The Ambiguous Unemployment Statistic

The job market is a shambles. Companies are laying off, people are out of work, and it’s just a bad situation.

Or is it?

Even though it makes good press, unemployment by itself isn’t a good measure of how the economic health of the nation. The focus shouldn’t be on keeping people employed. Here’s an example.

When self-checkout machines were first introduced in the supermarket, I heard a woman remark to someone else that she refused to use it because it caused someone to lose his job. While she was correct in that the introduction of such a machine will indeed lower the demand for cashiers (and thus lead to the hiring of fewer cashiers) and some cashiers may lose their hours because of it, she was grossly incorrect in thinking this was a bad thing.

What the machine does is make it easier for people do get work done. It’s a device that saves time and labor. Imagine what life would be like if we thumbed our noses at every device that saved labor and caused job loss. Farmland would still be plowed by hand. People would still deliver ice to your door. All our clothes would still be sewn by hand. We would be living in a very different world. On the whole, the self-checkout machines are a good thing. Temporarily bad for the individual cashier, but a boon to everybody who goes to the supermarket- not to mention the new productive jobs created at the factory where the checkout machines are assembled and the ones created by when the machines need repairing.

The key is production, not employment. It’s much better to have low employment and high production than the other way around. That way, people’s efforts go further. What if 10% of the world’s population could do all the work to satisfy the needs of everybody? We would have 90% unemployment, but it would be an economic miracle.

Government can create jobs, but it generally cannot create productivity- especially on a national scale. What it gives to B it must first take from A. So the result is usually theft, waste, political favoritism, and a greater dependence on the state.

For these reasons, we should not look to the government to "fix unemployment." The best we can expect from government is to either create more government jobs (almost never a good), or to create another bubble in some industry it decides to favor ("green jobs" comes to mind). This is little more than a complicated form of welfare.

That the government bears the responsibility of being the job-maker is a myth that needs to be dispelled. If the government should focus on anything, it should be production, rather than employment. With an unlimited power to tax and spend, creating employment should be easy. But productivity is harder to come by. The only thing government produces well is more government. If government wants to do something positive, the best thing it can do is remove barriers that inhibit private sector activity.

If we want to set ourselves on a solid economic footing for the long term, we need a reduction in government. Less government means lower taxes, which puts capital back in the hands of the private sector- the only place we will ever see any innovation and productivity.

Just don’t get too optimistic when they say the job market is on the rebound and unemployment is dropping. It may just be a disingenuous way of telling us that growth of government is continuing unabated.