Why does the government want to kill jobs?

The government claims they want to create jobs.  They scream it out from the mountain tops, “We want more jobs!”  They even get up on their tippy toes, hold the bullhorn up high, and bellow out, “We not only want jobs, but we want high paying jobs!”

So, if this is what the government says, then how come their actions say otherwise?  It’s very confusing; like someone looking you in the eye and saying “YES!” all the while shaking their head from side to side as if to say “NO!”

You see, on the one hand the government says they want to create jobs, but on the other had the government imposes rules and regulations that tells every employer to stop hiring.  Since private – profit driven – businesses live in the real world, they can’t go by what the government says, they can only go by what the government does.  If the government imposes job crushing rules, regulations and red tape, then business has to adjust.

And, the adjustments available are limited.  Here are a few as follows:

1.  Look for ways to reduce employee hours.
2.  Look for ways to reduce employees.
3. Look for ways to replace employees with automation.
4. Look at moving the business to a country that is sincere about creating more jobs.
5. Look at ways to circumvent the government rules and risk a forced take down and/or possible jail time.
6. Close the business.

I would suggest that every single private business in Australia, USA, UK and every other country where the government imposes job crushing legislation, is hard at work looking at one or more of the 6 options listed above.

Every time government steps into the marketplace and dictates minimum wage hikes, jobs go away.  Jobs go far away.  Every time the government dictates minimum wage hikes, employers look harder and harder for ways to get rid of employees.

Why?

Because employees cost too much!

It’s not rocket science.  It’s not complicated.

Employees come at a cost to the business.  Just like coffee beans to a coffee shop, employees are another cost of doing business.  And, that’s all good; it’s ok.

The difference between employees and coffee beans is generally this:  The government doesn’t dictate (not yet at least) what price you have to pay for the coffee beans you buy for the shop.  At this stage – generally – the business shops the market for the best quality/price point.

With employees, the business doesn’t get that luxury.  The business has to pay a government dictated price for employees; even if the market says otherwise.  And, that’s all fine as long as the dictated price allows the company to make a profit.

But, what happens when the employee costs rise to the point where the business can’t afford to pay the government dictated price?

Again, is this rocket science?  Hardly …

The business will start by getting rid of employees.  This may help, it may not.  But the company has no choice.  To hang on to staff means a loss.  How long can a company run at a loss?

But, getting rid of employees may make the whole process of going out of business just a faster process.  After all, how long will people be happy to wait while one overworked employee runs around trying to serve coffees?  Customers will go to another shop – if there are any left open – or just go home and make their own.  So, the company is in a fix – a Catch-22 – hire the employees – go out of business; fire the employees – go out of business.

Checkmate.

So, what’s a business to do?  They can’t hire all the staff they need; they’ll be running at a loss.  Can’t get rid of the staff because then all the customers will disappear because of poor performance; poor service; poor delivery.

That’s when businesses start putting on their thinking caps.  What can we do to keep service up without all the employees?  And, that’s when you start seeing automation take over.  That’s when you order your burger by pressing buttons on a machine.  That’s when you start scanning and checking out your own groceries at the supermarket.

That’s what all this automation is about; one thing and one thing only – the race to get rid of employees.

And, you can thank your government for that.  They’ve created an environment where businesses are aggressively looking for ways to dump employees; get rid of them; get them off the payroll.  Employees are just too damn expensive.  Employees are a luxury most businesses can’t afford.

By dictating an excessive minimum wage – from the business perspective – the government has essentially taxed employers; requiring them to pay more for employees than the market requires.  Generally speaking, when the government taxes something, they’re telling you, “Hey stop that, we don’t like it.  That activity/product is bad for you.”  This is the argument the government uses to justify the obscene and gouging tax on cigarettes and liquor.

But, this same message and effect happens anytime the government taxes anything – whether they mean to do it or not; whether they’re aware of it or not.  Every tax is a penalty; every tax is an incentive not to do something; every tax is a message from the government to do something else … until the government taxes whatever else you’re doing.

