
Sorry, Folks, Rich People Don't Create The Jobs - Shivetya
http://www.businessinsider.com/rich-people-dont-create-jobs-2014-6
======
richcollins
Nobody creates the jobs, they exist to be discovered. If you adopt the
viewpoint that other people create jobs for you then your fate is not in your
own hands.

People want things. If you can create something that other people want and
they can create something that you want, you both have a job.

~~~
bryanlarsen
You missed a key qualifier: if you can create something that other people want
_and can afford_.

~~~
richcollins
They can afford it if they can create something of value that you're willing
to accept in return. If they can't then that is the real problem. You have to
ask why they can't create enough wealth to trade for the things they want /
need.

~~~
bryanlarsen
They can't because there are huge factories in China that can produce widgets
cheaper than they can, because there are farmers with million dollar combine
harvesters that can produce food cheaper than they can, et cetera.

We live in an industrial economy. Most people can create more value for the
economy by working for somebody else and/or don't have the safety net that
allows them to take the risks necessary to start their own business.

~~~
richcollins
Software developers make $100+ an hour. The jobs are there for people willing
to adapt to them. You can't just wait to be handed a job that matches your
current abilities.

~~~
sp332
_A few_ software developers make that kind of money. I certainly don't. There
is not an infinite demand for high-paid programmers.

~~~
qkrthnu
I doubt there is ANY employer demand for high-paid programmers.

The demand from an employer perspective is for highly-skilled programmers. If
a proven highly-skilled programmer was willing to happily work for minimum
wage employers would be lining up for miles to hire that person.

The highly-skilled workers are the ones demanding to be highly-paid.

If flipping burgers was more difficult then there would be a smaller supply of
qualified workers, those workers could demand to be paid more, and the
employers would have to pay up or risk getting crushed by their competition.

------
pdx
It will be interesting to try to see what happens in Seattle after passing the
$15 minimum wage. It will take years to fully implement, which will mask the
cause/effect, unfortunately.

I do this thought experiment. If I write every person in America a check for
one million dollars, who have I actually helped? In my thought experiment, the
prices of everything will instantly rise to compensate for the increased
wealth, and everybody will be exactly where they are now, just with more zeros
on all their bills and paychecks.

I suspect that rent prices in Seattle, which are already high, will rise very
rapidly, to relieve these workers of their extra income. That the wage
increase will take place over a few years time is unfortunate, as this effect
will be deniable by those who choose to deny it. But this is what my gut is
telling me will happen. So, amusingly, it will be those evil 1% landlords, who
will actually win, not the minimum wage workers, who will be exactly where
they are now.

~~~
skybrian
If you're going to do a thought experiment you need to think a little deeper.
Most home owners would be able to pay off their mortgages and own their homes.
All student debts would be easily paid off, and then some. Much inequality
(outside the 1%) would vanish temporarily, since the difference between 1
million and 1 million and a small amount of savings isn't that much.

People would try to spend their money, resulting in much more demand,
bottlenecks, and shortages. Of course this leads to inflation, but it also
means the recession is over. Businesses would run out of everything and try to
expand to try to meet supply, but their suppliers would raise prices too,
maybe too high to make a profit. It would be a chaotic situation and people on
fixed incomes would be screwed once the money runs out. It's hard to plan a
business under these circumstances, but I'm sure some people would be smart
enough to figure out a good plan.

So this is not "back where we started." It's a big reset that changes just
about everything and probably a big disaster if it's sprung onto people
without warning.

On the other hand, if properly planned and at a smaller scale, it could have
some good effects. Giving an equal amount of money to everyone would work
better than giving it to banks.

------
hansy
For anyone interested in learning more about the growing inequality gap in
America, I recommend watching the documentary "Inequality For All"
([http://imdb.com/title/tt2215151/](http://imdb.com/title/tt2215151/)).

~~~
ancap
I have not seen the movie but it is laughable that almost without fail the
voices for "equality" are those who are quite rich themselves. Just look at
the cast for that movie.

~~~
ceallen
And if they were poor, they'd just be people jealous of the success of others.
Ad-hominems are an easy way to sidestep discussion.

------
ancap
The line of reasoning of this article can be applied to all things and by
extrapolating out the logic it becomes evident how absurd the logic really is.
Examples:

1) Mr. Gates did not create Microsoft... someone else built the garage he
started in; OR his parents created him and therefore they created Microsoft
(or an infinite number of other rationales)

2) The engine malfunctioning did not cause the airplane to crash, gravity
caused the plane to crash

~~~
jgh
No I don't think that's quite right. He very clearly is saying that the
entrepreneur alone is not responsible for the success and growth of a company
because they also need customers and employees and etc etc.

