The Real Job Creators

Job Creators. It’s a term that’s been thrown around a lot in the media in recent years. It’s most commonly used as a term of endearment for wealthy business owners, usually in an attempt to defend them from new taxes or regulations that would hurt their bottom line, and by the media’s logic, hurt the labor market. In this view, the wealthy are like benevolent dictators, creating jobs only when taxes and regulations are to their liking. But this simply isn’t the case. As venture capitalist Nick Hanauer points out, businesses do not just generate jobs out of the goodness of their hearts; They hire people when they need to increase production to satisfy increasing demand for their products, and people will only buy products when they have income (usually from job) to spend on them.

This is why he argues, despite being a very wealthy man himself, that the United States needs to address it’s widening income inequality, and primarily through increasing taxes on the rich. He admits that on an 8-figure income, he effectively only paid a tax rate of 11%, much lower than even lower-middle class households pay. On average, in 2007, the top 1% paid only a 16.6% tax rate, compared to 30% in the 1990s, and he argues that this trend has contributed to increasing income inequality. He points out that earners in the top 0.1%, like himself, have seen their share of national income increase 400% since 1980, while the bottom 50% of earners in the US have actually seen their share of national income decline 33% in the same period. If the bottom 50% had seen their share of income remain the same, the average family would bring in an additional $13,000 every year. More than likely, most of it would be spent buying goods, generating consumer demand, and thus generating jobs. The fact is that the ultra-rich simply don’t spend a proportionate amount of income on consumer goods, so increases in their income will not have as large of an economic impact as if the same increase in income was given to someone in the bottom 50%. It’s the middle-income consumers who are the real job creators that we need to take care of, he argues. And with increased consumer spending, American businesses owned by the 1% should actually stand to profit as well.

In the end, he argues that a more equitable distribution of wealth would stand to benefit both the middle-class and the 1% alike.


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