21. is There a Limit to the Number of Jobs?

MANY PEOPLE BELIEVE THAT there is a finite number of jobs in the world, and that when one person gets one of these jobs, another must lose one. If this idea were true, our country’s labor force would still be the size it was when the Pilgrims landed.

If each person were self-sufficient, consuming only that which the person produced, the idea of a finite number of jobs would make no sense. A self-sufficient farmer remains unaffected when someone else starts a farm or another form of livelihood. The difference between self-sufficiency and a division of labor is that, instead of consuming only what you produce, you exchange your products for someone else’s.

In 1976, the California civilian labor force was eight million; today it is eighteen million. Where did all those jobs come from, and who lost them? Today we hear complaints about Mexican immigrants taking jobs from Americans. Legal or not, they are not reducing jobs for others. This notion is far from new. Immigrants from Mexico are just the villains of the day. In years past, it was the Irish, the Polish, the Italian, and the Chinese immigrants.³²

Possibly because of the small group/large group disparity and our instinctive abilities to assess economic events, immigrants who are known personally are never seen as a negative; it’s only the unseen anonymous immigrants who are disliked.³³ Most accept the idea that two people can produce more benefits for each other than each person producing alone. There’s no known point at which a million people stop benefiting because of the addition of one more productive person.

Labor unions use the “take away jobs” fallacy when jobs are so narrowly defined that one is allowed to do only one’s job designation. A plumber isn’t allowed to remove a wall to repair a pipe, because doing so would eliminate the carpenter’s job. History is replete with such nonsensical restrictions.

With unionized job restrictions, inefficiency raises the cost of products and services, which, in turn, reduces consumer preference for those products and services. This “take away jobs” fallacy also caused riots, killings, and the destruction of property when labor-intensive factories installed labor-saving machines. Yet, when factories installed those machines, the demand for their now lower priced products, in most cases, resulted in an increase in the need for workers in those very same industries. Many get upset when companies take advantage of cheaper labor in poorer countries to produce goods or provide services. But what’s the difference if a company in Detroit decides to send its car parts to Arkansas or somewhere out of the country for assembly? There may be a relocation of people performing a given type of job, or a change in the type of job for those who live in Detroit, but it does not reduce the number of total jobs.

When a company produces a good at a lower cost, it can, in turn, attract more buyers by reducing the price of that good to the public. The lower price of such a good frees the purchaser to use the savings to buy something additional that the purchaser could not have previously afforded. That “something additional” now has to be produced by someone who landed a previously nonexistent job.

Some are intrigued by the recent “wonders” of the European work ethic: apparently everyone enjoys more leisure time, with less time devoted to work. Europeans have mandated shorter workweeks—approximately six vacation weeks per year, and numerous holidays. Supposedly, this scheduling creates more jobs and greater prosperity; as long as everyone has a job, the economy thrives, irrespective of what or how much one produces. But can this concept be correct? Of course not! When people don’t work, products don’t get produced, and when products don’t get produced, prosperity can’t be realized.

Furthermore, tenure policies adopted by some governments to protect jobs (so employees can’t be fired) engender mediocre work, companies’ reluctance to hire, and an inability to compete in world markets. In France, the average workweek (including vacations) is about twenty-seven hours; in the U.S., the average is thirty-five hours.

Fewer work hours do not create more jobs and prosperity, as was theorized by the French in an attempt to alleviate their nagging high unemployment rate. To illustrate, assume a job (a task of producing a good) can be accomplished by one person in an eight-hour day. If the law prohibits a person from working more than one hour per day, then eight persons would be required to complete the same job. Even though eight persons are now employed, the task is still a single, eight-hour job. Such a law does nothing but dilute the prosperity created by spreading the production of one job among eight people. Now, instead of seven people being unemployed for eight hours a day, we simply have eight people unemployed for seven hours a day.

Enforcing shorter workweeks to increase jobs and prosperity is not a new concept. Economists John Maynard Keynes (1883–1946) and John Kenneth Galbraith (1908–2006) proposed such nonsense decades ago. Imagine if you were a self-sufficient farmer and were told by your political leader that you must spend less time plowing, seeding, and harvesting in order to have more to eat. You would most likely want to commit that poor soul to an asylum.

Shorter workweeks and rigid tenure legislation only reduce people’s productive potential. It is productivity that improves living conditions, and those States that adopt rigid labor laws will find themselves falling behind those States with more flexible labor laws. But the individuals who circumvent these policies counter some of the negative effects of rigid labor laws. When the State restricts one’s ability to hire and another’s ability to work, the human spirit will create arrangements that will bring them together in myriad ingenuous ways that no law or enforcement can totally prevent. The ratio of work time to leisure time is a personal preference, and when the State dictates the ratio, those who think otherwise will find ways to get the final word.

Of course it is not only rigid labor laws that entice individuals to circumvent those laws. Any law that restricts the production of goods and services has a similar enticement for individuals to circumvent that law, as well. Fortunately for these productive individuals, we have free underground markets that make available goods and services that would otherwise not exist. Italy is a great example of a country with such markets. Its underground economy is estimated at between 15 percent and 25 percent of the Gross National Product (GNP) and tax evasion is a national pastime. The underground economy of Europe is estimated at between 7 percent and 16 percent of GNP.³⁴ If everyone were to obey the laws to their full intent, many countries would be far less prosperous than they are currently.

This is true in the U.S. as well. Despite hundreds of thousands of restrictive regulations, many find ways to offer goods and services that are prohibited by law. Violators risk being caught and fined or incarcerated; however, the sheer abundance of the regulations, coupled with the abundance of violators, reduces the likelihood of any one of them being caught.

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³²Brian Frazelle, “The Truth about Immigrants: Xenophobia Existed in Early America,” Houston Catholic Worker 19, no. 7 (1999).

³³Rita J. Simon, “Immigration and American Attitudes,” Public Opinion 10, no. 2 (July/August 1987): 47–50.

³⁴National Center for Policy Analysis. http://www.ncpa.org/ba/ba278.html, Brief Analysis, no. 278 (1998).