Creating Jobs in Oregon
By Christopher Gergen
“We cannot solve our problems with the same thinking we used when we created them.” – Albert Einstein
Solving the grave economic challenges facing Lane County and the State of Oregon cannot be accomplished by mouthing the same tired rhetoric based upon faulty assumptions about the economy. We need fresh, original solutions based in reality.
Over the course of the last two installments (Part 1, Part 2) in this four part series we discovered why the usual suspects of job creation—government, “stimulus spending,” entrepreneurs and small business—do not by themselves create permanent jobs:
- Government does not create jobs by legislating, taxing, and regulating businesses to the point they leave the state or decide not to move their companies to Oregon in the first place.
- “Stimulus spending” on infrastructure projects only creates temporary jobs while the project is in progress. Once it ends, the jobs end with it. Also, “stimulus spending” forces governments to raise taxes on everyone, which in turn drags down consumer spending, further depressing job creation.
- Entrepreneurs and small businesses can’t create permanent jobs absent demand for their products.
- When companies and small business owners invest capital into the marketplace they hire under the assumption that demand will be sufficient to sustain the new jobs. Should demand fail to support the venture, the jobs created are lost—and thus were temporary.
In this installment we’re going to discuss where sustainable jobs really come from. Then in our final installment we’ll examine the proper roles of government, small business, and consumers in creating a healthy economic environment.
Understanding demand is key to understanding how consumers behave and how market forces work. Today we’re going to focus on two types of demand: market demand and consumer demand.
The macro solutions for Oregon’s and Lane County’s economic ills are found in creating market demand for goods and services, which, in turn, is created by consumer demand. To accomplish this, the Oregon Legislature needs to create a healthy economic environment by slashing a burdensome regulation regime.
A 2009 study by Cal State Sacramento economists on the effects of the State Legislature’s over-regulation of the Californian economy (1) found “…that the total cost of regulation to the State of California is $492.994 billion, which is almost five times the State’s general fund budget, and almost a third of the State’s gross product. The cost of regulation results in an employment loss of 3.8 million jobs, which is a tenth of the State’s population.” Oregon faces a similar challenge.
Regulation kills businesses and collaterally kills consumer demand in Oregon because the consumer cannot demand an Oregon product from a producer that does not exist in Oregon. He or she may still demand the product, but it now must come from a more business friendly state.
The Oregon Legislature has the power to erode or even destroy Oregon’s market demand. That destroys existing jobs and discourages creation of new ones. It’s as simple as that. If the market demand for Oregon goods and services is artificially low or non-existent for goods and services in demand elsewhere, it’s most likely because the business environment in Oregon is not advantageous to the producer of that good or service operating profitably. That fact alone means that while demand could potentially be high for a particular good or service, it makes no difference to our economy because Oregon doesn’t produce or offer it—which means these jobs don’t get created.
Market demand, which creates and sustains jobs, is driven by individual (i.e. consumer) demand. A group of consumers all buying the same thing creates market demand. At its optimum, this demand can even shield a company against a severe recession. Apple is a great example.
In January, 2012 Apple posted enormous earnings and revenue for the fourth quarter of 2011. To put into perspective how well Apple performed, the consumer demand for its products and services created more profits ($46.33B) for Apple than Google had in total revenue ($10.8B) (2) (3). It’s worth noting that Apple not only isn’t laying people off; it’s hiring—but not in Oregon.
At the other end of the spectrum is General Motors. In early March, GM announced it was suspending production of its Chevy Volt for five weeks (4). Chris Lee, GM spokesman, cited the reason for the suspension of production was “matching (its) production levels with demand and building to market.” This “matching…production levels with (consumer) demand and building to market (demand)” caused 1,300 people to temporarily lose their jobs. The Chevy Volt has continuously missed its sales (demand) targets because consumers just don’t like the product —resulting in job losses.
Public and private sectors both have a role to play in creating an environment that increases consumer demand. In our last installment we will look at specific things the public and private sectors in Lane County and Oregon can do to increase demand for Oregon goods and services. Specifically, we’ll look at how permanently lowering and reallocating public spending can bring Oregon’s economy out of stagnation. Well also look at the role wages play in this process.
Be sure to join me for this discussion in the next issue of “Lane Solutions.”
Note: For further study on the subject of economics, please click here for a good primer: http://www.investopedia.com/university/economics/default.asp#axzz1rwn7hGc4
Chris Gergen is a Springfield based financial advisor and is the author of The Quality Paradigm: Why You and Your Business Need it to Succeed. He blogs at Be Epic.Daily. He can be reached via email at chris@chrisgergen.com.
(1) http://hotair.com/archives/2009/09/25/study-regulation-costs-california-economy-almost-500-billion/
(3) http://investor.google.com/earnings/2011/Q4_google_earnings.html
(4) http://www.mlive.com/auto/index.ssf/2012/03/gm_to_stop_chevy_volt_producti.html
Exactly. You can’t solve problems with the same thinking that created them. The thinking being – give more money to the rich and they’ll create jobs. They have 90% of the wealth, where are the jobs? Oh yeah, China and India. That’s where they spend the tax cuts you give them.
Government does not create jobs by legislating, taxing, and regulating businesses to the point they leave the state or decide not to move their companies to Oregon in the first place.
Giving them tax incentives to keep jobs HERE is what will matter. Tax incentives like cutting payroll taxes, which your hidden backers, the GOP, opposed.
“Stimulus spending” on infrastructure projects only creates temporary jobs while the project is in progress.
DUH. That’s in order to create the demand you cite below, in order to keep the economy from crashing entirely. That was necessary because the people you gave tax cuts to LOST all the money in mortgage “investment” schemes.
Entrepreneurs and small businesses can’t create permanent jobs absent demand for their products.
Ah, DEMAND. Which requires a populace with MONEY. So why are you opposing college loan assistance, higher wages, health care premium assistance, and other measures that will put money in the pocket of people who create the demand.
Get Out Of The Way. You only cause compromises that hurt economic stability. A Republican has never created a vibrant economy. EVER.
You’re “Healthy Communities” front isn’t fooling anybody.