Let me give an example to explain …

Many moons ago in England, the government came up with a window tax.  Now, I’ll bet the government created this tax for the age old reason of all governments, “We Just Need the Money Damn It!”  Well, how did the people respond?  You know.  I don’t have to tell you.  They did what any thinking person would do.  Humor me as I tell you anyway … they boarded up all their windows.  No more windows; no more tax.

By introducing this tax the government was essentially telling people to board up their windows.

That’s how tax works.  When the government taxes something they’re sending out a big bold message, “Hey, stop doing that!”  With the window tax the government was saying, “Hey everyone, board up your windows!”  So, the people did.

Now, if the government came up with a big ugly tax on carports – not garages, just carports – what do you think would happen to all the carports in your village?  Do you think folks would do one of two things 1) Tear down the carport or 2) convert the carport to a garage?

So, can we agree, when the government taxes something it means they don’t want us to do it?  Ok, if that’s too big a stretch, can we at least agree that when the government taxes something is causes people to act like the government doesn’t want us to do it?  Ok, let’s go with that one for now …

If the government wanted us to buy a cleaner burning petrol, all they’d have to do is take off the tax.  Once the 38 cents a litre excise tax and GST is removed, this cleaner burning fuel would be a very attractive buy compared to the other “taxed” choices.  Virtually everyone would buy the “no tax” petrol … assuming it’s good quality and the only difference is the much lower price because there’s no tax.

So, taxation is a great tool for government to use as leverage if they want folks to behave a certain way.  Take off the tax and everyone swings toward the “No tax” items.  Add a big ugly tax and people tend to stop buying.

If we accept this theory of taxation ( … please do, at least for a few moments while I try to explain my way out of this one … ) then everything the government taxes, folks will tend to buy less of it.

Does the theory apply to … say, income tax?  I would say so.  By taxing income, the government is essentially telling everyone “don’t work!”  How so?  Well, what’s the government telling smokers?  Aren’t they saying, “We’re taxing cigarettes because we want you to stop smoking; it’s bad for your health.”  Just change a few words and you have, “We’re taxing income because we want you to stop working; it’s bad for your health.”  So, just like buying cigarettes is taxed as an incentive to not smoke; income is taxed as an incentive to not work.

Sounds crazy, but let your mind think about this for a moment … let’s drift off into a world where incomes are not taxed.  Are you there yet?  When you get there let’s look at how things would be …

By not taxing income … guess what?  Do you think more people would want to work?  Do you think more people would be putting their hands up to work?  Do you think everyone might be excited about keeping all their pay?  Do you think more people would be excited about working?

By the way, this (no income tax) was supposed to happen when the GST went into effect in Australia back in the year 2000.  Peter Costello sold it by touting, ‘We want to tax Australians when they spend, not when they earn.’  That means no income tax.

Well, let’s get back to employees and the government legislated minimum wage.  When the government dictates a minimum wage that’s higher than the labor market dictates … the market always wins.  The higher government dictated wage is just a disguised tax; nothing more; nothing less.  The government is a big bully but it’ll never be big enough to beat the market.  When government and the market (otherwise known as the “Real World”) collide it’s the same as a battleship (government) colliding with a lighthouse (real world; the market).  The battleship never wins.  Yes, the battleship is a bad-ass; it’s big; it talks tough; but it ain’t no match in a head-on collision with the lighthouse; the battleship will be squashed like a bug under a boot.  In the same way, the government is no match for the market.  The market – in the end – will win.  It’ll be ugly; it’ll be be painful; it’ll be deadly; but the market comes out on top; the market wins – every time.  History has proven this over and over again.  You cheat the market at your own peril.  And if a government tries to cheat the market, it risks the survival of the nation.  We can break this fact down to a simple, yet universally known and understood phrase … “No Money; No Honey!”

Let’s discuss what I mean here …

You may have a big-ass military and all kinds of war gear, but stop paying the troops (no money) and see how bad-ass your military becomes (no honey).  You may have a big bad-ass tax collection agency working for your all powerful central government, but stop paying the tax collecting henchman (no money) and see how much tax they go out and collect (no honey).  It’s universal; when the king stops paying his soldiers, he’s no longer the king; his soldiers will look for a new king … one who’s got money.

