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June 29, 1993
"The Jobs That Would Be"
San Jose Mercury News
By Timothy Taylor
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WHEN PEOPLE talk about "saving jobs," what they usually mean is saving identifiable jobs of people who can be interviewed on television, at the cost of people who cannot easily be identified.

Consider the example of the North American Free Trade Agreement. Among the economically literate, there is little doubt that NAFTA will destroy a certain number of jobs and will create even more, ending up as a net gain for the U.S. economy. However, when a company shuts down a U.S. plant, workers, political leaders and community organizers all clamor for the media spotlight.

But how can one locate the workers and towns that suffer because the lack of free trade means that a company doesn't have the opportunity to expand production? The company just says it's not hiring; it doesn't explain (and may not even know) that a job could have been offered if trade with Mexico were easier.

When a military base is closed, the talk is always about how to help those particular people find new jobs. But what about all the people who would have jobs if, say, the Presidio in San Francisco were fully converted to civilian use? In one study of 100 former military bases between 1961 and 1986, the total number of jobs increased within a few years after the base closed, as civilian industry replaced defense.

But the people who would have been hired if the base had closed down don't have any way of knowing who they are. They can't form a lobbying group, or kick up a fuss at legislative hearings.

The city of Oakland recently announced a "Hire Oakland" program, which requires that 40 percent of the hours on public works projects in the city must be performed by Oakland residents, and all new hires on such projects must be Oakland residents. Of course, this program does not save or create a single job; it's about taking credit for jobs that would have existed anyway.

Moreover, giving preference to local contractors often ends up costing taxpayers more, since it shuts out nearby competitors who might have offered lower bids. But the money that would have been spent on other items, if the city had taken a lower bid, is hard to spot. Competitors from other towns, and the workers they would have hired, are equally invisible.

These examples could easily be multiplied. Think of "saving" the jobs of farmers, with taxpayer money that would otherwise have been spent on other goods and services, or "saving" the American manufacturers of computer display screens, at the cost of hurting American computer manufacturers.

An economics professor of mine once put the underlying lesson this way: "Economists don't believe in real people. They believe in statistical people." What he meant, of course, is that public policy shouldn't be determined by which side has the most people who are easily featured on the evening news. Those who are injured by economic change are almost always more visible than those benefited by it -- but that doesn't mean change is a bad idea.

If the government wants to create jobs, the most effective way is to support the private economy. Nurture a well-skilled workforce, with opportunities for retraining as needed. Assure that business can operate in a stable macroeconomic environment, with low inflation and relatively stable exchange and interest rates. Support the development of new technology and investment, and avoid imposing regulatory burdens in an unnecessarily obtrusive way.

The appropriate role for government in job creation is like the difference between gardening and farming. Gardeners focus on a limited group of particular plants; they like pointing to particular plants, and taking credit for them. Farmers, on the other hand, don't much care whether a particular stalk of corn dies off; they know that focusing on a particular plant is not economically productive. Instead, they care about the general conditions for growing a healthy range of crops.

This policy agenda is quite activist, but only within certain areas. It focuses on accelerating economic change and adapting to it, not trying to slow it down. It accepts that jobs will constantly be destroyed -- but then focuses on creating new ones.

As George Bush found out at the polls last November, the process of private job creation hasn't worked especially well in the last few years, but it shows signs of picking up. The two most recent jobs reports, for April and May, showed that private business hired more than 200,000 additional workers in each month, the first time that has happened in more than three years. More people have jobs in this country right now than ever before in U.S. history.

Across Europe, by contrast, job growth has been slow for more than a decade, and economic forecasts point to an unemployment rate exceeding 10 percent this year and next. Surely, the problem is not that the relatively interventionist governments of Europe don't try hard enough to "save jobs." More likely, their attempts to save old jobs have been the enemy of creating new ones.

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