Lew Rockwell - on Job Market

The terrible job market has vexed an entire generation. It shows no hope of impr
oving anytime soon. Young people are shut out. College students are taking refug
e in matriculation without end. Thirty-somethings are zoning out in their parent
s' basements and attics. Despair for the future has become a theme of American p
ublic life.
The question we must ask is: why is unemployment stuck at 10% in the narrowest m
easure and as high as 30% for some demographics?
The usual answer is that the broad economy is not recovering. That's true but su
perficial; it explains nothing. We have a problem of a specific kind with the jo
bs market. To see it as just a symptom of slow growth is an excuse for politicia
ns and central banks to resort to reckless policies in the name of fixing the bi
g problem without addressing the reality on the ground.
Some new data reported by the Wall Street Journal helps get to the core of the p
roblem in greater detail. In the current environment, which the National Bureau
of Economic Research (NBER) laughably calls a recovery, business start-ups of jo
b-creating companies have not kept up with closings.
As compared with other recession aftermaths, new businesses are not hiring as th
ey once did. The number of companies with at least one employee continues to fal
l at a rate we've not seen in 18 years. Everyone speaks of this as a recovery, b
ut the numbers don't add up. New jobs in new companies are appearing a rate 15%
less than the last recovery.
Let's try to understand what is going on here. In boom times, companies tend to
bloat up in every area, especially in their staffing. Unemployment is always a f
eature of the bust because businesses shed jobs and expect more efficiency and p
roductivity out of the remaining staff. Many businesses close and lose all emplo
yees.
Whereas workers once had no problem finding jobs and naming their price, there i
s now a surplus of workers and a job shortage, at least at the wages that the un
employed are demanding.
What usually fills the gap here are new businesses. In recovery times, entrepren
eurs initiate new projects and hire the unemployed workers to staff them. The un
employed are usually willing to work for less and are willing to learn new skill
s in a new business environment. These new businesses become a major source for
economic growth and rising living standards.
Without new businesses, there would be no net job growth at all. In post-bust ec
onomies, it is these new businesses that are responsible for soaking up the exce
ss labor. That's because the older and larger businesses are not willing to take
on the risk of new employees and have already adjusted to doing business with f
ewer.
Until these businesses come along, unemployment will likely persist. And this is
precisely what is happening right now. And so, now that we have a better idea o
f the mechanics of the high unemployment rate, we have a better idea of what que
stion to ask and how to solve the problem.
Where are these new businesses and why are they not starting as we might expect?

Let us count the ways.

New businesses need to depend on a stable legal environment and a bright outlook
for the future. These are both missing. The supposed recovery has been phonied
up in every conceivable way: nationalizations, bad debt swept under the carpet,
money creation by the Fed, make-work jobs paid for by the taxpayer. No one reall
y believes all the hokum. The question is not whether the recovery is phony; it
is: what is real and what is not real? No one knows for sure.
Despite every attempt by the Fed to provide oceans of free credit, banks are sti
ll extremely reluctant to lend when the payoff is not there and the risks of len
ding are extremely high. This means that prospective new businesses have to rais
e their own capital from a massively depleted capital stock.
Looking at the risks, it makes far more sense to hire no employees beyond tempor
ary contract workers. Consider the payroll tax, the largest burden on both emplo
yees and employers. It does not benefit either party at all. It is sheer robbery
that vastly increases the cost of hiring.
The problem of health-care mandates is very intense. Employees who expect these
benefits are mostly going to choose between obtaining them and getting a job. Bu
t for certain firms and under some conditions, they are unavoidable and unpayabl
e.
Business taxes are all too high and probably going higher. Regulations on all bu
sinesses in every sector of life have been intensifying for decades. No industry
is free of them. Even formerly frontier sectors like software are becoming lega
l thickets of patents, protections, and scary mandates.
The minimum wage is way too high to encourage new job growth among new businesse
s. And given all the legal mandates and potential lawsuits, everyone knows that
once you hire employees, you are pretty much stuck with them for some period of
time. You can test the waters. But you have to be sure. And no one is sure.
Businesses thrive in an environment of freedom. But enterprise is no longer free
in any area. In boom times, the consequences are less obvious. In the bust, the
regulatory thicket, the taxes and mandates, and the legislative threats all bec
ome decisive in a way they were not before.
None of these problems are intrinsic to the business cycle. They are all imposed
by government. The same problem afflicted the economy during the Great Depressi
on, but back then the central planning was newly imposed. Now is different: the
old central planning is killing us day by day, even without dramatic new legisla
tion.
It could all be changed. Congress and the president and the courts could reverse
it all tomorrow, restoring an environment of freedom and free enterprise. Jobs
would recover quickly. Hope would be back in a matter of weeks and months. The e
conomy would genuinely recover.
What is keeping that from happening? The lack of political will and the insatiab
le desire of the State to keep eating away at our liberty and property.
It isn't complicated. The State is living parasitically off our living standards
and hopes for the future. It must die, if we are to live well again.

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