Who Really Creates Jobs?

Respectfully submitted by Lawrence Rafferty (rafflaw)- Guest Blogger

We have heard for years now that the wealthy and corporations need their tax cuts because without them jobs will not be created and the economy could fall back into recession. I guess I first heard of this concept during the Reagan years with the so-called “trickle down” economics.  The claim that economic benefits and improvements trickle down from the very wealthy to the middle class and the poor was one that helped ride Reagan into office and continues to be claimed by some as the way out of recession.  Indeed, the Republicans, since the George W. Bush administration have been insistent that the tax cuts for the wealthy are the key to promote increased employment for the country.

It is time that we look deeper into the claim that lowering taxes for the wealthy and for corporations will actually increase employment and separate the truth from fiction.  “Based on IRS figures, the richest 1% nearly tripled its share of America’s after-tax income from 1980 to 2006. That’s an extra trillion dollars a year. Then, in the first year after the 2008 recession, they took 93% of all the new income.  Wealth is even more skewed. The richest 10% own 83% of financial wealth, which they’ve skillfully arranged to be taxed at just 15%, ostensibly because they pump that money back into job-creating ventures.”  Common Dreams  

If I read those numbers correctly, the richest 1% continued to increase their wealth during the first year after the start of the recession while the middle class and the poor took significant hits in employment and income.  Basically, if the Right’s call to continue the Bush tax cuts and to cut corporate taxation in order to increase employment and wealth for all is to believed, would we not have already fully recovered from the recession since the tax cuts have been continued to this date and the effective corporate taxes are far below the actual corporate tax rate?  Just what did the Bush tax cuts do for President Bush’s record in creating jobs?

“The current President Bush, once taking account how long he’s been in office, shows the worst track record for job creation since the government began keeping records.”  Wall Street Journal  The Wall Street Journal wrote those words just as President Bush was leaving office and they compared all prior President’s records at job creation during their terms. It surprised me that even the much maligned Jimmy Carter administration had a far better record in job creation than President Bush, according to that same Wall Street Journal article. With that recent record of poor job creation, why would anyone believe that reducing taxes on the wealthy would create a bonanza of new jobs?

We have also heard repeatedly that the economy won’t grow jobs because corporations are taxed too much.  This refrain is one that baffles me.  Especially since I and others have written in the past of the many large United States companies that have paid little or no effective Federal taxes in recent years.

“Many corporate leaders have noted that other OECD countries have lowered their corporate tax rates in recent years, but fail to mention that these countries have also closed corporate tax loopholes while the U.S. has expanded them. As a result, the U.S. collects less corporate taxes as a share of GDP than all but one of the 26 OECD countries for which data are available.” Citizens for Tax Justice 

These same corporations make Billions and pay a lower effective tax rate than the poor of this country.  “Corporations even pay less than low-wage American workers. On their 2011 profits of $1.97 trillion, corporations paid $181 billion in federal income taxes (9%) and $40 billion in state income taxes (2%), for a total income tax burden of 11%. The poorest 20% of American citizens pay 17.4% in federal, state, and local taxes.”  Common Dreams

The numbers tell us that it is not the wealthy and big corporations that create jobs, but the middle class.  According to that same Common Dreams article linked above, “A recent study found that less than 1 percent of all entrepreneurs came from very rich or very poor backgrounds. They come from the middle class.  That deserves repeating. Entrepreneurs come from the middle class.  Not surprisingly, then, since the middle class has been depleted by the steady accumulation of wealth at the top, the number of entrepreneurs per capita has decreased 53% since 1977, and the number of self-employed Americans has decreased 20% since 1991.”

If the numbers tells us that jobs are not being created when the tax cuts for the wealthy and for large corporations are continued or even increased as has been suggested by the Right, then why should we believe those calls for continued lower taxes on the wealthy?  What do you think is the truth and what ideas do you have to increase employment?  And before I forget, Go Bears!

