Forum Post: Myths of Job Creation
Posted 13 years ago on Oct. 17, 2011, 2:29 p.m. EST by bwturner1951
(34)
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These links are to a blog post by and NPR interview with Bill Frezza, a venture capitalist and fellow at the Competitive Enterprise Institute. He correctly states that businesses are not obligated to create jobs and will do everything they can to eliminate them because an employee is an expense and businesses abhor expense. Businesses only legal, statutory obligation is to return value to its shareholders.
http://www.npr.org/2011/10/04/141033128/venture-capitalist-cautions-against-job-creation-myths
Your links really do not say anything. Yes, we know that businesses are not hiring because of lack of demand, but the real problem is that businesses are laying off workers even though they are showing profits to make even higher profits and corporations have no duties to their employees.
70% of job cutting corporations cut jobs even though they were showing a profit to further enrich the CEO and the shareholders. This is the problem -- the lack of employee bargaining power -- only 6.9% of all private sector jobs are unionized and so employees are squeezed more and more and have to work harder and harder to pick up the slack for the laid off employees.
http://www.dailyfinance.com/2010/11/23/record-corporate-profits-are-coming-out-of-workers-hides/ http://www.slate.com/articles/business/moneybox/2011/03/more_profits_fewer_jobs.html http://online.wsj.com/article/SB10001424052748704709304576124603226205660.html http://www.ctj.org/html/layoffs.htm http://money.usnews.com/money/blogs/flowchart/2010/12/03/4-reasons-jobs-remain-so-scarce
http://www.google.com/search?client=safari&rls=en&q=ratio+of+ceo+to+worker+pay+in+1950's&ie=UTF-8&oe=UTF-8
Hiring has nothing to do with demand. It is a function, as you pointed out, of how it affects the bottom line. If 10 workers, who represent variable costs to a business, could be replaced by one automated system, that represents a fixed cost, then any prudent business person would eliminate the 10 workers under the current rules of the game. With no incentives to hire workers and statutory requirements to return value to shareholders, businesses will not hire regardless of demand if it reduces the value of the company.
I agree entirely with what you have said. I just wasn't sure if the links were more talking about that the jobless rate is due to lack of demand. Well said on your part.
Automation + Computer Software + Cheap oil = Job cuts !
Very succinctly put, and unfortunately quite true.
Great post. It is true that because of the lack of employee bargaining power today, most corporate profits are made through squeezing the worker instead of through creation, innovation, and investing. Here are some links that show that CEO's have have any easy way to increase profits for shareholders and increase their salaries and it is by squeezing the workers:
http://www.dailyfinance.com/2010/11/23/record-corporate-profits-are-coming-out-of-workers-hides/ http://www.slate.com/articles/business/moneybox/2011/03/more_profits_fewer_jobs.html http://online.wsj.com/article/SB10001424052748704709304576124603226205660.html http://www.ctj.org/html/layoffs.htm http://money.usnews.com/money/blogs/flowchart/2010/12/03/4-reasons-jobs-remain-so-scarce
This is why there are so many people out of work. The people that come in here to discuss in opposition are mostly stock shareholders, those with the most wealth to lose and/or they own a business (corporation) "Every man for himself" is the way of capitalism and it shows.
Interesting... a venture capitalist saying, in essence, that capitalism is a failure.
I'm unclear as how you came to that conclusion from the interview and blog post. I obviously missed something or didn't read between the lines appropriately. Enlighten me please.
I don't know anyone that would debate this. They may obfuscate it and play the smoke-and-mirrors game ... but this is simple fact.
The growth mentality of this nation mandates that profits continue to grow. When the actual revenue portion of the pie is near maximized and minimal real growth can be achieved, the only solution is subsidize this number with reduction in expenses. Fewer workers, same workload. Offshoring. Etc.
That's why we are seeing our government make "big business" legislation. Free trade agreements with countries that have near-slave labor in order to export our jobs and import our commodities. The short term goal of reduction of cost, missing the long term issue of reduction of purchasing power.
It's interesting that we use tax as a social modifier and then our government, and loads of people, support the notion of a payroll tax. Meanwhile these same people abhor the notion of a consumption tax.
The combination of changing the two taxes, as a social engineering motivator, would be to right the issues we currently face.
Yes, I agree!
http://occupywallst.org/forum/jobs-are-becoming-obsolete/#comment-126947
Unless one person can do everything the business needs to make money they create jobs in the process.
Yeah, but right now, most businesses have way more employees than they need to operate efficiently.
That's subjective... if you're working people to the point of burnout, you're going to get a high rate of turnover, and lose productivity in a multitude of other ways. Just because it works in the short term to keep costs down doesn't mean its sustainable.
Yes they do so is the problem a matter of businesses being unfair or immoral when they lay workers off or have these same businesses been benevolent for as long as they could have been? I'm not taking a side but more playing devil's advocate. I also like the fair tax plan and agree that government has caused more problems with regulation than they have solved.
I think a lot of it comes down to inefficient middle managers not laying off people when they should. Maybe due to incompetence on their part, or maybe just due to their own personal emotional based reasons. I think the first thing that needs to be done is our society needs to acknowledge that there is a surplus of human labor that is not needed. Then, agree upon reasons why it's not needed. In my opinion that is due to advanced technology creating a more efficient workplace. Next, restructure our system to accommodate the current conditions.
We're currently in a transitional period, whether we like it or not. The best thing to do is control the transition. Right now, we are not really controlling it, and we're starting to see the outcome of that. One thing I've noticed, from spending a lot of time in companies in Manhattan, is there are a lot of cubicle workers, sometimes whole floors of them. What are they doing? Data entry it seems. Analyzing data maybe. If we were to standardize our accounting programs, email, etc, computers should be able to exchange and input information between companies without the need for tedious human labor. If everything is in one standard format, data should be able to be analyzed by algorithms, and then the algorithms can act on that data.