As for your plane crash analogy,
[http://en.wikipedia.org/wiki/Chain_of_events_(aeronautics)](http://en.wikipedia.org/wiki/Chain_of_events_\(aeronautics\)).

------
JackFr
Me, I'm a wage slave, but I do have a friend who put up his savings, borrowed
money from a bank and built and opened a car wash. He hired a dozen or so
young men and women who staff it, while he is an owner/manager.

He has been successful -- he judged the demand for a car wash correctly.
Probably not a %1'er, but as a local small business owner is able to live a
comfortable middle class life.

Certainly without customers and without the bank he could not have succeeded,
but I think it's ludicrous to say the 'economy' created the jobs. There are
some agents within the economy who 1) recognize opportunities for profitable
activity and 2) direct resources these opportunities. I think it's reasonable
to describe these people as job creators.

~~~
akmiller
But it's certainly reasonable to assume most of his customers are middle class
individuals with enough discretionary income to spend on occasional car
washes. The articles point is not that your friend doesn't deserve credit in
creating jobs, but the initial creation is only one part. Sustaining those
jobs requires sustaining the customers and to do that they must maintain
enough discretionary income to spend on car washes. With the income disparity
ever increasing it's easy to see the middle class fading and as that happens
so shall your friends car wash business.

------
eloff
I think here there's some truth to both propositions (why are people so black
or white in their thinking when the world is always shades of grey?)

Clearly without demand (consumers with money) you can't create jobs in the
economy. Just as clearly, without entrepreneurs willing to take the risk and
put in the effort, and the investors who fund them, you can't create those
jobs either. So the truth of the matter is that economics is complex, and you
need plucky entrepreneurs, wealthy investors, and consumers with lots of
disposable income to create jobs, among a whole host of motivations, cultural
and societal influences, international trade and agreements, infrastructure,
even healthcare, and other human factors.

~~~
bryanlarsen
The analogy the original article used was that of entrepreneurs and investors
to seeds: a seed is a vital component to the growing of trees, but far from
sufficient.

------
jpetersonmn
I wonder how many of these "Job Creators" really believes that the wealthy
create jobs, or if they are fully aware it's BS?

~~~
wodenokoto
As far as I am to understand, most of the 1%'ers wealth is tied up in
investments.

And this is why they consider themselves the job creators. They invest in all
sorts of companies and markets and without the initial investment to start a
company, there wouldn't be anything for the middle-class to purchase with
their middle class salary, not to say no one to pay that salary either.

If they just bought gold and hid it in a vault, then I expect them not to
consider themselves job creators.

~~~
krisdol
It's precisely why high income taxes on the wealthy should exist. With high
income tax, they have an incentive to invest more money than they keep (rather
than hand it over to the government). With low taxation, they can take a small
hit and hoard whatever amount they feel like they should. Not taxing the "job
creators" stops making them "job creators". Furthermore, keeping wages low
prevents regular workers from ever becoming "job creators".

~~~
akmiller
The wealth disparity that is increasing is mostly due to investments and an
extremely low capital gains tax. We can't just increase the income tax because
the wealthiest 1% probably don't even have much of an income...they have
capital gains from investments. Yes, the income tax needs to be increased (or
actually more brackets need to be created) but we also need to raise the
capital gains tax for higher amounts of capital gains.

------
bkcooper
The threshold for the 1% is "centi-millionaire," eh? I'm apparently
substantially more baller than I realized.

~~~
jameshart
I guess you, like me, initially read it as an SI prefix, and were a bit
confused about someone with a net worth of $10,000 being touted as a one-
percenter... I mentally rewrote it as hecto-millionnaire and it made more
sense.

But I guess a centipede doesn't have a hundredth of a foot, and it's not like
millionnaire/billionnaire follows an SI naming scheme in the first place.
Maybe we should introduce a new scale:

megalonnaire

gigalonnaire

...

