Saturday, October 29, 2011

Where will employment be created in the U.S. economy?


A lot of the Republican discussion of employment seems to be based on the idea that small businesses create a lot of jobs. The data from the Bureau of Labor Statistics shown above seem to indicate that it is businesses with more than 250 employees that are employing more and more people. I don't know about you, but I think of a company with 250 employees as not being very small. The mom and pop stores and privately owned mechanics shops are a lot smaller than that.

I think it is true that a lot of jobs are created every year in small businesses, but I suspect that even more jobs are lost every year in small businesses that are going out of business or scaling back on their work forces.

Think about your neighborhood shopping center. The old stores close and the new stores open, but the number of stores stays the same. About the same number of people work in the shopping center, although over a period of decades as we use technology to become more labor efficient, there may be a small decrease in the number of workers.

Cutting taxes for the rich, with the intent of seeing them create more jobs in small businesses seems crazy. The economy is awash with cash in businesses that they are not putting to work (other than in financial markets, which is a problem in itself). If the demand were to go up, then we might see people putting more money into expanding production and creating jobs, but the way to change consumption is not to give the rich more disposable income, but rather to give lower income people more disposable income.


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