Robin Lumb: Job Creation 101
Notice I said he’s decided to “talk” about job creation. That’s because talk is all he’s good at.
Here’s the rub: President Obama doesn’t know the first thing about job creation because he’s never worked in the private sector or met a payroll. If he had any meaningful business experience, or if he understood basic economics, he’d know why his policies have failed to create any new jobs and why his legislative agenda has actually discouraged job growth.
Allow me to explain:
1. Business investment drives job creation.
Jobs are created when businesses expand or when new businesses are created. But growing or starting a business requires an investment.
The cost of the investment – and the cost of hiring employees – must be covered by the increased revenues the investment is expected to generate and, of necessity, must produce a marginal rate of return sufficient to justify any risk.
If the investment can’t drive this level of revenue then it’s not an investment, it’s just an expense.
2. Business climate drives investment.
All business investment involves risk. That’s why business owners are constantly gauging the shifting winds of the business climate. If they see things getting better they’re more likely to take a risk and invest money in their businesses. If they think things will only get worse they’ll stop taking risks altogether.
Health care reform, cap and trade, card check and increased taxes are all guaranteed to drive up costs and threaten profits. They make investing in a business much riskier.
For a business owner the calculation is simply this: “With all these additional costs to contend with, why should I invest in creating a new job when the investment might not produce a return or might actually cause me to lose money?”
With Mr. Obama in the White House most business owners do not expect things to get better any time soon. In fact, most business owners I talk to expect things to get worse if the President gets his agenda through Congress. To put it bluntly, Mr. Obama is scaring the heck out of business owners.
Here it is in a nutshell: In this environment business owners are either unable to accurately calculate risk or they view the potential risk associated with any new business investment as excessive.
That’s why there will be little or no job growth in the months (and maybe years) ahead.
I thought you’d like to know.