Successful tech entrepreneurs could rather aspire to becoming binary prefixed
mebilonnaires or gibilonnaires.

~~~
eCa
Hecto[1] would have been a better choice for a prefix.

[1] [http://en.wikipedia.org/wiki/Hecto-](http://en.wikipedia.org/wiki/Hecto-)

------
CWuestefeld
_Unlike Hanauer and other 1%-ers, middle class people spend almost every penny
they make, and this spending becomes revenue for companies started and owned
by people like Hanauer._

The same is true for the rich as well. Much of what they earn is consumed
directly. But for anything that's not, it's surely not being hidden under a
mattress (they didn't get to be rich by losing out to inflation). Instead,
these people are investing it or saving it.

If they just save it in a bank account, then the bank is (less the fractional
reserve portion) loaning it back out to somebody else, probably providing the
means for a non-rich-person to finance a house or a car or a new business.
That is, it's being spent by the person taking out the loan.

If they invest the money, then it's providing the capital for business, which
is even better. That business might spend it (there it is again - spending) to
buy new machinery, or they might expand operations and hire more workers, etc.

Any way you slice it, other than the part that's held back in fractional
reserve, the large incomes of the rich _do_ get spent. Either they spend
directly, or they let someone else use it for their own spending.

~~~
asgard1024
Depending on what you mean by "spending". I see spending as an irreversible
process, where someone actually decides how to convert resources to products.
You could say the more you do that, the bigger the economy.

However, rich people don't engage in this sort of spending as much. Lot of
their "spending" is in reality just circulation of money through rent
extraction. And it's important for them to do that, because that allows them
to keep their power. For instance, if they loan it to a person, that person
becomes dependent on them.

Your idea is based on flawed premise that one has only two rational options
what to do with money - invest (in a narrow sense, to make actual decision how
to convert one resource to another) or consume. In reality, there is a third
option, which is similar to saving, that is investing money in power grabbing
and rent extraction. While saving doesn't give you an advantage to other
players, the rent extraction may.

This was already explained by Marx long time ago, when he described the
capitalist as someone who wants to create more money from money he has through
profit from investment. And more recently this was explained by Piketty, that
you can have a situation in economy where rich people try to "invest" into
rent extraction and not producing more goods or services.

~~~
CWuestefeld
Be that as it may, it's not the claim the article was making. The claim was
that rich people don't lead to growth because much of their money sits idle,
and thus cannot "trickle down" by being used in the economy.

The moral effects that you outline aside, you seem to agree that the portion
of their money that the rich don't spend themselves, they're allowing to be
spent by another person. Thus while you may dislike the moral implications,
you seem to agree with my assessment that the claims of the article are
incorrect.

~~~
asgard1024
> you seem to agree that the portion of their money that the rich don't spend
> themselves, they're allowing to be spent by another person

Not really. If I give you 1000$ it's a different thing than when I just lend
you 1000$. In both cases you have discretion to spend it, but in the latter
case, you have much less freedom, because you need to return it back (and
more).

What I am saying is that economy as a whole can store a large portion of money
in such contracts, not really producing much of anything (because of the
constraints placed to the borrower). Still, it's a rational thing to do for
rich people because it allows to keep them power. So in this sense, the money
are "idling" \- by circulating around in contracts that have to be honored.

------
snowwrestler
I think it's plenty arguable that rich people create jobs.

For example: if rich people don't create jobs, then how can it be their fault
that there are not enough jobs? If jobs really come from the middle class, why
hasn't the middle class created more of them? It would be in their self-
interest to do so.

Arguing that wages for middle class jobs should go up raises the question of
where that wage money should come from. The answer is capital, i.e. rich
people.

Societies without rich people are also societies that struggle to create well-
paying jobs. The USSR and China attempted to eliminate rich people by adopting
a communist economy. What happened is that the people in the government were
the only ones who got rich, and the government was the only source of jobs.
That is not a coincidence.

Since the end of the 20th Century, both Russia and China have relaxed
government control of capital, and the result has been an increase in both
rich people and well-paying jobs in those countries.

Finally, consider technological innovation; a rich source of job creation. It
is created by investment, sometimes seemingly far-fetched or speculative
investment. Google and the iPhone are two examples of products that were not
guaranteed success, and were even dismissed by some industry experts when
released. Each has directly created thousands of jobs and indirectly enabled
at least tens of thousands more in supporting or related fields.

