Former Secretary of State Hillary Clinton sent political commentators into high gear with her statement that businesses and corporations don’t create jobs. She went on to say that trickle-down economics has proven to be a poor tool to create jobs and that her husband did more to help working families by presiding over an increase to the minimum wage while President.
So who is right? Does the government, as Secretary Clinton implies, create jobs? Or, are those on the right correct that business – not government – is the driving force for putting people to work.
The answer is yes and yes.
Let’s start with the role of business.
Entrepreneurs come up with a new idea and develop it. If the idea is worthy and they do a good job, the result is a company that employs people. In the start-up stage of a business, the owner(s) take a chance to put people to work. But, the continuation of any business depends on its ability to find and fill a customer need. It is the initiative, perseverance, customer-focus, and hard work of those in the business that creates value to the customer. The owner has to balance the need to make a profit with the reality that not paying people a fair wage creates turnover and increases cost.
So Clinton was wrong. Business creates jobs. All we need is to get government out of the way and unleash the free enterprise system. Businesses will create jobs if we allow them to do so.
Government actually plays an important role in job creation. Consider this:
- The freedoms that exist in the United States make it possible for individuals to pursue their dreams. It is enshrined in the Declaration of Independence – we are endowed with certain unalienable rights including life, liberty, and the pursuit of happiness. The rights that we too often take for granted create an environment where business and jobs can grow.
- The quality of the economy is heavily influenced by the skills and abilities of the workforce. Those skills are developed in our schools which for most of us are funded and operated by local and state governments.
- Governmental regulations and policy decisions make it easier or more difficult for businesses to operate and add jobs. We typically complain about over-regulation, but there are incentives and enterprise zones created by government agencies that also influence job creation. And, we can’t forget the role of the Federal Reserve Bank. The low interest rates we’ve experienced have certainly influenced job growth.
- Then there is direct government spending. You may not agree with the amount of spending that is currently in place, but you can’t discount it. Over 20 percent of the U.S. gross domestic product (GDP) comes from federal spending. Spending by state governments contributes another 8 to 9 percent. And, local government spending exceeds 10 percent. So like it or not, government does create a lot of jobs.
The Real Answer
Secretary Clinton and her detractors are both right, and they are both wrong. Government does and doesn’t influence job creation. The entrepreneurial spirit and environment that inspires people to take risks and start businesses is linked to the policies, regulations, taxes, fees and types of investment made by the government at all of its levels.
The problem today is that the discussion is being controlled from the fringes. It’s not government. It is politics.
There are those on the left who completely discount the role of business and entrepreneurship in creating jobs. And, there are those on the right who believe that the government is, at best, a necessary evil that should be throttled lest it run amok.
The answer lies in understanding and maintaining a responsible, balanced view. And that is virtually impossible in an environment where the candidates we elect and the media we watch encourage both sides to run from the middle and embrace their respective fringes.