Wednesday, December 30, 2009

Peter Schiff: Obama should learn economics to stop job losses

Peter Schiff discusses Obama's upcoming summit to find the root cause of job losses and come up with a "solution."

In the private sector, all individuals have a choice to either work for themselves or someone else. Since labor is far more productive when combined with capital (office equipment, machinery, business models, and intellectual capital), those who lack these assets themselves often choose to work for others who have sacrificed to accumulate them. This increased productivity is shared between the worker and the owner of capital, and both are better off.

However, for one person or company to choose to offer a job to another, there must be an incentive to do so, and they must have the necessary capital. In the first place, employers must commit to paying wages and benefits, comply with government mandates and regulations, and subject themselves to potential lawsuits from disgruntled employees. All of these costs must be measured against the extra profits an employer hopes to earn by hiring an additional worker.

If profit opportunities exist, jobs will be created. Otherwise, they will not. Of course, anything the government does to raise the cost of employment, such as a higher minimum wage, mandated heath care, or greater regulatory burdens, not only prevents new jobs from being created but also causes many that already exist to be destroyed. [Emphasis added]
The solution is for government to stop raising the costs of employing people. Even better, the government could eliminate many of the barriers to employment it currently creates thus lowering the cost of employment. The lower the cost of employment, the more profitable it will be to employ people and the more people will be employed. It's elementary.

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