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Thursday, August 19, 2010

Saving Jobs Means Saving Us from Prosperity

A most pernicious fallacy.

One of the most pernicious fallacies in popular economic discussions is that we should adopt policies designed to save jobs.  What was once just language used by those with a special interest in particular jobs (such as unions calling for import quotas as foreign cars became more popular) is now part of the Obama administration’s defense of its counterproductive “stimulus” program.  “Jobs created or saved” has become the standard of an economic program’s success.  There is so much wrong here, it’s hard to know where to start.

Let’s make the obvious point first:  Creating jobs is easy, but it’s nothing to be proud of.  In fact, destroying jobs is the real path to wealth.

To use an example I’ve used before: One way to create jobs on a big construction project is to take away the machines that dig out the foundation, and limit the workers to shovels.  Or better yet, spoons.  That will create lots of jobs.  But that is not progress.  Using more labor than needed to get the job done costs wealth.  Better to use the machinery and free up all the shovel- and spoon-toting workers to produce output in addition to the foundation.  By the same logic, we could create lots of jobs by destroying all the farm machinery.  Surely, though, we would not be richer for doing so.

The rhetoric of saving jobs is as misguided as the rhetoric of creating jobs.  We want jobs to disappear – that’s how we define progress!  Think of all the jobs that weren’t saved over during the twentieth century.  Agriculture employed about 40 percent of Americans in 1900.  Today it’s less than 2 percent.  Are we really worse off for not having saved those jobs?   Or consider this picture from 1947:

Telephone operators are nearly, if not totally, extinct 63 years later.  Has the loss of those jobs, or those in agriculture, meant massive unemployment?  Hardly.  In fact, the six decades since that picture was taken were ones of steady increase in the number of Americans working, and an even larger increase in the percentage of women.

But, goes the objection, if we invent substitutes like digital switches, then the cell phone, to replace operators, where will the new jobs come from?  One easy answer is that someone has to make the new technologies.  That’s true enough, but it’s only part of the story.  The rest is that new technologies open up new possibilities.  Yes, we’ve lost lots of telephone operator jobs and we’ve gained some in the production of the substitute goods, but we’ve gained a lot more jobs like these:

Cell phones need apps and someone has to write them.  And cell phones make possible new ways for firms to interact with customers. Someone has to write and implement that software and design the website, not to mention manage the process.  The real gains that offset the jobs lost are not just with the new technology directly, but all the other kinds of new opportunities that it opens up.

The women today who would have been operators generations ago are now better educated, doing more interesting and productive work, taking home higher wages, and far more independent as a result.  Meanwhile, the rest of us reap the bounty of all the new technology that destroyed those old jobs.  My $30 per month unlimited data plan in 2010 would have covered just a couple of long-distance calls placed through those operators in 1947.

The rhetoric of “saving jobs” means that we never progress from telephone operators to software engineers.  It means that we never progress from rotary dial phones with per-minute costs representing many valuable hours of labor to the Internet at our fingertips for the equivalent of two hours of work per month at the average wage and phone calls that cost nothing on the margin.  Saving jobs means slaving away in manure-laden fields under the hot sun and brutal cold for 12 or 14 hours per day to feed your own family, with a little left over to buy a few necessities — rather than jobs with far better working conditions and far better pay and hours, jobs that afford most Americans the ability to pay other people to cook and serve their meals several times a week.

Saving jobs means putting the engine of human creativity in neutral if not reverse.  The healthiest economies are those that consistently destroy jobs by inventing new and better ways to satisfy existing human wants with less and less labor, while freeing other labor to satisfy new and not-yet-dreamed-of wants.

Whenever you hear politicians talk about the jobs they’ve saved, just think of your ancestors scraping out a living on the land, or a room full of women spending their days plugging wires into holes, and then think about how much better off we are because no one bothered to save those jobs.

  • Steven Horwitz was the Distinguished Professor of Free Enterprise in the Department of Economics at Ball State University, where he was also Director of the Institute for the Study of Political Economy. He is the author of Austrian Economics: An Introduction.