Guest Opinion
Who are the real job creators?
By Peter Fisher, Research Director

As published in the Oct. 18, 2011, Des Moines Register
PDF (2 pages)



Hereís a question for you: Who has done more to create Iowa jobs during this recession ó Whirlpool Corporation, or public school teachers?

The answer: teachers.

Whirlpool cut 440 jobs at its Amana plant in 2008, and another 350 in 2011. Iowaís public school teachers, on the other hand, through the spending they do at Main Street businesses, have each supported about an additional half of a private-sector job. So 33,500 teachers support another15,000 Iowa workers.

We are continually told that private companies are the job creators; the rest of us just depend on their good graces for a living. But a recession makes a fundamental economic fact quite clear: Private-sector jobs exist if and only if the good or service those workers are producing can be sold or utilized. If consumers arenít spending, companies cut production, and workers are laid off. A market economy like ours is driven by consumer spending. Consumers are the real job creators.

There is an important lesson here for the Legislature as members look toward the next session. The voters last time around were understandably angry about the state of the economy; they want our legislators to do something about it. So what can be done? The Legislature would do well to abide by the principle: First, do no harm.

Compensation paid to state and local government employees amounts to over $11 billion a year in Iowa. When those employees spend those paychecks ó at hardware stores, restaurants, department stores, car dealerships, day care centers ó they support over $3 billion in private sector payrolls, and about 100,000 jobs. For every 100 jobs in the public sector, another 45 jobs are supported in the private sector.[i] So if you want to support jobs and the Iowa economy, one of the last things you should do is destroy jobs by laying off public workers.

The second principle should be: Donít throw money away. When state revenues are down and services have been cut for several years in a row, we canít afford to throw money at a problem in the hopes that it might do some good. Yet that is exactly what we do whenever we expand a business tax incentive, or create a new one. Whirlpool cut 350 jobs just a few months after receiving a new round of incentives, including tax-increment financing from Iowa County, to expand employment. Businesses donít produce things they canít sell, regardless of how low their taxes are. Businesses are sitting on vast amounts of cash right now, so giving them more by cutting their taxes will do nothing to put factories back on line.

The key to private sector job expansion in this state is the recovery of demand for their products. The state of Iowa canít do a whole lot about that, but there are a couple of things it can do: Maintain purchases of goods and services from Iowa companies, and maintain public jobs and the local spending that follows.

Teachers and firefighters and state troopers and prison guards and social-service case workers ó these folks together account directly for 16 percent of total nonfarm employment in Iowa. State and local government is a large and important part of the state economy. And it is the only part that our legislators have real control over. Letís make sure that when they go home in May, legislators have left that share of the economy in at least as good shape as they found it in January.

[i] All calculations in this paragraph are based on figures from the Iowa State Input Output Model as run by David Swenson of Iowa State University.

peterfisherphoto

Peter Fisher
is research director of
the Iowa Policy Project
in Iowa City
and co-director of
the Iowa Fiscal Partnership.

Contact: pfisher(at)iowapolicyproject.org.