. This is not the function of government. We cannot expect it to come up with the next great invention, although it should arguably encourage the real inventors by supporting basic research. So, what can government do to encourage job creation in the short run?
Government has but one way to affect job creation -- it has the ability to shape the economy. Anything government does to put dollars in the hands of the lower and middle classes will create demand, and therefore favor job creation. Just consider what the lower classes will do with those dollars: they will spend them. The rich will not. An additional billion dollars in the hands of a billionaire is just dead money; he will not spend it on goods that are manufactured by his fellow citizens. He will simply become richer.
How can we put dollars into the hands of those who will spend those dollars? One part of the solution is to return to the days when workers were generally represented by unions. This would tend to put money in the pockets of union workers, and indirectly into the pockets of non-union workers. But this is not a simple proposition, because of the widespread notion -- fostered by Republicans -- that labor and management are by nature mortal enemies.
In my last job before I retired, my eyes were opened to the possibility that labor and management could not only coexist, but could thrive together. We were a small business, and a very successful one. The sole owner, Tom Mittler, was extremely wealthy, probably worth in excess of $150 million at the time of his death. He had a genius for running a welding supply business, and I haven't the slightest doubt that he could have utterly broken the union that represented many of his workers, had he been so inclined. Instead, he bargained with them in good faith, and they in turn worked very hard to make the business successful. Both sides won.
I don't pretend to know how we as a country could create the labor-management environment that mimics my personal experience. The issues are varied and complex. But I am convinced that we would be far better off if we made a genuine attempt to do so. Instead, the Republican idea seems to be that labor must be utterly crushed. This is a very bad idea. We must oppose it.
Another part of the solution is a bit simpler, at least in principle. Using the tax code, we should take dollars out of the hands of the ultra rich, and put those dollars in the hands of people who will spend them. We had very high marginal income tax rates during the 40's, 50's and 60's -- one of the most prosperous periods in our history. We should reinstitute those rates, not only for wages, but for all forms of income. This would not be class warfare; rather, it would merely be sound public policy. Class warfare would be pitchforks and torches and the gallows. We do not want class warfare.
The Republican argument is that the wealthy, under a heavily progressive tax policy, would lose incentive to produce wealth. Is this true? For the sake of argument, let's suppose the tax code were such that every corporate executive had his or her take-home pay cut in half. Does anybody really believe that they would work less diligently? This is not the way human beings behave; this is an idea that is simply and categorically false. People strive for excellence regardless of the magnitude of the reward; they strive for excellence because that is their nature.
This, in my opinion, ought to be our message. It is a purely technical message that strives for prosperity for all Americans. We ought not to advocate class warfare, and I firmly believe that the Democratic ideal does not do so. I believe we advocate public policy that results in prosperity for all. I think that this ought to be our message in the 2012 campaign.