There's this idea that has been injected into the cultural narrative that "job creation" happens something like this: a person comes up with an idea, but they need money to make the idea happen, so they go to a bank or a rich investor to borrow the money. Having borrowed the money, they are now able to start a profitable new business that will employ people.
The problem with this narrative is that money does not start its life in the pockets of rich people. Nor do jobs come from the minds of entrepreneurs. The reality is something more like this: what creates a "job" is economic demand for goods and services. Part of what creates that demand is money in everyone's pocket. But only part; actual physical needs or wants supply most of what constitutes demand, but economically speaking, 'demand' exists when someone is willing
and able to pay for something.
Does your body produce needs? Does your brain produce wants? Do you spend money for goods or services to satisfy those needs and wants? If so, congratulations:
you are a job creator.
What happens in an economic depression is that everyone has less money, so they spend less, which causes jobs to become more scarce, which causes people to have even less money, which makes jobs even more scarce. When prices start to go down there's a danger of the economy entering a
deflationary spiral.
Anyway, the scenario described above does describe one way by which jobs can come into existence. It is not, historically speaking, the primary way. Banks did not even exist as we know them today until about four hundred years ago. Mostly it's happened like this: someone starts producing goods or offering services on a very small scale. They sell these things on the street or to family and friends until more and more people want them; the money people get from this they invest in expanding their operation. Most business ventures in the history of humankind have been on the scale of Etsy storefronts.
The implication of all this therefore is that if there is more money in everyone's pocket, there will be more jobs.
What causes there to be less money in people's pockets? A huge factor in this is exploitation. The technical definition of exploitation is paying someone a wage that is less than the marginal revenue product of their labor - the additional value created by working one more hour. The less precise way of saying that is that exploitation is when you pay someone less than you make off their labor.
Exploitation is practically a virtue in our society. It's considered synonymous with making a profit. What
actually makes a profit is that bread is worth more to people than a pile of flour. A car is worth more than a pile of car parts. You do not need to exploit your employees to make a profit. If everyone were paid what they were worth, there would be more money flowing because the multiplier effect on money spent by the middle class is higher than the multiplier effect on money spent by the rich (because they spend their money on different things).
It is not a coincidence that this depression and its miasmic "recovery" happens at a time when "real wages" (wages adjusted for inflation) have been stagnant for thirty years.
Right now the minimum wage in the US is $7.25/hour and the president has proposed raising it to $9/hour. The argument against is that it will lead to fewer jobs being created. I've just laid out an argument as to why I think that assertion is completely bogus. It is true that minimum wage hikes in the past led to a slight increase in unemployment among teenagers, but I'm willing to bet that's because it made more adults find minimum-wage jobs attractive enough to apply for them. If a job pays too little it's actually not worth taking because one can usually find other, less strenuous ways to eke out a living, and the minimum wage is close to that point as it is.
I was thinking this morning too about the prospect of 11 million undocumented immigrants suddenly becoming legal residents of the US and having the legal agency to demand wages closer to what they actually contribute. There's a lot of fear that the products and services they provide would become too expensive people couldn't afford them anymore. There would be some tumultuous readjustment but consider for a moment what 11 million people suddenly making a living wage rather than a pittance could do for the economy of the US. They would all be able now to buy better clothes, better food, houses, cars, iPhones... they would be better off, and so would we all.