Jobs, jobs, jobs, or the right jobs?
The Alabama Department of Commerce’s recent Made in Alabama report announced that state economic development initiatives in 2014 produced 18,000 jobs due to new or expanding businesses. The most notable new business attracted was Remington Outdoor, which will build a firearms plant in Huntsville, creating 2,000 jobs. Over 250 of the new jobs were in Pike County, from expansions at Lockheed Martin and Southern Classic Foods.
Normally we celebrate the creation of new jobs; the Made in Alabama report certainly takes a congratulatory tone. Healthy economies certainly create many new jobs. And the availability of jobs, especially high paying jobs, is mightily important to us as individuals. Yet for the economy, jobs are only a means to the goal of prosperity. We cannot simply find a job for everyone and hang up a “Mission Accomplished” banner. Growth requires the right jobs.
A job for everyone does not automatically generate prosperity because we live in a world of scarcity. This means that our wants and desires exceed our capacity to produce goods and services, and this will always be the case. The things we use in production, including labor, are consequently scarce. Using all of our available scarce inputs is not particularly hard. The situation parallels a family budget; spending all of your money is easy, but making smart buying choices is challenging. Keeping people busy has never been enough to ensure prosperity. People have worked very hard, typically from childhood until old age, for centuries. Poverty was the normal condition of the average person until about 300 years ago, when economic growth began in England.
Tools and technology enable prosperity by helping us do things we used to have to do all by ourselves. Labor saving machines really free up labor to produce new things. Throughout history, producing enough food for survival used most of the available labor. About 80 percent of Americans in 1800 worked in agriculture; this fell to about 40 percent by the early 20th Century, and about 1 percent today. The percentage of people engaged in food production provides a decent measure of living standards across time and nations.
Similar progress has occurred in manufacturing, which once employed 25 percent of the American workforce, versus around 10 percent today. This is not because America does not manufacture anything anymore. Manufacturing output hit an all-time high in 2014, but was produced with many fewer workers.
Today we produce as much food and manufactured goods as 100 years ago, only with just over 10 percent of the American work force instead of 60 percent. The tens of millions of people thus freed up now produce other things, generating our higher standard of living. Prosperity required the right jobs, ones using tools and technology to make people far more productive.
As individuals, though, we need a job to get a slice of this prosperity. Being without a job can be ruinous, both economically and emotionally. This creates an enduring tension. We want jobs to be available, and don’t want our jobs to disappear. When we take these demands to our politicians, politics becomes all about “jobs, jobs, jobs.”
Yet generally only the private sector can deliver the types of jobs we need for prosperity. Government officials have few good options when asked to provide jobs. They can restrict competition in markets, subsidize companies, or increase public sector employment. Restricting competition merely eliminates the need to innovate. Our economic development program more or less pays businesses to relocate to Alabama, which merely shifts existing jobs around instead of incentivizing creation of the right jobs. Or they can increase public sector employment, but this often squanders scarce labor on make-work jobs. The best contribution that governments – from city hall to Washington – can make to growth is to produce the goods and services they provide using fewer resources.
Should celebrate the 18,000 new jobs Alabama’s economic development efforts created in 2014? Yes, if these jobs help create wealth and grow our economy. But we should really stop asking our politicians for jobs, because government cannot create the jobs that will make Alabama more prosperous.
Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision. Respond to him at firstname.lastname@example.org and like the Johnson Center on Facebook.