More Economic Nonsense from the Kindergarten Playground
On the eve of the Government’s job initiative Fianna Fail’s Michael Martin put it starkly:
‘Government’s don’t create jobs.’
This is straight from the kindergarten school of economics. Governments create jobs all the time. Let’s draw up a list.
1. The Government directly employs approximately 300,000 people in public services and administration: nurses, teachers, Gardai, sewage workers etc. This is not nothing.
2. These 300,000 - directly employed by the Government - spend their income in the economy. This consumer spending creates thousands of jobs in domestic enterprises - retail, hospitality, private sector services, etc. This number is hard to estimate but it is substantial.
3. The public enterprises that the State owns - ESB, Bord Gais, An Post etc. - directly employ another 40,000 men and women directly. And, as above, the consumer spending of these public enterprise employees create jobs in domestic enterprises.
So already we have 340,000 people directly employed in the public sector and state enterprises - with thousands of more jobs dependent on their spending power. But we’ve only just started.
4. The Government employs thousands more through the capital expenditure budget. Indeed, Deputy Martin’s own party produced the revised NDP programme which estimated the amount of people employed through capital projects - between 8,000 to 12,000 jobs for every €1 billion invested. And this only counts the ‘direct’ employment - not the downstream jobs (suppliers, transporters, etc.). Those jobs, by the way, are all private sector jobs.
Not only does this immediate impact of investment creates thousands of jobs, thousands more are created down through the years. Take an example of public investment in next generation broadband - jobs are created out of the implementation of the programme; and as more private sector enterprise ‘use this new asset’, they create jobs as a result (this is known as the supply-side effect of investment - long-term increases in productivity and profitability).
5. Discussion about ‘public services’ usually refer to the public sector workers. However, thousands of private sector workers are also employed in producing public services. About one-third of the Government’s total expenditure on public services is spent on contracts to the private sector - something like €8 to €9 billion.
Take, for instance, a school. The Government employees the teachers, caretakers and support staff (the fabled and expendable ‘back-office workers’ without which there would be no school). But the Government doesn’t manufacture the blackboards, erasers, desks, paper, pens, etc. They purchase there from the private sector. Those companies that supply these goods and services employ people to produce them. Without those public sector contracts, there would be fewer private sector workers.
6. Similarly, public enterprises buy in goods and services from private sector companies for production. Employment is boosted by these contracts. And, of course, the spending power of private sector employees working in companies reliant upon public sector contracts also boosts jobs that are reliant upon consumer spending.
7. The State grant-aids companies. Take one agency: Enterprise Ireland. It disperses over €300 million in aid to indigenous companies. While we should be cautious about Ministerial job projections, we can reasonably assume that substantial job creation arises directly out of this investment. Now take the other agencies: IDA Ireland, Shannon Development and Údarás na Gaeltachta, along with local enterprise and sector-specific agencies (e.g. Bord Bia, etc.); these are all contributing to job creation. And let’s not forget the agencies that training and retraining people to fill jobs that employers need - without that training there would be less employment.
During the election I was on an RTE programme current affairs programme. A researcher from the ESRI announced, Martin-like, that ‘Governments don’t create jobs’. That’s interesting in that the ESRI receives a €3 million grant from the Government - about a third of their payroll. Even in the ESRI, the Government is creating jobs.
It is difficult to total all this - in particular, employees reliant upon public sector contracts or state-agency grants, never mind the jobs created by the combined spending power. But we know that it greatly exceeds the direct employment in the pubic sector. Over half-a-million jobs reliant upon state activity would not be an unreasonable guess and could well be a gross under-estimation.
Of course, there is the debate over how efficient the state spends money on creating jobs. That’s an absolutely important debate. But when engaging in that debate let’s not start from nonsensical premises. The fact is that the state or government or public enterprises or public agencies - they create lots and lots of jobs.
If Deputy Martin insists on spouting nonsense - and ignoring the everyday operation of a mixed-market economy - then Fianna Fail deserves a very, very long spell on the Opposition benches.
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Comment by: Seanán Kerr
May 10th 2011 at 14:05
You could perhaps add to this the state’s very low level of corporation tax which is claimed by many to be one of the key reasons we attract so much foreign direct investment and therefore could be viewed as a government jobs subsidy. Also the 400,000+ people the government “employs” to look for work.
Comment by: Frank MIata
May 11th 2011 at 15:05
It’s necessary to keep on pointing out the stupidity of the Martin assertion because that assertion is part of a broader set of neo-liberal myths being used to undermine the social welfare policy gains of working people everywhere.
Free market fundamentalism is a myth with virtually no independent scholarly research to substantiate it. In the United States,neo-liberal or free market fundamentaism has created economic chaos, vast inequalities across social classes and undermined the political legitimacy of the state.
Glad to see you jumping all of these fools.