How politicians use claims about jobs to mislead us

Ross Gittins
The following article (5 April 2017) by Ross Gittins, economics editor of the Sydney Morning Herald, appeared in the Fairfax publications. This is a worthwhile contribution to the needed debate on the connection between jobs and a healthy economy. A debate that needs to be centred on breaking through the mantra that lowering what is paid to labour, is the way to prosperity. In practice, this has led to most people being worse off. An alternative is needed that will create decent jobs and will result in an economy where the benefits do not just go to a few.

What’s the four-letter word politicians of both stripes most use to bamboozle voters? Jobs. Or, as Neville Wran, former NSW premier and never given to understatement, used to say Jobs, Jobs, Jobs.

Economists and business people worship at the shrine of Growth because it raises their material standard of living. Materialism is the god of our age.

But growth is rarely what the pollies try to sell the public on. No, what presses the right button with ordinary folk is jobs.

Just as most of us don’t know much about art, but know what we like, so most of us don’t know much about economics, but do know there’s an eternal shortage of jobs. We can just never hope to have enough of them.

So the sleaziest, most obviously self-aggrandising business person knows to say about whatever money-making project they want permission to undertake that it will create loads and loads of new jobs.

No matter what damage your scheme would do to the surrounding environment – and thus to the prospects of other industries – nor how great the risk you’ll skip town if it’s not working out, promise jobs and you’re already half way in the door.

You can always find a friendly economic consultant who, for a small consideration, will do some modelling of your proposition and produce a generous – even exaggerated – estimate of the many thousands of jobs your plan will generate. Directly and, not forgetting, indirectly. Thousands.

Then there’s a high chance government politicians will take up your cause, accepting without question or qualification you inflated job estimates, and castigating all those who lack the vision to see how much your scheme will contribute to the community’s wellbeing (not to mention their re-election).

This, among many other instances, is the story of the resources boom, which our leaders applauded all the way and made little effort to control.

Think of all the jobs created. The main price we paid was that the dollar, caused by the boom to stay way too high for too long, prompted a slab of our manufacturing sector to give up the struggle.

Perversely, the highly-publicised loss of jobs that followed has served only to reinforce the public’s conviction that we can never have enough jobs and that anyone claiming to want to create a few should be welcomed without further question.

It’s true, of course, that a healthy rate of growth in employment is the most important thing we should expect of our economy, given our growing population.

Trouble is, our uncritical obsession with jobs – any jobs – leaves us open to manipulation by business people and politicians with their own barrows to push.

Promoters of projects exaggerate the number of jobs they will create secure in the knowledge that politicians and the media will repeat their claims without bothering to check them.

And no one but no one will return a few years later to check the gap between what was promised and what was delivered.

With mining projects, too little is done to remind people that almost all the promised jobs are for the construction, not running the thing. As soon as the project’s completed, the construction workers go back where they came from – often overseas – leaving the nearby towns as flat as a tack.

Many development projects require skilled workers. But workers with particular skills are usually in short supply, meaning the project doesn’t create additional jobs for plumbers or whatever so much as create vacancies that have to be filled by attracting plumbers away from their existing jobs elsewhere.

Every dollar anyone spends has indirect, flow-on effects beyond what was originally spent on. But these indirect effects are hard to measure and easy to exaggerate.

My rule of thumb is that whenever you hear the promoters of projects talk about all the jobs to be created indirectly, they ain’t to be trusted.

As you recall, the centrepiece of Malcolm Turnbull and Scott Morrison’s “plan for jobs and growth” was their desire to cut the rate of company tax from 30 to 25 per cent over 10 years.

Last week the Senate agreed to cut the rate to 27.5 per cent for companies with turnover under $50 million a year.

Turnbull and Morrison have chosen to regard this a big win, and are already assuring us it will do wonders to encourage small and medium businesses to expand and create jobs.

ScoMo​’s demanding to know whether Labor would reverse the tax cut and spend the money on other things, such as education and health, accusing it of “playing cynical politics all along with no regard for the jobs and wages that are at stake”.

Get it? Cutting company tax creates jobs; not cutting it doesn’t. Nor does spending the money on education and health create jobs.

This is economic nonsense. ScoMo regards it as a self-evident truth that cutting taxes creates jobs whereas raising taxes destroys jobs. Unfortunately, no one’s told the Scandinavians.

In fact, there’s no empirical evidence of a relationship between countries’ level of taxation and their success in creating jobs.

ScoMo’s own Treasury modelling predicts that the full company tax cut would do almost nothing to increase employment.

Beware of politicians trying to sell propositions on the basis of all the jobs they’ll create. They just know which of your buttons to press.

 

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