How a job is created
markmaunder.com
markmaunder.com
a) The sentence "You create jobs by helping grow existing businesses and helping create new businesses." is practically a tautology.
b) "Creating jobs" is a complicated issue in the first place. If I start a new company with fifty employees but drive a competitor who used to employ sixty employees out of business, have I created any jobs?
c) "Creating jobs" is not the problem. "Creating good jobs" is closer to the problem. You could easily create jobs by cutting welfare and offering all of it's former recipients government jobs paying $50/day to dig holes, but this would not be a positive outcome.
d) Creating good jobs in the long term is largely a problem of improving productivity. This means investments in education and infrastructure, and reducing drags on efficiency.
e) He's got a line in there arguing in support of bankers. Banking, like tax preparation or law is a a field that is more "administrative overhead" than a productive industry. Unless we are providing these services to foreigners these fields provide little benefit to the country.
In conclusion I'm not really sure what the point of his article is to do except complain that the government isn't helping him enough.
Creating "good" jobs then becomes something more like "creating good jobs that can can keep the current population employed". I don't hear many people talking in those terms anymore.
They might not be working as programmers at startups but there's still a lot of worthwhile tasks we could get these people doing with the right preparation and support.
Problem is, evidence suggests that retraining doesn't work very well.
Here's a heartbreaking series of stories about furniture workers who were laid off when their factory outsourced their jobs. The reporter followed them as they took a community college training program, and tried valiantly to get jobs at the Google data center opening nearby:
http://www.npr.org/templates/story/story.php?storyId=1215161...
http://www.npr.org/templates/story/story.php?storyId=1215673...
http://www.npr.org/templates/story/story.php?storyId=1215767...
Unsurprisingly, virtually none of the people got jobs at Google, and the ones who didn't ended up doing things like working at WalMart at much lower wages.
It's a myth to pretend that we can re-educate enough blue-collar workers to make a dent. We're going to have to find another way, and my suspicion is that it's going to involve a resurrection of trade barriers until older workers can retire.
I'm not sure, however, that the examples cited within them are entirely fair - they took middle aged furniture workers and tried to get them jobs at Google after a few years retraining. Of course a guy who's had six weeks of classes in Linux isn't going to get a job at one of the most technical companies in the world.
What I was thinking was more along the line of retraining them to do useful blue collar jobs - for example HVAC maintenance - which can't be easily offshored and still is useful to society.
It's a myth to pretend that we can re-educate enough blue-collar workers to make a dent. We're going to have to find another way, and my suspicion is that it's going to involve a resurrection of trade barriers until older workers can retire.
I'd be reluctant to do this, as it's essentially a tax on everyone else to support them and essentially surrendering to the fact that we can get very little value out of these workers.
Well, yes...the story is tragic because they never had a chance. But I wouldn't be quick to assume that this is a story specific to Google. You'll note that a lot of these people end up doing menial work, even after their re-training program. One presumes that if it were possible to find better jobs, these people would have found them -- they certainly sound like dedicated workers. Instead, they're working double-shifts at WalMarts and prisons.
"I'd be reluctant to do this, as it's essentially a tax on everyone else to support them and essentially surrendering to the fact that we can get very little value out of these workers."
That's one way of looking at it. Another way of looking at it is that we've consistently exploited cheaper labor markets to undermine our own, without building non-US markets for our own products. Moreover, many of these foreign labor markets have been playing currency games to ensure that US workers can't possibly compete. It's a system that's rigged against US production, and taxing it is one way of reintroducing balance.
That's a fairly zero-sum way of looking at it, and I'm not sure it's accurate. Germany is a big exporter, for instance, and they're certainly not China in terms of how they treat their workers, tax companies, and so forth.
In Anglo-saxon countries sales and marketing seems to be considered more important than engineering. And most sales and marketing people aren't in a position to innovate in traditional engineering sense, so they do what they can. Create killer marketing and compete on price. Whereas engineering culture led organisations compete on features and new tools. Compare German car companies and US car companies.
I suspect if it were possible to find better jobs in Lenoir, N.C (Pop. 16,000), they would have found it. In fact, they probably would have found better jobs anywhere in the Hickory-Lenoir-Morganton statistical area (Pop. 360,000).
On the other hand, there are plenty of data center technician jobs in Newark and other parts of northern NJ. I don't see any reason to believe the people in this story made any effort to seek them out.
