The Job Creation Fallacy: Why Market Freedom Creates Real Prosperity

Few economic fallacies are as persistent or damaging as the belief that inefficiency creates jobs

In our national conversation about employment, few economic fallacies are as persistent or damaging as the belief that inefficiency creates jobs. This misunderstanding has driven countless policies aimed at "creating work" through artificial constraints, regulations, and mandates—often with devastating consequences for the very workers they're meant to help.

The Fundamental Misunderstanding

The fallacy begins with an intuitive but profoundly mistaken assumption: that there exists a fixed amount of work to be done in an economy. From this premise flows the seemingly logical conclusion that we must "spread the work around" to ensure everyone has a job. After all, if the economic pie is fixed, shouldn't we ensure everyone gets a slice?

This thinking appears in various forms: union featherbedding practices, mandatory workweek reductions, penalty overtime provisions, and restrictive occupational licensing. These all sound noble in their intentions but rest on fundamentally flawed economics.

Mandatory Inefficiency: A Case Study in Unintended Consequences

Consider the example provided in the building trades: the plumber who cannot replace a tile while fixing a shower leak must call in a specialized tile-setter. On the surface, this "creates" an additional job. But does it?

Let's trace the economic effects:

1. The homeowner pays double what the repair should cost

2. With less disposable income remaining, the homeowner foregoes purchasing a new sweater