Investment Does NOT Create Jobs [View All]

INVESTMENT DOES NOT CREATE JOBS

Investment does not create jobs. Companies do not hire workers because they can "afford" them. Companies hire workers when they need them, and only when they need them.

When do companies hire workers? When consumer demand for production increases, which increases the demand for workers to provide production. What difference does investment have on demand for workers? NONE. Absolutely zero. Companies never hire workers unless they are needed to fulfill the production demand created by consumers.

Increased demand for workers increases hiring, as well as the wages of those working. Increased demand for anything raises its price. In this case, the "anything" is workers and the "price" is worker wages. So increased production demand by consumers increases wages and hiring, because it increases demand for workers.

What creates consumer demand for production? Consumer spending. What provides the money to finance this spending? Consumer income. So what determines the ultimate limit of consumer spending, as well as production demand? Consumer income.

Worker wages provide consumer income. Thus wage decline reduces consumer income and demand for production. As a result, recent "real" wage declines have reduced consumer income, spending, and demand for production. The reduced production demand reduces the demand for workers to provide that production, causing even further reductions in wages and hiring. Thus wage reductions by themselves put still further downward pressure on wages. This becomes a vicious cycle. And it's a vicious cycle we need to break out of.

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