Dec 12, 2024
It’s fairly common for politicians — on both sides of the aisle — to take credit for creating jobs. However, political commentator and podcaster Ben Shapiro vehemently denounces their employment of spin doctor tactics.
“It drives me up a wall when I hear a politician say, ‘I created this number of jobs,’” he said on a recent episode of The Ramsey Show. “No, you didn’t! By what standard? What business did you start?”
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Dave Ramsey agreed with his sentiment but added that the role of government in creating or sustaining employment might be more nuanced than two pundits posit. Here’s why.
The government’s impact on job creation
Governments create jobs in direct and indirect ways. As of March 2023, state and local governments employed 19.6 million people, according to the U.S. Census Bureau. That accounts for 11.8% of the total workforce at the time, according to Federal Reserve data.
In other words, one in nearly nine employees is directly employed by the government.
Shapiro, however, doesn’t consider this real employment.
“If you did create jobs in the public sector, how much money did you have to steal from the private sector in order to redirect it to people that you think are now going to vote for you?” he said.
One could argue that it’s unfair to categorize corporate taxes as “stealing” given that a business owner would expect help from government institutions like the police, firefighters or regulators to help protect their assets.
Those same governments also create and sustain jobs in several indirect ways.
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The Payment Protection Program (PPP), introduced during the pandemic, boosted business survival rates from 9% to 22%, according to a study published by the National Bureau of Economic Research. The Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act and the Inflation Reduction Act (IRA) have helped to incentivize green energy and semiconductor manufacturing in the U.S. Those are sectors that were previously considered commercially unviable, according to the London School of Economics.
Meanwhile, a significant portion of the workforce at major employers like Walmart and McDonalds depend on food stamps to make ends meet, according to a 2020 study from the Government Accountability Office. It would be fair to assume that these employers would have to raise wages and potentially cut jobs without the government-sponsored safety net.
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Businesses generate profits, not jobs
Ramsey and Shapiro assume that a business grows employment as revenue and profits increase or its tax burden is lowered.
However, data from the Brooking Institute doesn’t support their assumptions. Shareholders from 22 of the largest companies in the U.S. saw their aggregate wealth jump $1.5 trillion from January 2020 to October 2021, but workers' wages increased only 2%. The study also highlighted that these companies spent five times as much on stock buybacks and dividends than wage increases.
Other companies are growing their wealth while their workforce is shrinking. Meta laid off 11,000 employees or 13% of its workforce in 2022 and another 10,000 employees in 2023. The company recently announced another round of layoffs this year. However, Meta stock has more than doubled in value since January 2022 and revenue has expanded by nearly a third over that period. Meanwhile, tech giants Amazon and Tesla are replacing staff with automated machines.
Business owners who can grow their companies while shrinking their workforce might not be job creators as much as profit maximizers temporarily inconvenienced by labor costs. In this age of artificial intelligence and automation, working-class Americans must recognize their job security is at risk even in a robust economy.
The final add is to protect yourself by setting aside an emergency fund that meets your essential needs for at least six months. Try to acquire new skills that adapt to the automation trend and job hop frequently to maximize your earnings — add a side hustle to bolster your income too.
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