The problem with that argument is that while you're almost certainly right, there are a lot of reasons that people get stuck in one place -- poverty, houses they can't sell, sick family, etc. -- and it's fundamentally unrealistic to expect everyone to move to find a job at a data center. Few work forces are as mobile as a 20-something programmer with no kids.
Also, given that the cost of living is quite a bit higher in New Jersey than Lenoir, North Carolina, one has to carefully examine the risk/reward of the decision to move. Maybe it would work out, but for a lot of these people I suspect they'd be no better off than working at WalMart in Lenoir.
So if this guy has a start up that creates a competitive technological vector away from the foreign countries' abilities, it's most positively the RIGHT way to create jobs. Do not count on the large companies doing this. Their way of creating efficiency and reducing economic drag is to ship the jobs off shore so their stock holders are happy (most of which are probably foreign anyways so they dont give a rats what effect this has in the long run).
The more technology and the progressively higher ability jobs you ship offshore, the higher and smarter jobs you need to have left in country.
It's simple...if a few billion people offshore can do the same job as you, and there is absolutely no transportation or communication barriers to have that job done offshore vs. in the US, guess what...it's done by the person that does it for less. If those jobs are assemblers, designers, engineers, you pretty fast run out of things all the American folks can do that others can't.
The way to create jobs is to get people producing things that other people need and want and are willing to exchange things for. This could be through lower pricing or better quality in an existing industry, or it could be through creating a new industry. As long as any human needs or wants are unfulfilled, there's a possibility for a new jobs to created filling those needs and wants.
I'm fed up with purchasing crappy products. I want a store that charges 50% more but guarantees purchases for life (kind of an anti-walmart (except for the profit part ;)).
Call me crazy, but I suspect that we'd be much better off with a situation like this. Imagine the boost in motivation to improve your career prospects after spending a few weeks doing work like this. And surely we can find some use for a bunch of holes in the ground.
In contrast, I know an awful lot of folks who got laid off in the last 18 months who decided to just take some time to find themselves because they were getting unemployment.
As I read it, he's complaining that the government views VCs as bankers. I think it's legitimate to consider the differences between the traditional loans/bonds/etc of banking and the investments VCs make.
People on welfare can sit around watching TV, playing sports or engaging in other recreational activities [1]. This is probably more pleasant than getting a job. If we replaced recreation with hole digging, people on welfare would have a greater incentive to find a job.
Regarding d), this is only true if additional education and infrastructure provide a greater benefit to the economy than their opportunity cost (e.g. the cost to business and consumers of the taxes paid to support education/infrastructure). It's not by any means clear that this is the case.
[1] Based on obesity rates among the poor, I suspect watching TV is much more common than playing sports.
In the US, obesity causes about 112,000 deaths yearly [1]. 14,000 or so people were murdered [2], mostly by people they knew [3].
This doesn't give relative risks in any given neighborhood, of course, but it is suggestive. Also, personal experience: Harlem is extremely safe, but you see lots of obesity and very little sports activity there.
[1] http://scholar.google.com/scholar?hl=en&lr=&cluster=...
[2] http://www.fbi.gov/ucr/cius2008/offenses/expanded_informatio...
[3] http://www.fbi.gov/ucr/cius2008/offenses/expanded_informatio...
Regarding "b: No. But driving the competitor out of business assumes that you're doing the same task more efficiently (with fewer people), which is theoretically better for the economy as a whole, since it means that the same goods/services are produced at less cost, and frees up labor for other things.
Regarding "c": How exactly would we be worse off as a society in this context? Replace "dig holes" with "pick up litter" or some other menial but necessary task, and it looks like a net win to me. You expend the same money, but actually get some small societal return on your investment. Can you actually argue that welfare recipients _ought_ to be idle?
Regarding "d": Aren't higher taxes and greater difficultly in obtaining starting capital "drags on efficiency"?
Regarding "e": Imagine you have a brilliant idea on how to produce, market, and sell widgets. To get started, you need new equipment, a storefront, and some working capital. How do you obtain these things? If someone lent you the capital to get started, and you created a new business as a result, are they not (at least tangentially) engaged in a 'productive' activity?
If there are already people employed by state or local governments to pick up litter, they won’t be happy to see former welfare recipients being given the same job for a much lower pay.
OTOH, one thing the current stimulus package did was give money to state and local governments, so that they didn’t have to lay off sanitation workers (or teachers or police officers or etc.) for lack of money. Recessions are particularly hard on state governments because most state constitutions require balanced budgets, but recessions cut into their tax revenue at the very same time that demands on government services increase.