But before there was Google or the iPhone, there were rich people writing
checks to the people who envisioned them.

BTW this is NOT an argument against a higher minimum wage. In fact I think the
questions of "where jobs come from" and "what is the ideal minimum wage" are
only very loosely connected.

edits: spellings

~~~
clavalle
Holy smokes, where to begin...

> if rich people don't create jobs, then how can it be their fault that there
> are not enough jobs?

No one is blaming rich people. They are blaming the system (aspects of it, at
least) that we have collectively created.

>If jobs really come from the middle class, why hasn't the middle class
created more of them?

Much like fire needs heat, oxygen, and a fuel a successful business needs
entrepreneurs, capital, and demand. If the middle class doesn't have
disposable income that limits available capital _and_ demand for creating and
sustaining a business by middle class entrepreneurs.

>Arguing that wages for middle class jobs should go up raises the question of
where that wage money should come from. The answer is capital, i.e. rich
people.

Creating value creates money. That's how this whole thing works. It doesn't
have to come from rich people, it comes, ultimately, from profit.

>The USSR and China attempted to eliminate rich people by adopting a communist
economy.

You are jumping a bit far, there. I don't think anyone is advocating
communism.

>But before there was Google or the iPhone, there were rich people writing
checks to the people who envisioned them.

Capital doesn't have to come from rich people. Just as centralization of
economic control is inefficient and ultimately harmful in communist systems
you cite, it is just as destructive in a capitalist system.

~~~
snowwrestler
The terminology makes it very difficult to have a productive discussion. "Rich
people" are not rich the way that Asian people are Asian. A rich person is
simply a person who has the legal right to direct large amounts of wealth.

Conversely, every piece of wealth has at least one person who has the legal
right to direct it.

So when you make a statement like "It doesn't have to come from rich people,
it comes, ultimately, from profit," it's a somewhat meaningless distinction
because every piece of profit is controlled by a person somewhere. A rich
person is just a person who has the legal right to direct large amounts of
profit (i.e. wealth). Therefore their decisions will have larger effects on
job creation.

Ultimately it doesn't matter that jobs are created by rich people. What
matters is what policy steps we can take to improve job creation, wages, and
opportunity for U.S. citizens. Unfortunately actual policy discussions are too
frequently railroaded by framing arguments like "do rich people create jobs."

~~~
clavalle
>So when you make a statement like "It doesn't have to come from rich people,
it comes, ultimately, from profit," it's a somewhat meaningless distinction
because every piece of profit is controlled by a person somewhere.

It is not meaningless at all. Rich people are _individuals_ that control large
amounts of wealth. This is opposed to groups of people who collectively
control large amounts of wealth. A superintendent of a large school district
can control a billion dollars of wealth but that doesn't make him or her rich
(though they make a good salary I'd still classify them, personally, as
solidly middle class).

And it certainly does matter if we rely increasingly on fewer and fewer
individuals (due to increasing inequality) to make economic decisions for
everyone. It is inherently inefficient. What we are talking about is
identifying this trend as a problem and implementing policies to counteract it
before it becomes intractable.

~~~
snowwrestler
School districts don't make a profit, they are funded from profits. Before a
school district can have a billion dollars to spend, that wealth has to be
generated somehow.

> And it certainly does matter if we rely increasingly on fewer and fewer
> individuals (due to increasing inequality) to make economic decisions for
> everyone.

