Who creates jobs? How economists see the Obama-Romney debate.
The debate about job creation is becoming one of the central themes of the presidential campaign. The answers aren't simple, many economists say – especially in the current climate of employment malaise.
It takes a village to raise a child, the saying goes. And, you might add, it takes a whole economy to create jobs.Skip to next paragraph
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And yes, Barack Obama, you’re right: Job creation doesn't happen just because of a few wealthy risk-takers with bright ideas. It also requires a surrounding climate that includes laws, infrastructure like roads and schools, and consumers who are able to buy products.
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The debate about job creation is becoming one of the central themes of this year's election campaign. President Obama says the Bush years proved that tax cuts for the rich don't generate a vibrant economy and that a healthy middle class is the key to job growth.
Romney and his conservative allies also argue that Obama has shown little understanding of how to create a good business climate. They have even pounced on one recent Obama statement – "you didn't build that" – as a sign the president doesn't appreciate what business people do.
So, who's right? How do jobs get created, and by whom?
The answer isn't a simple one, many economists say – especially in the current climate of employment malaise.
"One way of answering the question is that the economy is the job creator," says Ken Mayland, president of ClearView Economics, a consulting firm based near Cleveland. If an economy has more "inputs" of labor and capital, the result will be a rise in output and the creation of jobs.
When you look for actual people to call job creators, he adds, "it's a lot of entrepreneurs taking risks." But the bigger picture is important: They don't do it in a vacuum. Like garden crops, jobs grow in an organic environment that's conducive.
"This is why Warren Buffett ... says the only reason why I'm going to hire is if there's more demand," Mr. Mayland says. "He doesn't run a social agency."
Brian Bethune, an economist at Gordon College in Wenham, Mass., offers a similar explanation of job creation. An entrepreneur is the linchpin person he mentions first as a "job creator." But Mr. Bethune quickly explains employment growth as fueled by the surrounding conditions.
"For the most part, it's driven by the general economy," he says.
Essentially, a growing economy creates more demand, begetting more production. Jobs are the result.
Consider a restaurant chain that opens a new outlet: It buys equipment and hires workers. "If the economy is expanding, then you have a lot of that activity taking place," Bethune says.
The problem now is a weak economy, with low consumer and business confidence. In this climate, entrepreneurs can still start successful companies – and some of them will become so-called gazelles, which sprint forward with rapid growth in jobs and product demand.
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