I know that we all like to get huffy and pretend that our favorite ideology is the one that has all the right answers for making jobs, or eliminating poverty, or creating world peace, but ultimately, adults have to acknowledge that there are going to be problems in the world that politicians can't solve.
Obama can't make your startup succeed. Congress can't make someone want your product. But they can do more basic things, like making sure that you won't starve to death when you fail, or ensuring that falling ill while starting your company won't bankrupt you (or kill you). They can make sure that the lights turn on, that clean water comes out of your faucet, and that you're reasonably safe at home and work. You've got to take it from there.
Unless you have some kind of condition, is there any situation in which the fear of not having health insurance is actually justifiable? I mean, if you want to avoid paying off a huge hospital bill over time, then ok... but come on, if you're starting a startup, gambling a 0.001% chance (or whatever) that you might have to pay 4-5k off over a few years seems like an insanely good bet.
Also, I heard from a friend (who is very probably wrong about this) that you don't actually have to pay off a hospital bill. It won't count against your credit score. Is this true? I would never do something like that, but... if not paying the bill doesn't count against your credit score, then I can see why people might not pay it.
Apparently, a lot of people do... otherwise the nation wouldn't spend such a large percentage of the GDP on medical care.
Be thankful you're not old, yet.
Your friend is wrong. Google "medical bankruptcy".
Total bill? $1553.
This is a very significant sum for people with regular, consistent income. For someone subsisting on ramen to launch their next great idea, this is crippling.
Also, I highly doubt the credit score thing is true.
Having treatment refused to my children because they are not insured (or not insured enough) is quite frankly terrifying. The system standing between me and medical machines and professionals is damn near random and I find it terrifying. Enough that I've had serious pause when striking out on my own.
Not everyone who starts startups (or other business) is 23 and single.
I got in a car accident in 2000, other driver at fault. Their insurance company agreed to pay the medical bill. I didn't realize until 3 years later, when the collection agency tracked me down, that they never did. That crap finally fell off just a few years ago, but cost me who knows how much in added interest rates over the years.
Not having health insurance is pretty stupid, even if you're healthy, young, broke, and in college. If you're starting a company, it's just completely irresponsible.
Two years later, we were doing about 2 million a year. Still, I poured every penny I had into the company "creating" additional good-paying jobs. Then I had a stroke. Yes, at 27. Because the doctors could not find a "reason" for my stroke, the insurance company paid a grand total of $2700, mostly for the ambulance and the care I received in said ambulance.
I was left with a bill of $67,000. Yes 3 zeros. Because of how long I was in the hospital and recovering, and because my business was based on relationships with my clients, the business faltered, and I eventually shut it down. I am now paying off every cent of what I owed on the business, as well as that $67k in medical bills.
Moral of the story: don't think you're invincible because you're young, or because you don't have a pre-existing condition. Also, I can absolutely assure you that medical debt DOES affect your credit.
Here's the crazy part. I'd do it all again in a heartbeat, and I will.
This seems remarkably unsupported. I don't think of Europe as being very innovative, despite their impressive social safety net. And I think of Asia as being very innovative and entrepreneurial, despite their lack of much of a safety net. Hmmm...
The reality of a great safety net is that someone has to pay for it. Who is that?
I'm a bit of a die-hard let-the-bozos-starve sort of wack-job libertarian. So, what's a bigger infringement of rights? Take hundreds of billions of dollars from US citizens, and spend it enforcing arbitrary rules on a populace that doesn't have representation or a vote? Or take billions from US citizens and spend it patching up said citizens when they fall down or get sick?
I hate taxes. Really, I do, as much as anyone you'll ever meet. And I hope that the market could someday solve this problem more efficiently. But I also think that killing people is a lot more evil than healing people. I voted for Ron Paul largely because he was the only candidate who said outright that he would shut down all unwanted military bases in his first year.
Dismantle the military empire, and you've got money for medical care. Additionally, adding a base level of safety net could be a disruptive force that allows smaller and more agile companies (ie, in the 1-10 employee range) to get more done with less overhead, which is exactly the sort of thing that needs to happen if stuff like this is going to be solved cleverly.
Come on, we're hackers, right? Think about it. This is a complex problem with a ton of moving parts, and that's kind of what we do, isn't it? So, apply the same maxims that serve you so well in dealing with software:
Measure before you optimize. Solve the big problems first. Patch the in-production product, and THEN design its replacement. The perfect is the enemy of the good.