I agree with this, but it doesn't disagree with the idea that rich people
create jobs.

~~~
clavalle
School districts don't make a profit but they do create value, but that is a
digression.

>I agree with this, but it doesn't disagree with the idea that rich people
create jobs.

Rich people can create jobs, but we shouldn't over-rely on that mechanism.
They aren't the only ones creating jobs is my point.

------
hnnewguy
This is all "chicken and egg" stuff; does the demand for goods create jobs, or
do the jobs create demand for goods? I think it's both.

Regardless, the premise is flawed. Rich people don't create jobs, _smart_ and
_ambitious_ people do. There just happens to be some overlap between those
groups.

------
pdkl95
There seems to be a lot of people equating _investment_ (often by the rich or
owners of business) with people returning all/most of their wage income back
to the economy (the poor or middle class that spend their paychecks directly).

If these activities are the same, I assume you would agree that they should
also be _taxed_ the same? If so, we should really get rid of "capital gains"
taxes and tax those profits as regular income. Otherwise there would be a
severe bias introduced into the economy from the uneven application of taxes.

/or, maybe there is something different about investments after all...

------
talmand
I understand the concept that a business such as Wal-Mart can easily afford a
sudden rise in minimum wage as that's almost always the example used. That, or
another similarly large and successful company.

But what about that mom and pop store on the corner? Am I to understand that
they could afford the new employment costs if suddenly it were to be doubled,
or close to it? How long does it take for the new economic benefits of the
store paying out more money per week to employees to offset the new costs? Can
they last that long? Some places are on tough times and on tight margins. Any
increase in expenses is potential disaster. Do they raise prices at first
because that new positive economic impact doesn't happen immediately, which
may actually prevent the positive impact if other local stores have to do the
same? Will the customers with more money to spend in their store offset the
new higher costs of employing people or will it be a wash?

(If anyone has a source of the economic impact on small businesses, and not
the large chains, of doubling the minimum wage I would be highly interested in
reading it.)

Because this isn't just about increasing minimum wage, it would increase wages
for a great number of people who are not making minimum wage. Would the
manager of a pizza shop be happy that his drivers suddenly make more per hour
then he does? Of course not, that would mean all wages at the place would need
to be adjusted according to seniority and responsibilities. Many wages are
structured based on the current minimum wage level.

Plus, it would seem that it would be in the best interest of Wal-Mart to push
for doubling the minimum wage. As been shown numerous times, they can afford
it. Much of their competition could not.

Not that I disagree with the sentiment, something definitely needs to be done
because the current mantra clearly doesn't work. But the issue is far more
complicated, as the original essay mentioned points out, then just simply
raising the minimum wage. I think raising the minimum wage would, in the end,
be a good thing; but I believe there would be a wave of negative consequences,
and there are many, that would have to be survived. Many people who are
against raising the minimum wage point out those negative consequences, but
cannot see beyond them. That doesn't mean they should be ignored.

~~~
gerbal
First off, most of what follows is anecdotal.

I've worked at a couple of mom-and-pop businesses. Most of our customers at a
couple of the places were people working at or just above minimum wage.

Were our customers to have their income doubled it would be great for the
business. More customers with much more disposable income? That sounds
fantastic. And in turn the cost of higher wages for the employees is smaller
than the reward from a more prosperous customer base. On a $2 cup of coffee
for instance, the wage cost is somewhere between $0.15 and $0.50.

A customer making $8/hour would balk at a $3 cup of coffee, but a customer
making $16/hour would have no issue with it. Even accounting for a 15% to 25%
increase in cost all the way down our supply chain, we would still come out
the better for it. As would most businesses.

Even businesses were wages are the majority of the expenses wouldn't be hurt.
If the cost of a service is 75% labor wages, and that cost doubles, you need
to raise the price of that service by 35%, right? But your lowest income
customers have a 100% increase in income. Probably a multi-times increase in
disposable income. That's good for business.

The problem with competing with walmart has little to nothing to do with labor
and wage costs. It has to do with Walmart's highly optimized supply chain and
one-stop-shopping at very low prices. Doubling of wages would have very little
impact on the dynamic between Walmart and smaller businesses.

Though smaller businesses may benefit from a consumer base with more
disposable income having to be less price conscious and not having to shop at
walmart out of economic necessity.

~~~
pdx
Speaking for myself and my wife. We debated for years whether to get a house
cleaner. Finally, we have made the leap and have somebody come over once every
two weeks to clean. However, if that house cleaning company were to raise
their rates 35% to compensate for increased wages, we would go back to
cleaning our own house, without question.

I suspect that kind of thing could quickly make some businesses that had been
viable, no longer viable.

~~~
lhc-
Many of their potential customers would also benefit from increased wages as
well though, so while you may have to drop the services, there are potentially
many others who are now willing to purchase it.

------
joelhaus
The academic term for this area of economic study is _Marginal Propensity to
Consume_ [1]. It's defined as:

    
    
      "The proportion of an aggregate raise in pay that a 
      consumer spends on the consumption of goods and 
      services, as opposed to saving it."
    

I don't think it's very controversial.

