Real jobs emerge from the market, not government. In a free market, new jobs emerge due to a need in the market, generated by supply and demand and the genuine need for labor. In far too many instances, the government works to artificially manipulate jobs and wages through subsidies and regulations.
Corporate subsidies are also bad economics. When the government uses its influence to shrink or grow a certain industry, it is not only choosing winners and losers, it is also forcefully reallocating resources away from where they may be better utilized. Even the wisest public officials cannot allocate resources as fairly or effectively as capital markets, which efficiently set the prices of debt or equity securities issued by companies. Public officials try to pick winners and avoid losers but experience shows they seldom succeed.
As the John Locke Foundation notes, “Unlike the maintenance of low across-the- board tax rates or the provision of core public services such as education, highways, and public safety, corporate welfare doesn’t benefit everyone. It requires public officials to intervene in private markets to decide which businesses or regions are worthy of support. This sets the stage for increased special-interest lobbying, strings-attached campaign contributions, and unethical behavior in public office.”
Two areas where the government has interfered in the employment market and cost people their jobs are the minimum wage and occupational licensing. Minimum wage laws require businesses to pay their workers higher wages, forcing businesses to make adjustments elsewhere to offset the increased costs in order to maintain profitability. These cuts lead to reduced hiring rates, fewer work hours for employees, diminished employee benefits, and higher prices for consumers.
Overuse of government-mandated occupational licensing reduces competition and increases prices of basic services; all in the mistaken belief the government is improving the quality of services. Less-stringent certification and voluntary certification are viable alternatives that allow consumers to choose services themselves.
The employment market works best when the government does not interfere. Corporate subsidies, wage controls and unnecessary licensing standard manipulate how jobs are allocated in the economy, which erodes the number of jobs available while allowing the government to choose winners and losers and encouraging waste and corruption.
It is better to leave money in taxpayers’ hands than to give it to a few politically chosen individuals and businesses in hopes that they will make the best investment decisions. Lower tax rates benefit the economy as a whole.
The Heartland Institute's experts on employment issues are available for legislative testimony, speaking engagements, and media interviews.