A government that tries to cheat the market will eventually – no exceptions – run out of money.  When that happens … the “No Honey” is not far away.

See what I mean … no rocket science here …

Let’s look at this disguised tax from a business owner’s perspective.  Based on our discussion above, the message the government is sending to the business is exactly opposite to what they tout to all the news outlets and their voting public.  To the news media, the government says, “We’re helping the workers; we want to create more high paying jobs; we do that by raising the minimum wage.”  But, the business owner is able to read the real message getting sent out by the government – the truth.  And, the truth is this … the government is telling the business owners to dump their employees.  The government tax on employees (minimum wage above market value) drives businesses to look for ways to get rid of employees.  That’s the real message the government is sending.  So, businesses logically look for ways to reduce their exposure to this tax – just like the people of England boarded up their windows to avoid the window tax – businesses look for creative ways to get rid of employees to avoid the “minimum wage” tax.

Is this surprising?  I hope not.  It’s really just common sense.  Tax something and folks will look for a way around it – legally of course.  Just like the people of England responded to the window tax …

Englishman:  “What’s this tax bill?”

Taxman:  “That’s for all your windows?”

Englishman:  “So, you mean to tell me I owe you a tax just because I have windows on my house?”

Taxman:  “That’s right old chap; new law; sorry about that.”

Englishman:  “You mean if I didn’t have any windows, I could rip up this tax bill?”

Taxman:  “That’s correct me Laddie; I wouldn’t be here; you would have no tax bill.”

Englishman:  “Ok, rip up the tax bill, I’m getting rid of all my windows!”

Businesses are looking to cut employees.  As government makes labor costs soar; businesses are looking for ways to get rid of this profit sapping expense.  If the business could run with no employees, they would.  Every business is now looking for ways to operate with less and less staff.  Businesses are actively looking for ways to get rid of staff; get them off the payroll; get rid of this disguised government tax burden on the business.

And, finally I’d like to finish off with a question for any employees out there, which would you rather have, 1) a job that pays you a wage you’re ok with; one you agree is fair; one you negotiate without interference from the government or 2) no job?

Don’t agree with what I’m saying?  Ok, let’s go to real world; let’s go to market.  Remember a time when automobiles were manufactured in Australia?  What happened?  How come we don’t manufacture cars anymore?  Couldn’t the government bail out the car manufacturers?  They tried that. It worked for a while.  Not really, it was just cheating.  And remember what I said about cheating the market … you can’t do it; not long term.

Bottom line; government control of the car manufacturing business through wage, regulations, compliance and all other manner of red tape buried the industry.  No business could possibly manufacture cars in Australia under such government controls.  So, the big bad-ass government got a lesson in reality; you mess with me (the market) and you lose (government); every time.

Government control of private business – through regulations and other compliance rules – such as minimum wage laws – will always lead – eventually – to one thing … no business.  And, this of course leads to … no jobs.

And, here’s the saddest part of the story.  When all the businesses are gone, all the jobs will be gone too and all the paychecks will stop.  And, the most surprised group will be the politicians, government officials and government employees.  They’ll all be left standing with their hands out saying, “Where’s the money?”  It may take them a while to figure out what happened; to figure out that all the money came from private business.  It may take them a while to face reality – after all, they’ve been eating from the public trough for so long they don’t have a clue how the Real World (Market) works.  Yes, that’s the  source of a nation’s wealth – business.  You kill business, you kill wealth.  You kill business, you kill jobs.  And, Mr and Ms Politician person, when you kill business you kill your very own self-same financial lifeline; the lifeline that pays your salary, perks, benefits and that big-ass, fat balls, pension you want and claim you deserve so badly.  So, kill business at your own peril.  Do it and the market (the real world) will run you over.  It’ll flatten you like a bug under a boot.

Like I said, it’s not rocket science.