[1]
[http://en.wikipedia.org/wiki/Marginal_propensity_to_consume](http://en.wikipedia.org/wiki/Marginal_propensity_to_consume)

------
nickthemagicman
What constrains landlords rent prices?

If you increase the minimum wage won't the landlords just subsequently
increase rent?

So essentially increasing minimum wage is just funneling money to landowners?

~~~
dragonwriter
> What constrains landlords rent prices?

Competition.

> If you increase the minimum wage won't the landlords just subsequently
> increase rent?

Yes, they will -- as will people selling other goods that are in demand by the
people receiving more income. Under any reasonable assumptions about supply
and demand elasticity, those receiving more income as a result of the minimum
wage increase will _still_ be better off _after_ considering the specific
inflation in the price of certain goods and services resulting from the
greater income received by them as a group, but not by as much as a pre-
increase analysis that ignored the market-specific inflation would suggest.

> So essentially increasing minimum wage is just funneling money to
> landowners?

One effect of increasing minimum wage will be funnelling some money to
landlords and others selling goods and services to the people receiving
increases, while funnelling some money _away from_ those selling goods and
services to the people and corporatiosn _paying_ the increases. (Often times,
those will be the _same_ people, though different _specific_ goods and
services.)

------
nileshtrivedi
So if the billionaires are putting their wealth in savings, isn't it because
they are getting good returns on it, implying that there is demand for capital
in the form of loans? What is to say that this isn't what the economy needs?

------
lnanek2
Wow, a business article saying money sitting in a bank account does nothing?
Are they that clueless? It is leveraged many times over and invested and used
by the bank. Putting a dollar in the bank lets the bank pretend they have
forty.

~~~
chrisbennet
We were taught in school that a bank takes deposits and lends them out as
loans but that's not how it really works. When a bank makes a house loan for
example, the house is added to their balance sheet and it becomes an asset
that they can lend again, minus a fraction.

------
taeric
The source essay for this is equally as good of a read. If not better,
honestly.

~~~
taeric
Oddly, I posted it and it got turned into a dead link. :( I'm not even sure
what that means. I'm assuming I messed up the posting.

------
budu3
> Had he been born in Africa, Hanauer points out — where the potential
> customers for his entrepreneurial efforts would have barely enough money to
> survive — Hanauer would likely be selling fruit by the side of the road

Africa in not a country. It's a continent with 50 plus countries, some with a
middle class with decent spending power. So there's a high probability that
Hanauer would in fact not be likely to be selling fruit by the side of the
road growing up in a middle class family (as he did in the US) in an African
country.

~~~
GioM
Unless it's been revised, the actual article (not the business insider
summary) says "Somalia or Congo", not Africa. See page 3 of the link below.

[http://www.politico.com/magazine/story/2014/06/the-
pitchfork...](http://www.politico.com/magazine/story/2014/06/the-pitchforks-
are-coming-for-us-plutocrats-108014.html)

------
ancap
>To anyone reared on the political orthodoxy of the moment... "higher wages
cause higher unemployment,"

This is not political orthodoxy at all this is economic law. Anyone who
understands the basic principle of supply and demand knows that higher price
lowers demand. [http://www.economicpolicyjournal.com/2014/06/asian-
community...](http://www.economicpolicyjournal.com/2014/06/asian-community-
letter-explains-damage.html)

~~~
ssmoot
Yes, but better wages don't necessarily equate to higher prices.

During the domestic auto bankruptcies it was a bit grating to hear people
ramble on about the "high" wages of union workers being at-fault for the
domestic's inability to compete.

Considering domestic vehicles are already generally less expensive than
imports, just how much more less expensive do they need to be to get people to
buy them? If union labor represents $1,000 of every Malibu sold, and union
wages were cut in half across the board, and that savings was passed onto the
consumer with a $500 lower MSRP, would that move significantly more vehicles?

I'd like to think common sense would say "of course not". The price is already
(generally) very competitive.

It's like basic reasoning skills go out the window in these discussions.

To make the argument higher blue-collar wages are a problem, first you (you'd
think obviously) need to quantify the impact of those wages. Is it 2% of the
cost? 5%? 10%? 20%? Would killing the retirement benefit, and cutting the base
salary in half drop that ~$60 total compensation package to $35? If labor
compensation is 10% of the cost of a $30,000 vehicle, you can now
theoretically (if the savings aren't simply reinvested elsewhere, or disappear
in management bonuses) drop the price of the car to $28,750.

All of those "savings passed onto the consumer" assumptions seem real unlikely
to me. But even then, is that $1,250 savings going to move more product?

Probably not. While there are always exceptions, most people who aren't
already considering a domestic vehicle aren't making their decision on price
alone. Price isn't even the primary concern for someone who purchases a Camry
over a Malibu (obviously; and there's nothing wrong with that).

So yeah... I don't think increased wages for the average worker have a whole
heck of a lot to do with higher unemployment. And there are a lot of business
advantages to being an employer who takes care of their people IME. Especially
when applied to software development (you'd think here of all places that
would be glaringly obvious).

I think your comment is needlessly snarky. You could as easily suggest that
"Anyone who understands basic economics knows that higher wages increase
purchasing power" (in the short-term at least). Furthermore that the people in
the lowest pay brackets are the ones most likely to spend it in ways that
benefit the overall economy. Which is why (as distasteful as feels sometimes)
extending unemployment insurance is one of the most economically beneficial
and stimulating things you can do in times of recession. Those dollars are
going to get spent, and they'll get spent where they'll be most effective at
creating new jobs.

