Politicians cannot create value, and neither can governments. Still, voters are often the first ones to admit they chose a particular candidate because he or she promised to “create jobs.” With both conservative-leaning and progressive-leaning Americans making the case for government-sponsored programs that create more jobs, it’s easy to ignore the role of basic economics. After all, knowing economics in depth means that you understand that you cannot create jobs out of thin air. What you can create instead is value, and the only way to do so is by having government get out of the way completely.
In an environment where individuals are free to start businesses by basing their decisions on the demands of consumers, jobs are created out of a real necessity. By responding to an actual market need, employers then offer potential employees the opportunity to trade their labor for wages, which in turn will help them better their standard of living. As Robert Fellner wrote for the Mises Institute, “wages spring directly from, and are proportional to, the degree in which a job creates wealth by helping to satisfy an unmet need.” Or in other words, wages are the product of the wealth creation process triggered by a service or product created to meet the market’s demands.
When government attempts to “create jobs” and stipulate wages artificially by passing minimum wage laws, they are neither creating these positions out of a real necessity to meet a market demand nor raising standards of living by creating value. Instead, government-sponsored job creation is often the result of taxpayer-backed projects, which are in turn managed by central planners with little to no knowledge of market demands. And by increasing restrictions on the productive sector of the economy with minimum wage laws or other restrictive policies, the government takes the businessman’s freedom to give low-skilled individuals a chance at being employed, learning a trade and perhaps going on to take jobs in the future that offer higher wages.
The new law also stipulates that workers may not work without breaks of at least 11 hours between shifts.
Needless to say, this new law will only hurt workers who are often the first to take on extra shifts and are willing to cover for colleagues due to an abrupt schedule change — not the employer. These individuals will be forced to take on extra side gigs to make ends meet instead of simply working more hours for their current employers.
If anti-poverty advocates were honest about helping those in need, they wouldn’t demand government do “something” about creating new jobs or raising wages artificially. Instead, they would look at the only viable way of actually helping the greatest number of people possible: the free market.
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