Creating So Many Jobs that Destroy Wealth

When Americans face an intense, hyper-partisan Presidential election, every labor market report becomes fodder for Administration claims of what great managers of the economy they are and counter-claims of how misleading such stewardship claims are. 

Of late, such dueling narratives have featured issues such as the seven-digit (and growing) difference between the official employment rate and the lower employment rate implied by the household unemployment survey, whether growing official employment has not meant more full-time jobs for American citizens because of sharply increasing employment of immigrants, and how the reduction of hours worked by full-time workers and the shift from full-time to part-time work has resulted in less labor services rendered even when official employment increases.

Of particular interest to me lately has been the large fraction of jobs that have been “created” in government. While it hasn’t got much attention in (reflexively pro-Biden) mainstream media, some more careful observers are noticing. For example, last month, Ryan McMaken published a piece in Mises Wire titled “Employment Falls for the Third Month In Spite of 50,000 New Government Jobs,” which noted that “the growth in government jobs makes up about 20 percent of all new jobs.” This month, the Wall Street Journal had an editorial titled “The Government-Spending Jobs Boom,” noting that “more than half of the new jobs last month were in government, health care and social assistance” (the latter two areas relying on “transfer payments from government”). 

The reason this issue is so important is that government spending doesn’t really create jobs, but instead moves them from where people themselves would have chosen to where the government dictates by way of its tax, spending, and regulatory policies. And the distinction between creating jobs and moving jobs makes a substantial difference, given that there are almost 3 million federal employees and roughly 20 million state and local government employees in America (13 percent of total jobs). That substitution means that many of the jobs created directly or indirectly by government policies impose net costs on society rather than producing benefits, which worsens rather than improves Americans’ wellbeing. 

The most obvious illustrations come from the vast (and getting vaster) crazy-quilt of federal executive agencies, mandates, regulations, etc. But those are piled upon mountains of state and local interventions (or is it vice versa?) for “good” measure (at least if you are mistakenly looking up antonyms for the term rather than synonyms). Peaceful wealth creation arises from voluntary agreements among people, but the primary activity of the regulatory state is often to interfere with mutually productive jobs, undermining social coordination and destroying wealth. Imposing added constraints on voluntary productive arrangements does create some jobs, but that acts as a massive regulatory tax on jobs that benefit other people.

Professors Susan Dudley and Melinda Warren have studied federal regulatory agencies that explicitly restrict private sector transactions. They found 277,000 such regulators in 2015 (substantially larger than General Motors’ worldwide workforce) and an 18-fold increase in those agencies’ inflation-adjusted budgets since 1960, to over $57 billion (in 2009 dollars). 

More recently, The American Action Forum reported that Biden administration agencies “published $875.3 billion in total costs and added 4.7 million annual paperwork burden hours” in just one week last month, “just $20 billion less than what President Biden did on two terms,” which its president Douglas Holtz Eakin called “simply a jaw-dropping regulatory blitz.”

Forcible federal interventions often lead to multiplier effects on state and local government employment as well (even if not the Keynesian multiplier effects students hear about in macroeconomics courses). Further, interventions at all those levels also create private sector jobs to comply with the growing extent of their dictation. Many human resources and health care industry jobs, for example, were created to comply with Obamacare, and the mushrooming of Medicaid since then. But for ill-advised programs and restrictions, such jobs can create costs rather than benefits for society.

The sharp increase in government’s “Peter-Paul” (robbing Peter to pay Paul) approach evident in almost every area of public policy also multiplies into more lobbyists being hired to help special interests benefit at others’ expense. Others, in turn, are forced to hire more of their own in self-defense, to combat the extent of robbery they will be forced to bear. The expanded fight to control federal government theft has created a booming job market in the influence industry, which has dramatically stimulated the economy in Washington, DC, but destroyed wealth for people everywhere else in a massive negative-sum game.

Similarly, when laws or rules of questionable constitutionality or legality are promulgated (as with the Biden Administration’s environmental and education policies), it increases the number of lawyers and legal resources the government employs. It also increases the number employed by those who would be abused. Such opposition can be one of the most valuable investments for Americans in stopping such inroads on people’s rights, but even fighting them to a standstill leaves Americans worse off than if those overstepping initiatives had not been advanced in the first place.  

While there are many words being exchanged in the battle over President Biden’s job creation “achievements,” and more to come before November (at least to the extent that the media’s cone of silence in Biden’s defense can be evaded), there is one area in which he has dramatically over-achieved. He has created lots of jobs in government (as well as in government compliance) that undermine our private efforts whose mutual gains are guaranteed by the need to get all parties whose rights are involved to agree to them. In the process he has expanded the government further into areas in which we have no such protections from it. But such over-achievement is diametrically opposed to what our founders understood (from John Locke) to be the main reason for government — to better protect all of our rights and property from invasion. And we would do well to remember that “creating” such jobs may pump up the employment numbers for Biden’s re-election chances, but they inhibit rather than increase our well-being.