Political Promises or Economic Disaster? The Myth of State-Created Jobs

For quite a considerable amount of time, the topics of job creation and unemployment have been central to every political campaign in almost every country. It hasn’t been without good reason, either, since job security is one of the most important factors in someone’s career. Therefore, a candidate who can promise to create more jobs and sustain job growth would appear on paper to be the better candidate. However, there are few policies that promote greater havoc than job-creation programs. This should not be a surprise since the state is ultimately not responsible for financing jobs, so it need not worry about profit or loss.

Politicians are inclined to include job-creation programs in their promises because they are often popular with voters. After all, if there are more jobs in the economy, unemployment will be lower, and there is a greater likelihood that workers in the country will not fall on hard times. Since nearly every household has a member of their family who works, job-creation programs have nearly universal appeal. If a politician can position themselves as a job creator, they garner a massive boost toward their odds of being elected. Thus, they all aim to one-up each other with what they promise to voters. Unfortunately, in this case, competition does not lead to better results.

It is not proper to think a politician creates jobs in the same way an entrepreneur does. An entrepreneur risks his time, effort, and capital to run a business to serve consumers and turn a profit. Entrepreneurs seek to profit by providing value to consumers. For them to succeed in their venture, they must hire workers to contribute to their projects. When a business venture is started, jobs are created as workers help the business to facilitate value to the consumers. In the free market, jobs are created because resources, including labor, are used efficiently to create value in the economy.

The same is not true when a job-creation program is pushed through by politicians. There are only a few ways in which politicians can create jobs. Most of these efforts include the subsidization of certain businesses or by inducing regulation with the hope of it leading to more jobs. The former is a particularly terrible way of promoting business as it requires the state to fund the program. Ultimately, this means that taxpayers bear the brunt of having to subsidize businesses that the state deems appropriate to receive funding. Effectively, the state steals from its citizens and gives the money to a firm with a good political standing with the hope that the firm will create jobs. This is in stark contrast to the way jobs are created via the free market as the state does not really need to prove that value is generated for consumers. It only needs to prove that jobs increased as a result of state funding. By getting involved, the state lowers the efficiency of resource utilization.

The same is true when regulation is induced with the intent of job creation. A prominent example commonly used by politicians nowadays is tariffs. Tariffs are levied with the hope that domestic industry will thrive as foreign competitors are priced out of the market. While this may boost jobs, protectionist policy has significantly greater negative impacts on the economy of a country. By levying tariffs, consumers are forced to pay higher prices, often for inferior products. This lowers their standard of living and leaves them with less disposable income to spend on other needs or wants. However, these unintended consequences are never mentioned because politicians have no wish to demonstrate that their jobs are of negative value.

For circumstances to improve, we must realize that wanting the state to create jobs leads to disastrous results and does not make economic sense. Such attempts are only made now because they are politically popular. Real progress can be made only by asking the state to reduce their interference in the lives of citizens who are then allowed to work toward a better future for themselves. We would be better off if our politicians did less rather than more. Thus, we should ask for them to get out of the way rather than stand in the way.

This article originally appeared on Mises Institute.