Job Creation Obeys Law of Supply and Demand

Jobs are governed by the same factors that drive all other transactions. Count all of the job openings and you have the aggregate demand for employees at current prices. Count all job seeking individuals and you have the aggregate supply of available employees at current prices. Any government that artificially manipulates the supply of employees, the demand for employees, or the pricing in job transactions...will fail. History is littered with examples. The latest example is Greece, where the government took it upon itself to dominate all factors affecting the aggregate supply, demand, and price of jobs.

Shortage and Surplus - Supply, Demand, and Price

Like it or not, the job creation market will take supply, demand, and price into account. If there is a shortage of a certain skill set, market forces will increase wage compensation until the supply of people with that particular skill set increases. If there is an over-abundance of supply of low skill employees in the U.S. (and around the world), wage compensation (price) will fall until the supply is absorbed. Anyone claiming to support the truth of science realizes the forces depicted on the graph above act like gravity. You can complain about gravity all you want, but you are not going to be able to use government effectively as a tool that can change the law of gravity or the law of supply and demand. Generally speaking, the value of low-skill labor will always be.......low. Merely "pretending" that low skill labor is worth more than the market is willing to pay for it is simply wishful thinking. Any individual who is dissatisfied with his or her relative level of compensation would be well advised to do what billions of individuals have done.....improve his or her skills.

From a practical standpoint, the current discussion of yet again extending unemployment benefits to people who have not worked for 99 weeks is absurd. While the policy argument for extension might appear on the surface to be “compassionate,” it actually poisons our entire system. Resources used to pay unemployment benefits do not materialize from thin air. They must be extracted from the entire system by adding costs that exacerbate the conditions.
The simple solution to the "jobs situation" is to accept a market-based pricing of jobs. At all levels, work skills that are allowed to be priced properly, will be utilized. And when labor is being “utilized” we call this process, “job creation.” Unemployment compensation is an unsustainable artificial incentive. It perversly bolsters the process of the system NOT utilizing potential employees to create value.

America has been deceived into thinking a market-based approach to both the available supply of jobs and available employees won’t work. We have been sold the bogus idea that artificial government manipulation of the supply-demand law is a better functioning alternative. We could write ten paragraphs on the ways our government has forced jobs to be mis-priced and therefore destroyed to illustrate the point. However, it is easier to simply point to the results as the proof. Potential employees are being dramatically under-utilized in America.

Unfortunately, one way or the other, as the nation of Greece is about to learn, eventually America will be forced to return to pricing jobs based on the actual market value of the output. In the interim, all artificial attempts to alter the realities of supply and demand for employees and jobs must be susidized by borrowing. Adding to the real costs of job creation based on some idealistically absurd notion of “social justice,” will continue to backfire and drive employment down. The sooner we admit the laws of supply and demand apply to job creation, the sooner the American dream will be restored.

Job Creation Obeys Law of Supply and Demand