How many times have you read a headline about the government creating a buttload of jobs? And how many times did it leave you scratching your head (or butt) in confusion? A lot? OK, PHEW! We're not the only ones.
The truth is, these "jobs" don't get pulled out of thin air. It's way more #complicated than that. And although we love the visual of a cute little job creation factory in Washington DC, we're here to bring you the reality check you deserve.
So without further ado, here we go...the TRUTH about how the government creates jobs.
Ah, interest rates. We love to hate them. And the government loves to lower them and call it “job creation!” When interest rates are lowered it's easier for businesses to borrow money to do what they need to grow, like adding jobs. However, even though hiring new workers is an important factor in taking a business to the next level, it's expensive AF. Recent data shows that the average cost per hire is over $4,000. Add in benefits and perks and that number could jump up fast.
When interest rates are lower, John Doe CEO can borrow money much easier and put those funds towards creating new jobs in his factory. However, there's one small "but" to keep in mind. Lowering interest rates to encourage business owners to borrow more cash only works if they feel safe to do so. In other words, when they're lowered right smack dab in the middle of a recession, those magical jobs might take a little bit longer to create themselves.
How many times have you seen a roadside worker and thought, "Oh, he came from the job creation factory!" Maybe that's a little weird, but hey, we have no shame. The government is Notorious B.I.G. on pumping money into public works projects, like road repair and construction. And more money for these projects means more people need to be hired to git 'er done.
At any given time, there are a LARGE amount of pending public works projects in the pipeline. Between 2012 and 2021, the government spent just shy of $100 billion on highway projects alone! So when the government wants to puff their chest out with pride over job creation, they can simply green light the projects and put folks to work.
Tax cuts put more money into everyone's pockets, plain and simple. There's flavors for every business owner and worker alike, and they all play a part in job creation. When the government gives business owners a tax break, they can put that cold hard cash right back into the business and use it to grow. And as we already know, business growth means having to hire more cube dwellers or donut makers.
Payroll tax cuts help make jobs too, but it's a little more big-brain. The goal of a payroll tax cut is to take less of an employee's paycheck for Uncle Sam. This means households get more money to spend, which can *technically* create jobs. How? Well, more money in your paycheck means more money to spend on vacations, at the mall, and wherever else you like to get your swerve on. With more demand for extra curricular spending, there's more of a need for extra referees at your favorite laser tag joint. Slap on a big ol' "job creation" sticker.
Oh yeah, this one's pretty koo-koo, but stay with us. Increase unemployment benefits to...increase jobs? Yep, that's right. When unemployment benefits go up, so does spending. During the pandemic, the extra unemployment payments made up about 15% of the entire nation's wages!
It seems like a backwards way to stimulate the economy, but all that extra money flying around has to go somewhere. Retailers and manufacturers often hire more people to keep up with the demand, and voila! "Job creation" strikes again.
And yeah, there's no such thing as a free lunch, and unemployment dollars come partly from the paychecks of the gainfully employed. But it's a little Wizard of Oz magic moment when the government can say new jobs came out of an economy stimulated by extended unemployment!
As you can see, the government doesn't pull jobs out of thin air. It takes a lot of work behind the scenes and (you guessed it) a ton of money. Job creation is all in the hands of the companies who employ workers, and it's up to Uncle Sam to make sure they have the right environment to do so.
Guess what? The President loves to talk about job creation...but so do your local & state government reps! Here’s three small things you can do that make a BIG impact:
