Why is "creating jobs" seen as good and "destroying jobs" seen as bad, even when there are major labour shortages?

Question

During periods of (mass) unemployment, it seems reasonable for governments to pursue policies expected to create jobs, and therefore for politicians and political parties to propose and support such policies. However, it seems this argument is still used in times of labour shortages, such as is the case today in many sectors in wealthy countries, with demographic trends suggesting staff shortages will get worse (a comment points out this can be due to lack of budget rather than unfilled vacancies, but improving compensation can only to a very limited degree increase the total available workforce). For example, in Germany (and probably elsewhere), the political debate whether a (higher) minimum wage destroys jobs continues. Elsewhere, people argue that unionisation destroys jobs.

Whether minimum wage or unionisation destroys jobs will probably remain a debate in perpetuity and is not the scope of my question. Considering we have labour shortages that are expected to get worse as demographics means that more people leave than enter the workforce in the coming years in wealthy countries. Suppose those policies do destroy jobs — so what? Why is job destruction/creation still seen as bad/good when existing vacancies cannot be filled today (except perhaps by mass immigration)? Wouldn't a pro-business politician more sensibly support destroying jobs, which would help other businesses recruiting and possibly even push wages down as an added "bonus"?

Answer 1

Labor is not a fungible good. When people say that there is a labor shortage (or high unemployment) in a country, then that does not mean that:

• all professions are affected equally
• all areas are affected equally

Just because one city has a shortage of construction workers does not mean that another city 100 km southeast can't also have a surplus of restaurant staff.

So when a company says that they are "creating jobs", then what that usually means (hopefully) is they are "creating jobs for a profession in an area where that profession has a high unemployment rate". This is usually something that is very beneficial for that area. High unemployment causes a lot of problems which the local government has to deal with: More crime, more homeless people, rush on food banks, decline of local businesses people can't afford anymore, and so on. Which is one reason why large employers are highly sought after by local governments. For example, by giving them rebates on taxes, spending money on public infrastructure that only benefits singular companies or being willing to look the other way when it comes to enforcing certain laws.

Answer 2

People do "destroy jobs". We just use a better-sounding name: increasing productivity. Productivity is measured in GDP/hour worked, and increasing it results in more output for the same amount of work and workers.

Increase happens in many ways: computers and AI affect desk jobs, robotics affect factory jobs, self-service affects service jobs, freight trains and larger planes affect transport jobs, etc.

See Japan in particular for a country that tries to do this to counter labor shortages, with mixed result.

Answer 3

Creating jobs is inherently desirable, because creating jobs tends to reduce unemployment and increase wages, even when the job market is tight, which improves the well-being of average people.

There is nothing intrinsically good about destroying jobs. This can increase unemployment and unemployment can place downward pressure on wages. One destroys a job as a means to an end, like increasing profits, lowering prices, and/or increasing compensation for the people whose jobs are not destroyed who are producing the same things. You tout the benefits that arise from destroying jobs, not the destruction of the jobs, per se.

Answer 4

IANAE, but it stands to reason:

If there is too much unemployment, it's bad for reasons that don't need restating. Too many people without jobs is a big problem - you can't simply get rid of the unemployed people.

However, if there is not enough unemployment - i.e. a labour shortage - it's not such a huge problem. Companies unable to find enough employees will either downsize, close down or just won't start up or expand in the first place.

So we're not going to be in the situation where we have too many companies and not enough people to work in them - or at least where that is a major issue.

The one area where you'd have a problem is where specific essential sectors have a shortage - e.g. we need to build more houses but have a labour shortage in construction.

In these circumstances, governments can and do pursue policies to attempt to encourage growth in the relevant area (e.g. tax incentives and such), sometimes even at the expense of other sectors. But actively "destroying" jobs in other sectors in the hope that newly unemployed people would try their hand at construction would be unlikely to help in this case.

Answer 5

The real (political) benefit of creating jobs is not in the jobs themselves but rather in the fact that a job being undertaken by a person means that person is paid a salary and can hopefully support themselves and avoid falling into poverty.

The actual message given by politicians who claim their policies will "create jobs" is that their policies will turn X amount of unemployed people into richer, employed people with a higher standard of living (in practice becoming employed can easily make someone poorer or miserable, however). It would be more accurate to say that the policies aim to reduce the poverty caused by unemployment.

This sort of policy when implemented in a smart way has a tendency of lifting up the standard of living not only of people who get out of unemployment but also of already-employed people in the same sectors. The reason being that when there is lower unemployment for a given sector of the economy, the bargaining power of the labor force increases, which translates into overall higher standard of living.

For all these reasons, it's easy to make the shortcut that creating jobs is a general good.

However, this can be done badly. Whenever jobs are created or maintained despite having very low productivity, the cost on society of artificially maintaining that job can easily outweigh the benefit. A clear example of this is the public sector in Saudi Arabia today, which ostensibly serves as a way to "provide jobs" to Saudi citizens without really needing them to do anything productive, thus wasting resources for little benefit (i.e. a more honest and efficient way of doing the same thing would be a form of basic income). In less obvious cases, this is a very complex topic, as the definition of "benefit for society" is obviously a political compromise.

It would be probably better to directly address the problem of living standards rather than jobs. As productivity increases and our economies become increasingly automated and complex, the share of people who can't be productively employed in any occupation keeps increasing. To take just one variable, there's only so much you can ask from someone in the lowest 10% percentile of IQ. It's not that there are zero jobs in that category, but there simply aren't enough. So what do you do with the rest? Having to go do a meaningless, artificial job to receive money might be the psychologically optimal situation for some people (feeling necessary is a pretty important human need). But for some others it might be preferable to just give them money and let them do whatever they want with their time.

People who's only talent is artistic in nature have a hard time finding ways to support themselves while doing what they want to do. For this kind of people, basic income is almost certainly preferable to an artificial job, as with basic income they can use their time to do what they want to do even if it doesn't fully support them.

In short, looking at "job creation" is too narrow in perspective when the policy goals can be achieved in other ways. But the public discourse on the economy isn't really ready to face the reality of a world where productivity goes asymptotic (that's only a slight exaggeration). So we keep on fixating on jobs.

Answer 6

Why is job destruction/creation still seen as bad/good when existing vacancies cannot be filled today (except perhaps by mass immigration)? Wouldn't a pro-business politician more sensibly support destroying jobs, which would help other businesses recruiting and possibly even push wages down as an added "bonus"?

Let's first argue from the employees perspective (most people are employees and voters so their opinion probably carries a lot of weight in democracies). Job creation is good because it means more opportunities and more choice. It means higher salaries and more fullfilling jobs because if labor is in such high demand you can either find a job that you really like, or one that really pays off financially (or both). The reason is that people can simply resign if they don't want their old job anymore. On the other hand, if job destruction was on the agenda and the number of jobs would decrease in total (as a net effect), there would be less choice. One could argue that if there are lots of jobs to begin with that it really doesn't hurt much to destroy some of them, but I also don't see a scenario where it actively helps employees to have less jobs to choose from. Small detail: maybe we should call them "job opportunities" that are created or destroyed. After all jobs are only created when someone is hired and jobs destroyed when people resign or are let off. Destroying job opportunities doesn't help employees in any way.

Now for the businessmen: which are a minority of the total population. They would probably like to have cheap labor forces but also strong demand for their products. Unless they export everything that means they need a strong economy and customers with lots of spending power. This means that then people can be hired and profit can be made. One could argue that from a business perspective the profit may be higher if the unemployedment rate is at a reasonably high level, where you do not have to compete for employees by salary alone, but from a single businessmen/women point it's better to hire more people if the economy is good because the marginal profit is still positive.

Full employment (with the usual fluctuations) is probably the natural state of the economy and everything else is just some systematic obstacle. Job creation is seen as good because it points towards full employment and beyond that better jobs (more rewarding financially or otherwise).

You may say that for example in Germany there is a current shortage of some type of jobs (craftsmen, doctors, nurses, teachers, caregivers) while there may be an excess of other less useful jobs. Maybe too many people actually go to university than would be best if everything is taken into account. But that is probably not the fault of the job opportunity creators.

Finally, it's not really clear how you envision the job opportunity destruction taking place. You don't simply mean people not wanting these jobs and job offers remaining unfilled? Maybe you mean an increased minimum wage for example? But will that really create jobs for nurses, teachers, plumbers, ... if job destruction was the goal? For example, already now, in Germany, many elder people cannot pay for their care or it's really expensive. Higher salaries for nurses would surely attract more people to take up this job, but may at the same time make it harder for some to afford that. That should be investigated in more detail.

I think what you ultimately aim at is the notion of good and bad jobs. Some jobs may be seen as "good" and worthwhile to be created while other jobs may be seen as "bad" and worthwhile to be destroyed. But who decides that and why not simply let the employees decide themselves between all job opportunities. In that way the market would optimize itself, if only there is low unemployment to begin with and people can actually choose.

Answer 7

The claim of "staff shortages" is largely a propaganda claim.

It is a way of describing that the reserve army of labour has shrunk to the point that capitalist profits are being hurt (in a context where profits are already huge, and labour time is often used very inefficiently), and capitalists are actually having to compete somewhat amongst themselves for workers and think about retention issues, not that there is actually an absolute shortage of workers.

Obviously, the liberals in charge who are forcing up unemployment in the West, cannot say outright "we are destroying jobs to make the workers in those jobs which remain, more desperate to accept lower wages".

Meanwhile, the claim of "creating jobs" is also largely a propaganda claim, since there is currently a massive assault underway to create unemployment in the West, and offshoring industry has been occurring for decades.

But the claim that jobs will be created is made because, obviously, working people accustomed to weak labour demand support the idea that there will be more jobs.

minimum wage destroys jobs continues. Elsewhere, people argue that unionisation destroys jobs.

This is in the context where private capital is granted the right to leave the country if it doesn't like the situation, or the state allows private capital to go on strike and not simply nationalise the activity.

In the past, capital controls were used to prevent the rich shopping jurisdictions for low taxes, low wages, and poor unionisation. And the state was also willing to step in to provide public capital whenever private capital went on strike.

For example, if private capital struck against building houses because it felt rental returns and land prices were too low, then the state bankrolled a massive increase in public housing instead, and used compulsory purchasing to take land out of private hands at its undeveloped price, thus breaking the strike of private capital.

So these claims always have to be interpreted in context. Fighting the capitalists (such as with wage rises or unionisation) will always lead to loss of jobs and economy, if the ability of private capital to go on strike is not directly confronted.

That is why the US federal model is beloved of capitalist liberals, because states can ostensibly set their own political policies, but they cannot impose controls on economic factors at their borders, such as capital, worker movement, and the movement of goods and services.

Answer 8

tldr Most economists agree that, in a healthy economy, jobs will be both created and destroyed. Typically the destruction is directly tied to creation, in a process known as "Creative Destruction", so naturally there is a preference to emphasise the creation over the destruction. Nevertheless, there may be some special situations where job destruction per se is desirable.

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There is some truth in the line of reasoning you seem to be pursuing here, but also some confusion. I'll try to address your various points in turn and hopefully it will clarify the situation. Note that my arguments are based on simple and idealised economic models, which will have many caveats in the real World, but are good enough in the current context.

You are correct to say that, during periods of high unemployment, many economists argue that the government should intervene to create jobs. This is especially true if other economic indicators, such as GDP and inflation, are also weak. The exact way in which the government should do this will depend upon the specifics of the situation, but typically an expansionary fiscal policy is implemented through increased government spending or decreased taxation. This increases aggregate demand which, if the economy is far from full employment, is likely to result in an increase in output without a significant increase in prices. The additional output comes largely from employing the previously unemployed i.e. "creating jobs". However, during periods of full employment (or "labour shortages") such a policy is not generally favoured because the increase in aggregate demand that results is likely to be highly inflationary. Nevertheless, the government will still be keen to "create jobs", but this is a different kind of job creation, as I discuss below.