Additional Sources:  The Taxonomist

139 thoughts on “Who Really Creates Jobs?”

  1. That Nick Hanauer video posted about 9 Sep 2012 by Bud is very excellent & shows how its not the rich that create jobs, boldly stated by a rich man.

    Too bad I now recognise so many of the names of commenters & bloggers, including quite a gang of bigoted narrowminded hatemongers who can talk about freedom & lofty subjects while excluding half the world or more. You know who you are & you’re sure to justify it with more hatred & bigotry as always. Such a shame, such a waste.

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  4. @Bron: hey do not have as free a market as we do.

    Are you frikkin’ insane? China’s labor market is about as completely unregulated as it can get. They still have laws against theft and murder, but those aren’t labor laws. There are no unions for the Chinese to join, because a union would be ineffective: It assumes the striking employees will pressure the company, and they won’t, because they would be dismissed and replaced within days from the billion strong unemployed labor pool you acknowledge exists.

    The problem is not with the government, the Chinese (or Indian) government does not assign work or find jobs for manual laborers in China, the people must find it for themselves and negotiate on their own.

    Next you argue that China is not a “mature market.”

    Oh, so now free markets do NOT work from the start, you need a non-free regulated market first, until it is “mature,” THEN free markets will magically work?

    Well if the non-free regulated market that protects workers, consumers, investors, and the environment works fine, why not stick with it?

    Be specific, Bron. What is it about China’s government, and their current policy of not interfering with business, that you think is causing their free market experiment to fail so miserably for the Chinese unskilled laborers? Which “individual rights” are you thinking their government could protect to make this unregulated market MORE free?

    They can already organize, but when the supply of labor far exceeds the demand, organizing does no good, they cannot create a shortage of skilled labor. Violence, vandalism and assault are all still prohibited, and as you said, punishable by death. So they cannot blockade a factory and refuse to let scabs in to work, but scabs are a PRINCIPLE of free markets, right? That people can choose to work for whatever wage and conditions they want, and cannot be forced to join or honor a union strike?

    These problems have nothing to do with Chinese politics, the labor markets and labor relations are unregulated and completely free, and the problem is that free markets do not protect workers when workers are easily replaced.

    They also, as government backed unions have shown on occasion here in the USA and elsewhere, do not protect companies when employees are in short supply, which is the situation sometimes artificially created by unions.

    That is the point of regulation, Bron, and anything you say China could do to correct the situation for Chinese laborers (or India could do for its laborers, or Pakistan or Korea or many others for its laborers) would obviously BE a regulation on labor practice and therefore a less-free market.

    The point of regulation is to level the playing field, to prevent the powerful (usually the company, in rare circumstances the employees) from exploiting the powerless.

    China’s (and India’s, and …) labor policies allow the equivalent of slave labor because laborers are forced into a choice between complete subjugation and, literally, death. The only difference is that the prospect of death is not by the hand of the “employer,” but whether death comes from starvation or a bullet makes little difference to the person doing the dying.

    That is the point of minimum wage and safety regulations, they exist because without them the result is, as we saw in America and see happening once again in these newly industrializing foreign countries, effective slavery, which is the natural outcome of unregulated “free” markets.

  5. Tony C:

    in a free society, people have a right to join a union.

    China is still a developing country. Look at the US, it took almost 100 years to build our economy to where it is today and that is with a free society and relatively free markets and with only a couple of hundred million people.

    China only implemented free market reforms about 35 years ago, is not a free society and has had a billion people plus to provide jobs for. They do not have as free a market as we do.

    The problem is not with capitalism but with the totalitarian government and the problem of finding work for hundreds of millions of people. Unfortunately the law of supply and demand hits labor as well as beer.

    It is my opinion that if China was not a totalitarian country, you would not have these problems. If it was a mature market economy you would not have these problems. China’s economy is still growing and it has a long way to go to employ almost 1 billion people [assuming that size of workforce].

