Where the Jobs Come From

Where the Jobs Come From

Every election in my adulthood has been about jobs and which candidate can deliver the most jobs. At least, it has been primarily about this among various other economic measurements and notions (income inequality, minimum wage, etc.). The only competing issue in my adulthood has been national security. Other issues have also been immigration and trade, but only as an extension of both national security and the economy.

To many, employment seems to be the #1 measurement of a president’s success. While I don’t agree with this, I’ll take it for what it is. Thus, politicians focus on their jobs creating ability. When you hear political ads and debates, to me the sense that you get is that new jobs look like this:

They talk about manufacturing going to China and we imagine images like this:

So, with outsourcing to China, I can only imagine that a candidate’s hope is to have this same plant exist in America with Americans in these pink suits. Companies will proudly state that their products were made in America and with American labor … even though for the past 30 years manufacturing has looked more and more like this:

As time goes on, there will be very little human manufacturing of mass market products. Tesla CEO Elon Musk’s Gigafactory is the prime example of what’s to come. His vision is to have a facility where raw materials go into one end of it and cars come out the other end.

The public must ask themselves what they value? In human history, technology regularly displaces jobs permanently. Farming is a good example of this. Let’s look at the history of what percent of the US labor force was farming over time:
• 1820 – 72%
• 1850 – 64%
• 1920 – 30.2%
• 1933 – 24.9% (Source: http://www.nytimes.com/1988/07/20/us/farm-population-lowest-since-1850-s.html)

Carrying this forward, now it is less than 2%. It would be silly to expect and hope for those farming jobs to come back. While this was going on, the Industrial Revelation was creating jobs that did not exist at the beginning of this trend. The farmers became manufacturers.

Similarly, manufacturing is undergoing the same thing. I also believe that as solar energy gets cheaper and its price drops well below other sources of energy, this technology will also displace jobs in coal, natural gas, and oil. There is no one to be angry at about any of this as it is inevitable.

So as we hear politicians promise jobs, let’s be real about where jobs come from.

Young companies that are five years old or younger create roughly 2/3rds of all new jobs. (Source: http://www.kauffman.org/what-we-do/research/firm-formation-and-growth-series/where-will-the-jobs-come-from).

In a word, where do new jobs come from? Startups.

The bulk of new jobs created during the next president’s time in office will look something closer to this:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.