Does Letting the Wealthy Keep Their Money Create Jobs or Not?
As are many of you, I’m following the discussion on extending the Bush Tax Cuts, especially for the wealthy. One of the primary arguments to justify more taxation in the name of the needy is that letting wealthy people keep what is theirs will not result in the creation of new jobs. The reasoning is since the wealthy will save, invest or spend the money as they see fit, those dollars will not work to create jobs.
However, no one making that argument has shown, even marginally, let alone conclusively, that wealthy people keeping their money doesn’t create jobs. I thought to ask the question in reverse. Is there evidence wealthy people do use their money to create jobs. Not surprisingly, there is.
Easy enough to demonstrate from basic finance is that savings and investments create jobs. Monies saved or invested carry with them the expectation of a financial gain. Those receiving the funds must generate enough profit to cover their expenses and profits and also provide the saver/investor with a profit.
This is often accomplished by loaning money to businesses to expand operations via new or upgraded technology, machinery, locations and the like. With additional capacity to provide their good or service, businesses then hire additional people to generate more profit since they, too, must pay back the loan, with interest.
Less obvious is how successful businesses associated with very wealthy people are doing in this regard. But the evidence is there if you dig.
The US Department of Labor provides statistics on employment in the major Market segments of the US Economy. These are not all US jobs, but close. I found these from 1999. To illustrate the impact the most wealthy Americans have on jobs, I chose 4 men with established wealth and clear and distinct connections with market segments: Henry Ford – Auto Industry; Andrew Carnegie – Steel; John Rockefeller – Oil, and; Bill Gates – Computers.
Together, these 4 men created almost 21 MILLION American jobs in 1999. All of them have been creating American jobs for decades, most for over 100 years! The total number of jobs listed for 1999 is 127,274,000. The employment legacy left by just 4 men is 16.5% of the jobs in the major market segments of our economy.
If we add to these the impact of men like William Randolph Hearst on media and Conrad Hilton on hospitality and any number of others one might mention, it becomes clear that the wealthy in this country have a deep, abiding and profound positive impact on job creation. Given that government employment at all levels only totaled 9.6 million jobs for 1999, it would seem clear where the goose laying golden employment eggs is to be found.
Just to be clear and to drive home the point even further, these are only US employment figures. Please make your own estimates as to how these 4 men have impacted global economics. While you’re at it, please add in the value they brought to all market segments via innovation. How does one quantify the impact of Henry Ford’s assembly line and John Rockefeller’s creation of corporate research? How do you measure the impact of Bill Gates’ computers on productivity and the resultant freeing up of capital for other use.
Even if we increase their numbers to account for all the big names in Steel, Oil, Auto and Computer, each is still responsible for hundreds of thousands of jobs annually. Why oppose these people? If the goal is to create jobs, we should find or create more of them, not demonize them and try to drive them out of the country and out of business.
Bill Gates: 2,227,250 jobs
Andrew Carnegie: 9,845,250 jobs
SIC 10 – Metal Mining – 39,250;
SIC 171 – Plumbing, Heating and Air-Conditioning – 906,500;
SIC 254 – Partitions, Shelving, Lockers, and Office And – 89,250;
SIC 33 – Primary Metal Industries – 699,750;
SIC 34 – Fabricated Metal Products, Except Machinery and Transportation Equipment – 1,539,250;
SIC 35 – Industrial and Commercial Machinery and Computer Equipment – 1,783,500 (minus Comp Equip);
SIC 37 – Transportation Equipment – 829,000 (minus Motor Vehicles);
SIC 371 – Motor Vehicles and Motor Vehicle Equipment – 528,500 (1);
SIC 40 – Railroad Transportation – 200,000;
SIC 41 – Local and Suburban Transit and Interurban Highway Passenger Transportation – 241,375 (1);
SIC 42 – Motor Freight Transportation and Warehousing – 824,950(1) (minus Warehousing);
SIC 44 – Water Transportation – 93,750 (1);
SIC 45 – Transportation By Air – 651,375 (1);
SIC 46 – Pipelines, Except Natural Gas – 6,500 (3);
SIC 501 – Motor Vehicles and Motor Vehicle Parts and Supplies – 261,500 (1);
SIC 507 – Hardware, and Plumbing and Heating Equipment – 317,750;
SIC 508 – Machinery, Equipment, and Supplies – 833,000;
Henry Ford: 5,990,500 jobs
SIC 371 – Motor Vehicles and Motor Vehicle Equipment – 528,500 (2);
SIC 41 – Local and Suburban Transit and Interurban Highway Passenger Transportation – 241,375 (2);
SIC 42 – Motor Freight Transportation and Warehousing – 824,950 (2);
SIC 44 – Water Transportation – 93,750 (2);
SIC 45 – Transportation By Air – 651,375 (2);
SIC 47 – Transportation Services – 463,250;
SIC 501 – Motor Vehicles and Motor Vehicle Parts and Supplies – 261,500 (2);
SIC 55 – Automotive Dealers and Gasoline Service Stations – 1,727,500 (minus Gas Stations);
SIC 75 – Automotive Repair, Services, and Parking – 1,198,250;
John Rockefeller: 2,834,250 jobs
SIC 13 – Oil and Gas Extraction – 296,750;
SIC 29 – Petroleum Refining and Related Industries – 127,500;
SIC 30 – Rubber and Miscellaneous Plastics Products – 1,023,750;
SIC 46 – Pipelines, Except Natural Gas – 6,500 (2);
SIC 492 – Gas Production and Distribution – 463,250;
SIC 517 – Petroleum and Petroleum Products – 154,250;
SIC 554 – Gasoline Service Stations – 666,500;
SIC 598 – Fuel Dealers – 95,750;
All job totals rounded to the nearest “250″.
(1) = Total for SIC category shared equally with Henry Ford
(2) = Total for SIC category shared equally with Andrew Carnegie
(3) = Total for SIC category shared equally with John Rockefeller