    Communist China does not have a history of respect for individual rights.
    The problems you identify are because of that, not because of the market.

  6. @Bron: Blue Flu: In China workers can be summarily dismissed for becoming ill, or for getting injured. Somebody else is waiting for the job. Some have been put on the street with their belongings with broken hands and limbs; the factory is not responsible for their health or injuries, the employees have to agree to that when they take the job, or they get no job.

  7. @Bron: Forming a union, striking, or organizing is pointless if there is a supply of replacement workers and no government protection for the union. A non-governmental collective action carries no force if it can just be ignored.

    Those tactics assume the individuals in the work force are necessary when they are not. As for totalitarianism, give us a free market solution you think would work, and then explain how totalitarianism on the part of China as it stands now will prevent it. That will be difficult to do, China isn’t interfering with individuals in this arena. They are brutal if you criticize the government, or break a law like stealing or rape or murder, but they are not interfering with labor.

    The problem is that, in China, it is an employers market. There are far more willing workers than there are jobs. If everybody acts in their own self-interest, it is in the self-interest of the employer to ensure employees have zero power, and the self-interest of the unemployed to take the job of anybody that strikes or tries to organize a collective action.

    So how does the free market protect unskilled laborers when they have zero bargaining power, when their choice is either perpetual work for slave wages that will never let them advance, or to let their family become homeless starving beggars?

    They cannot leave. First they cannot afford the expense, and second, everywhere they can go in the country is the same.

  8. China is a totalitarian country where you can receive a bullet to the back of your head for just about anything.

    I guess the workers need to form unions and organize for better wages and conditions. That is what I would do. Maybe they need to go on strike or have a case of blue flue.

  9. @Bron: China is not a totalitarian country when it comes to employment or capitalistic enterprise; the factory workers are not pressed into duty by the Chinese government. But they are not protected, either. It is an unregulated market, just like you want: No minimum wage, no OSHA, no SS or Medicare taxes, no rules.

    And what does that mean for the laborers? Oppression. Bleat all you want about China’s politics, it does not cause businesses to mistreat workers. They are free to quit and starve if they want. For some reason, they do not quit and starve, because there are starving people waiting to take their job and eat.

    So tell us, since the workers are free to do anything they want in the few weeks before they starve to death, what free market principle stops this utter oppression when there are fewer jobs than there are workers?

  10. @Bron: China, India, Mexico, their political situation makes no difference to your argument in the least. There are no regulations in those countries regarding employment (some in India on the books but never enforced), those are totally free and unregulated markets for commercial employment.

    An Exxon tanker shows up in port, there is no minimum wage, no reporting is necessary, they can pay in cash and pay zero taxes, there is not a single safety regulation they have to obey, and if somebody dies on the job they can leave them on the beach and sail away. If a potential employee wants something in writing, the Exxon captain just says, “No work for you. Next.”

    In China, no rules for employers; lots of rules for employees: You must live in the company dorm, your dorm captain will wake you, you have five minutes to shower, five minutes to get dressed, you will eat breakfast, lunch and dinner at your sewing machine, you have ten minutes for the first two, fifteen minutes for dinner. Your restroom breaks are scheduled, you will have an hour before lights out to write your family. If you do not agree to these rules, you do not get a job. If you are ill or injured on the job, you agree up front you cannot sue, and you lose your job immediately.

    Sound good? Unregulated markets lead directly to the oppression of workers to the point of slavery. For the manual laborers it is always a buyer’s market, they have no negotiating power because they work or their family starves, and their employers know that, and pay them so little they cannot save their way to advancing a rung.

  11. Blouise, Unlike you and your soulmate, Nancy Reagan, I don’t believe in astrology. I like to bust balls and I’m good @ finding the sweet spot!! No knee problems, upper back/cervical problems. Al Capone and Albert Anastasia were also Capricorns.

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