A bit of a false dichotomy, don't you think? I agree with most of the rest of your post, though I think that the primary effect of increasing the safety net will be moral hazard issues, not people jumping to do a startup now that they have a safety net. People who do startups are incredibly rare, and somehow I doubt that's because of any safety net issues.
Medicare and Medicaid appear to be similar to the systems that most other countries (e.g. Britain, Canada) have in place to pay for healthcare (except that in most other countries everyone is covered). How do you explain that, in those other countries, the per-capita costs of healthcare are lower than in the US?
Most other countries are poorer than the US; the US has a GDP per capita 50% higher than the EU and (for example) 40% higher than France. Since a medical procedure takes the same amount of time in either place, the cost will be proportional to wages.
Additionally, the US is far more unequal than most other countries. At the top of the skill chain, the gap increases significantly [1]. The US costs more simply because doctor's salaries need to be competitive with banker and programmer salaries.
[1] I know a few FOB Indians who had multiple jobs/offers, they say the US can often pay double what the EU does.
I don't recall exactly how Britain and Canada do it, but I'm pretty sure it's not the same way. Here's how it works:
The RBRVS Fee Schedule.[6]Medicare uses the resource-based relative value scale (RBRVS) to pay for physician services. Under this formula, Medicare officials compute the “objective value” of an estimated 7,000 procedures.[7] Each component of a medical service is assigned a weighted value that is calculated by using social science measurements of the time, energy, and effort required to perform a given procedure, including resource inputs such as medical equipment, malpractice insurance, and administrative costs. These weighted “values” are then converted into dollar amounts and used to determine the fees that Medicare pays to physicians for those services.[8] The diagnosis related group (DRG) system reimburses hospitals using a similar strategy.[9]
You've also got, unfortunately, a ton of people that go out of work. Noone will get rid of military programs if it shuts down jobs in their district.
http://en.wikipedia.org/wiki/Health_care_system_in_Japan
So does Korea:
http://www.slideshare.net/manhattanresearch/south-koreas-hea...
And so does Taiwan:
http://en.wikipedia.org/wiki/Healthcare_in_Taiwan
Any other innovative Asian economies you'd like to compare?
It becomes insightful when you take his point and put it next to the jarring inconsistency in our reality. Fact is, nothing done by Washington has done anything remotely to help this in a meaningful way.
Jobs aren't created by legislating them, as is currently fashionable in believing. Jobs aren't created by shoveling truckloads of money to special interest. It is the people "in the trenches" who are trying to get stuff done that create jobs.
Sometimes it is worth repeating the common sense truths as we often tend to loose sight of them.
I've never encountered anyone who believes this. Have you, really?
With the massive amounts of cash that has been thrown at shrinking big businesses in the recent past, it is important to recognize that over half of Americans work in small business, and it is the small businesses that are having the most difficult time accessing capital. Not just in the valley, but the mom and pop, brick and mortal business that should be considered the bread and butter of society.
Yes the author is focused on his own plight, in a slightly whiny and entitled sort of way, but that doesn't mean he doesn't have a point.
All of these things are provided by your state, not congress.
I found this bit quite disingenuous. Yes, he is a business owner, and yes, he is part of the demographic of job creators - but "job creation" is not his title nor his primary intent (unless I've grossly misunderstood his startup idea).
Founders are in it to create a product and get rich - some have higher-order ideals for what they want to do on their road to riches, but to pretend that you are not acting out of your own self-interest is disingenuous.
Maybe I'm reading this all wrong, but that bit sounds to me like trying to appear as a populist folk hero when you're really not.
Cut him some slack. He's from Seattle, it's a common attitude there. Having lived up there for a while, the start-up scene seemed to mostly focus on it's "we're not from San Francisco so nobody respects us" inferiority complex.
But beyond that, Seattle as a place for start-ups is just strange. At every happy hour, startup meetup, startup coffee event, whatever, invariably the theme always turned into this self-righteous "Seattle is just as important as the Silicon Valley, why don't we get the same respect? I mean we have Microsoft, Amazon, Boeing, and .. uhm .. that other company".
No wonder he's asking for a handout.
In this context, saying "I'm trying to be the next Google", is just like an NFL team saying, "We're trying to be the next New Orleans Saints." All it really means is, "I'm trying really hard to succeed."
Seriously, 1 accent color is more than sufficient.