Also, I agree, I think the government is basically holding up a failing system, which in someway gives the illusion that it's not failing.
If you have ever worked in corporate America for some big companies, you know that Middle Managers are one of the very FIRST groups to get the axe in layoffs. High income, lower value in day to day operations.
Yes, but even when they get the axe, there still seems to be incompetence in terms of not laying off employees whose jobs while traditional, could be done away with, or automated, with no loss to overall efficiency.
I dunno - I work for one of the world's largest and most successful corporations - and we laid off and laid off and laid off, until there were no low or even mediocre performers left...then laid off more. I don't get your statements AT ALL.
The problem to me is we could hire more with stagnant capital sitting in money market accounts - but businesses will not put that money at risk in this anti-corporate political environment.
But, I'm speaking in terms of potential job automation.
Ah, well, true - let me say this - it's gonna happen again and again as long as technology exists and somebody make a cotton gin. This is just adjustments that happen in ANY economy. Workers put off by market technological advancements will inevitably have to retrain into another line of work - there are no more buggy whip makers - but there are auto workers.
Those auto workers have been, and are continuing to be, replaced by robotics! Let's just agree to disagree.
I absolutely agree with your statement there, no need to disagree. See, that is where roles get redefined - robotics and some automation will always replace workers - but not ALL workers. This is just technological advancement friend, and it's painful - cannot be stopped.
Nobody's makes clothes by hand anymore.
RBE: "I don't think it needs to be stopped. If we acknowledge that human labor isn't needed as much, and the demand will further decline due to further automation, then we can have a conversation about what to do."
Automation does not reduce demand - it increases efficiency, ie lowering prices, ie 'Economies of Scale'. Human labor is always needed, just maybe not always doing the same thing. Nobody digs highways with shovels anymore, but we can build highways much faster now, so we build MORE. See?
I don't think it needs to be stopped. If we acknowledge that human labor isn't needed as much, and the demand will further decline due to further automation, then we can have a conversation about what to do.
Here's a good online book to check out: http://www.thelightsinthetunnel.com/LIGHTSTUNNEL.PDF
I can't find fault in anything you just said. I think the solution might just be innovation and entrepreneurship and that opportunity is presenting itself right now but again I have to go back to government making those things real difficult to accomplish in tough economic times. Too many regulatory hoops for the little guy to jump through to bring things to market and create jobs.
The real innovators are those with the ability to bring to fruition an idea or concept under existing conditions, economic, regulatory or otherwise. Corporations should not whine about being victimized by regulations anymore than we should whine about being victimized by greed and corruption.
No one is whining as much as looking for ways to improve our situation. There is nothing wrong with wanting to improve opportunity for us all. Innovators should just have to bring their products to market and not have to worry about jumping through hoops set there just to benefit those who are already in place in the market. Corruption is being taken advantage of and people have a right not to be taken advantage of and really because it's government doing it it's done at gunpoint. So yes people have every right to complain about it.
Then they should complain just as vociferously against the government subsidies and corporate 'entitlements' that are handed out continuously which distort the market by affecting competitiveness just as much or more than regulations. Businesses want the protection of government when it comes to free trade, imports and exports, and they want the monetary subsidies that they receive but they don't want any regulation. That's simply a wrong-headed expectation. Business people are smart enough to know that you don't get something for nothing. There will always be strings attached, just as they attach expectations to their goods and services.
The subsidies aren't given at gunpoint any more than the regulations are promulgated at gunpoint. You have every right to ignore them or find a way to innovate them into your goods or services. There are far too many examples of businesses that have done just that and even gone beyond the regulatory requirements. For example, Japanese auto makers have been making cars that get over 30 mpg for over 30 years. Why haven't the domestic auto makers done the same? It's because they haven't extracted every last dime from their old R & D and plant infrastructure, which is old technology, and make their first priority profit and shareholder value. There ARE companies that have it the other way around. They respond to customer demands and government regulations in innovative ways without whining about either. Some even go so far as to see this as a niche to exploit. That's real innovation and that's the only way our country will become competitive again in the global marketplace.
I agree with what you are saying. My point was more about the effect of regulation on the small business and garage innovators. I happen to believe that big business like the regulatory state because they influence regulation in their favor and against the small business and garage innovators. One example that comes to mind is the Tucker car back in the day.
I agree that regulations sometimes are made in a one size fits all environment which doesn't work well for every business under the regulatory bubble. More care should be put into the promulgation of regulations in order to target the specific group that needs regulation and leave the remainder untouched. That would probably be best done if congress were to write the statutes better, but then the politicians wouldn't be able to criticize the regulators and say they misinterpreted the statute.
The point I'm trying to make is that Congress doesn't write regulation, the corporations do. Congress just pimps the legislation to us as something for our benefit.
Actually, and you may call it semantics, congress enacts laws and the appropriate department or agency is directed by congress to promulgate rules to enforce the statutes.
I certainly agree that during the public hearing process of rule-making, lobbyists and corporations come out of the woodwork to either water down or completely subvert the rules to their liking. Rules shouldn't be written in a vacuum but then they shouldn't be written by the group the regulations are meant to target.
i've been working hard to get innovative new products to diversify financial risk and enhance asset returns for businesses looking to control volatility in their balance sheets in these tough times.
the clients are very worried and i'm glad to be adding value to their portfolios.
Yeah, I agree. I don't like a lot of the regulations either. There just needs to be more legitimate, almost non politicized, conversations. Truth and science, instead of typical politics.
I'm with you. I think a lot more would be accomplished if things were looked at through a logical lens rather than a political one.
Yes!