Tue, 10 May 2005

Creating New Jobs

Let's say that you want to create a new job. Where are you going to get the employee to fill it? There are basically four ways: grow a new one (but that takes 20 years), import one from another country, buy an employee who already has a job, or export the job to another country.

I'm sure that by this time (only three sentences) any labor unionist is seething under the collar. Union organizers maintain that there are never enough jobs to go around (yes, people have actually said that; 8 times, if you believe Google). This is utter and complete nonsense, which you can immediately understand by asking this question: "If you could hire as many people you wanted for a penny a day, how many would you hire?" Clearly, then, the problem is not a lack of jobs. The capitalist system ensures that there are always enough jobs to go around, even if the government acts to make the market-clearing wage illegal.

The only reason unemployment exists in a free market is because information takes time to propagate, and because of human nature. People are reasonably cautious at accepting the first offer for anything. We like to compare offers before we decide.

So, when you create a new job, you have to buy an employee who already has a job, or persuade an employee who has no job that yours is the best job for them. But what if somebody else has out-competed you, and bought that employee away from you? The job doesn't cease to exist. Somebody needs to do it. You have to go back to the list in the first paragraph to try to find an employee to fill the job. No one of these methods harms employees in this country! If you could find an employee at the wage you're willing to pay, you would have.

It's inevitable that a growing economy needs more workers. Nobody is harmed when employers pierce country boundaries to find workers. From the point of view of the workers, the more growth, the more employers seeking employees, the better the wages.

UPDATE: I thought of another reason why unemployment exists in a free market: rising expectations. Most people get better at doing stuff as they get older. Most people expect higher pay for more value. When they switch jobs (whether by quitting or being fired), they'll be looking for more pay rather than less. Also, free markets are always creating new value, so the same job can, over time, earn more and more money. This leads an employee to want more pay rather than settling for the first job they find and lower pay.

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