~~~
ufmace
I think he's talking about the labor market here. Conventional microeconomics
would suggest that increasing the price of labor by setting or increasing a
minimum wage would reduce the demand by employers for the product, human
labor.

That may be true in the limited case, but the argument is clouded by questions
like whether increasing income of all of the employers' customers would allow
the employer to do more business or raise prices, thus potentially increasing
their demand for labor to compensate.

I can't see any doubt that this would happen, but the extent is hard to
determine. How much will the average consumer's wages actually increase, and
how much of that will be taken up by increased prices in other goods they buy?
If they end up with more money, what will they do with it - save more, buy
higher-quality goods, buy luxuries? So the overall effect on any particular
business is unknown.

~~~
ssmoot
When we're talking about minimum wage however (other comments he made), that's
just patently untrue though. Even if a service job could get by with fewer
labor hours without impacting their sales negatively, there are always plenty
of other businesses who couldn't.

I mean, I worked those jobs when minimum wage was like $4.25. I haven't
noticed a drop in employment at the franchise or small business level. Have
you? From a practical standpoint, these places aren't just spreading around
labor hours willy-nilly today. If they find some "fat" to trim, they do so, so
the management can take home a larger slice of the pie.

------
paulhauggis
It's like saying: you didn't earn that PhD, since we all pay tuition that fund
the school, we all earned it for you.

it seems it's cool these days to never give the "rich" any credit. When hey
leave, and take many of the jobs with them, will we still be parroting this
nonsense that they don't create jobs?

~~~
Jtsummers
That's not really analagous to Hanauer's thesis. His point is that believing
the rich, on their own, to be the job creators is absurd. That it's the entire
economic system that enables job creation, and the wealthy are only one
component. And given his attitude in the original essay [1], he doesn't deny
them their credit, he just thinks "Job Creators" is a loftier title than they
deserve.

[1] [http://www.politico.com/magazine/story/2014/06/the-
pitchfork...](http://www.politico.com/magazine/story/2014/06/the-pitchforks-
are-coming-for-us-plutocrats-108014.html)

------
spindritf
What about clickbait sites selling demand-side economy story as some sort of
revelation despite being heavily represented in the field of economics and
government policy for the last hundred years? Do they create jobs? Or just
confusion?

While it's true that Americans take less money home, it's not true that
compensation has fallen. In fact, "total compensation reflects growth in
productivity."[1]

BTW What actually allows trees to grow is the CO2 from the air. That's what
they're made of. Partial credit for mentioning water.

[1]
[http://www.nber.org/digest/oct08/w13953.html](http://www.nber.org/digest/oct08/w13953.html)

~~~
Jtsummers
> BTW What actually allows trees to grow is the CO2 from the air. That's what
> they're made of. Partial credit for mentioning water.
    
    
      But what actually grows and sustains trees is the combination
      of the DNA in the seed and the soil, sunshine, water,
      atmosphere, nutrients, and other factors in the environment
      that nurture them.
    

Pretty sure they cover CO2 in that list under the broader category of
atmosphere.

