Explaining Job Creation

I just had a humbling, even humiliating, conversation with my 90-year-old mother – she is the only 90-year-old person that I presently know and while she doesn’t stand for all old people, she is somewhat typical of a segment of them.  She never recovered from two powerful forces: the events of the depression and its apparent swoop into WWII, and the confusion and burdens put on southern womanhood.

Being from the Deep South, she grew up as a Democrat, but was converted by my father’s father, a very political man and a Republican from West Virginia– all Civil War related selections.  I know that such choices, driven by ‘ancient history,’ seem of no present consequence, but many are still driving significant parts of, especially, rural and southern political positions.

So my mother said, unwisely if she wanted a quiet breakfast: “Without the rich people there would be no jobs; ‘it’s the rich people who create the jobs.’”

Now, I have matured, slightly, in my 68 years so I didn’t throw things or hold my breath until she took it back.  Rather, I recognized an opportunity to have a go at explaining the error of her ways; a practice session, if you will, for other hard cases.  Old people (I don’t so designate myself yet) are slippery in matters of the mind: they have accumulated lots of tricks as well as can pull the ‘I’m too old to understand’ routine.  I was prepared: hadn’t I played checkers with this lady since I was 5?  Hadn’t I argued every cause from civil rights and Vietnam, through Reagan being a fool, to George Bush being a fool?

I tried, “Now, just how do rich people create jobs?”  I hoped to spark some reflection on the process of job creation, but got the predictable, “They are the ones with the money to hire people.”  Her stare began to get a little vacant and I couldn’t tell if she was reflecting on the possible logical fallacies she was toying with or if she had recognized the trap I was setting and preparing an escape.

“Why would they hire someone in the first place?” I asked.  She noticed right away that the game had been changed from creating jobs to the actual act of hiring a person and played for time with the ‘I don’t understand economics’ argument.  I would have none of it. It was not a question that she wanted to answer and so we moved on into the land of the simple and hypothetical.

“Imagine that you are a shop keeper.”  I knew that she was ahead of me and had, at some level, capitulated when she didn’t ask what kind of shop.  “Imagine that you are a shop keeper and you have very few customers, will you hire an employee?”  “Of course not, that would be foolish.”

“Now imagine that customers start coming to your shop and you can’t effectively handle them all, would you hire some one?”  “Oh yes, you would have to.”

“So, are you creating the jobs or are the increasing numbers of customers forcing you to hire help?  Certainly, you are important in creating the environment in which hiring can take place, but can you really say that you are creating the jobs?”  “I see that more customers require that people be hired.”  There seemed to be, to my mind rewarding, cognitive dissonance bouncing around in her head.

“And the people hired are doing the work needed, they are producing the result, not just you, so shouldn’t they receive reward in proportion to their contribution?”

(I have left out that near the beginning of this conversation she told me of her father working for a steel foundry in the south, working with management, where the laborers lived in company houses, were paid in script and were effectively captives of the company.)

She sort of coughed up a semi-noncommittal agreement. 

“Now suppose that you hired an accountant because your time was needed in the shop, and that the accountant told you that you could make more money by paying your employees less, that you could get rich; would that create more jobs or only make you wealthier?”  She didn’t respond, but adopted a pensive look.

“No one would think it inappropriate for you to take more money from the profits than the employees since you created the environment in which profits were made, but you did not do it all; the others who work with you also have an interest in the shop and should be compensated in proportion to their contribution.”  “Yes, I see that.”

From there the conversation went to ‘The Spirit Level’ by Wilkinson and Pickett.  She thought it a very sensible and understandable observation that inequity results in social instability.  She was surprised that the U.S. was one of the most unequal countries in the developed world.

I was feeling pretty good by now.

I gave her Bernie Sanders’ statistic: “Have you heard that, in this country, the 400 richest families control more wealth than 150 million of the least wealthy people?”

“Wow, we better keep those 400 here!”

“What do you mean?”

“Those 400 richest people must really create a lot of jobs.”