Who Creates the Jobs?

In an economy in which it is necessary to provide more jobs to people, everyone should agree that encouraging the people who create the jobs should be a high priority. The question is, who actually creates the jobs and what policies should be perused. There are many on the right who have argued that “rich people” create the jobs and that tax cuts for the rich are necessary to grow the economy. There is some truth to this assertion, but it is not the whole truth, as I’ll explain. Lately, liberals have retorted that it is not the rich who create the jobs, but the customers, and that policies that redistribute wealth from the rich to the middle class are necessary to provide more money for the customers to buy things. Again, there is some truth to this idea, no company can prosper unless customers buy its products. But, again, it is not the whole truth and the remedy suggested is not likely to help anyone, except the politicians.

So, who are the real job creators? The real job creators are not customers or “the rich”. The people who create the jobs are the investors, the people, rich or not, who provide the capital necessary to establish or expand a business. Customers are an important part of the process, as are the employees who create the goods or services that the company sells, nevertheless, none of the process of creating the products or the company would be possible if the capital were not available. Customers cannot buy a product that is not available or that does not yet exist. Investors provide the funds that enable a company to be established before its first sale to any customer. Investors provide the funds for research and development to create new products before customers ever decide they want to buy them.

Please note that I did not say rich people. The income or amount of wealth that an investor has is irrelevant, except that a wealthy person is more likely to possess more money to invest. A rich person who keeps all of his money in a money bin, like Scrooge McDuck is doing absolutely no good to anybody, least of all himself. A person of modest means who invests his life savings in a 401k account or even has a savings account is providing capital that will eventually be used to create jobs.

Scrooge's signature dive into money.

Rich people don’t actually do this. (Photo credit: Wikipedia)

If you want a growing economy that provides jobs for people, you must pursue policies that encourage people to invest their money to provide the capital necessary to create and expand businesses. This includes keeping taxes low, not just for the wealthy but for everybody. Taxes and regulations should not be so onerous as to make potential investors decide that it would be easier to keep their money hidden in their mattresses or send it to a tax-free account in the Cayman Islands. Punishing people who have become successful is simply not helpful. To put it another way, we don’t want policies that benefit rich people, we want policies that encourage people to become rich, and thereby benefit others.

 

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