Suppose the economy is at full employment, this means, to a reasonable approximation, that every worker is doing the job that nets them the greatest possible utility (salary + other effects), in the short term. If you were to "destroy" any of the jobs that people are doing those workers would be worse off, even if many vacancies exist, because they are already in the best job for them. Their employer would also be worse off, because they have lost the output of those workers, which they need to make a profit. The only parties that benefit are the employers with vacancies, but the overall effect is likely to be negative (I'll revisit this last point later). "Destroying" vacant jobs is irrelevant, since nobody is doing them anyway (indeed, they have functionally already been destroyed). An example of this would be setting the minimum wage at a level below the wage of the lowest paid job in the economy. What about creating jobs? This is desirable, provided those jobs offer greater utility to workers than their existing jobs, which is likely to mean that those jobs have higher productivity than at least some of the existing jobs. This sort of job creation is the result of innovation. The overall effect of creating these jobs is that economic output increases, with the benefits being split between workers, employers and the government. There may also be some inflationary effect, because workers have more money to spend, but it is mitigated by the fact that they are also more productive so there are more goods and service to go around.

Notice something about the job creation described in the last paragraph: it also involves job destruction, namely of those jobs that the workers previously performed before moving to their new, higher productivity, jobs. This is one manifestation of the idea of "Creative Destruction" popularised by Joseph Schumpeter, and is a crucial driver of economic growth (at least in the capitalist mode, Marxists have argued that this phenomenon is detrimental in the long run). It is important to recognise the necessity of "destruction" in this process. Indeed, one inhibitor of economic growth is existing institutions (historically usually capital, rather than workers, given its greater power) suppressing innovation in an attempt to prevent destruction of their own enterprises. So you are correct to say that the idea "creation good, destruction bad" is somewhat wrongheaded. Nevertheless, it is natural for people to emphasise creation, because "You'll have a better job!" sounds a lot better than "You'll lose your job!".

In the process I've described above, creation precedes destruction, but it's possible that the causality could be reversed. One of the arguments for introducing a minimum wage is that it will lead to the creation of higher productivity jobs, as employers seek to utilise workers whose productivity would otherwise put them below the minimum wage. However, the evidence for this is mixed and clearly it is somewhat risky to destroy jobs in the hope that better ones will be created. Is there any other circumstance in which the government might want to destroy jobs? One possibility is that the government wishes to move workers into jobs that aren't favoured by the market. Probably the most common instance of this is during a war, when the need for soldiers and weapons exceeds what would be provided by a free market. In this case, it is common for the government to destroy jobs through such measures as taxation and price controls (which decrease supply and set supply below the free market equilibrium, respectively) or more drastically by conscription, which forcibly removes workers from jobs and places them in jobs in the military or military industry. An unusual example is the strategic bombing of German cities during WWII, obviously this wasn't endorsed by the German government, but the American economist JK Galbraith suggested that one of the effects was to deprive workers of jobs in the retail and service sectors and force them into armaments factories, thereby contributing to the German government's aim of increasing military production (although the overall effect remains contentious).

I explained above why, in theory, simply destroying existing jobs is a bad idea. The relationship between unemployment and output (GDP) has also been studied empirically and the result is Okun's Law, which is the observation that a 1% increase in unemployment will cause a 2% decrease in GDP. This is really only an approximate rule, but one does generally find that increasing unemployment leads to lower GDP. It therefore appears that the only politician who would endorse "job destruction" would be one who is only interested in the welfare of the employers who currently can't find workers because their enterprises offer jobs with lower productivity than other existing enterprises. Even if such a politician were to exist, it seems unlikely that they would be open about what they were doing, since it would be harmful to so many different groups!

Answer 9

The arguments about the work force shortage are often exaggerated.

The employer often wants a long work experience, formal education (where appropriate), all very precisely matching the expected work duties. If there are not many such applicants, the talks begin that "we cannot find that we needed people", even if there are lots of applicants that could be be easily retrained for a not so different task and they know this. For instance, this is well seen in a software industry where different programming languages are used: companies usually seek somebody with exactly work experience in specific language, even it is only a week of work to learn another (basic concepts are not so different).

Some companies are spinning and spinning the ads they have "a number of positions available". Are they growing so much? No. Is the work so unbearable there that nobody can stand? Maybe also no. Then the explanation is, the requirements are such that nobody can pass through, and well above that is required for they work.

Lack of ready, very precisely qualified workers encourages companies to accept and train applicants that are available, opening more opportunities for the people to grow.

Answer 10

I think it's primarily because if you have less jobs then companies are less likely to increase wages since they have bargaining powers over the employees, so the more jobs the better it tends to be for the vast majority of people. That's why it's unpopular to kill jobs since it has a negative impact on the bargaining power of the majority.