Featured Quote

In 1913, Henry Ford wrote the following as the directors had been reaping the rewards of profits - "The wages we pay are too small in comparison with our profits. I think we should raise our minimum pay rate".

Friday, November 19, 2010

Create Jobs!! Where are the Jobs??

How is a Job created?

First, there has to be a product or service.  Second, there has to be a demand - a need - for that product or service.  Third, there has to be someone willing to pay to fill that need.

So, as companies sit on record profits and large sums of cash on hand, there is little to no extra demand to require adding jobs.  Why?

The way I see it, the Middle Class has been lured - or walked willingly - into a fiscal trap.  We have mostly acquired cars, houses and credit cards - all with significant debt payments.  This debt payment ratio may be a fairly high part of our monthly expenditures.  With expenses remaining high while salary and take-home pay fall slightly, we have reached a point of really living paycheck to paycheck.  So, we are cutting back on acquiring 'stuff.'  We still need the essentials, but we are cutting back on those too.  "Conserve" is the new motto and our economy - based on "Consume" - is suffering for it.  So, while those companies sit on cash reserves, we don't have the cash to consume any more of their product, so there is no more demand.

To increase demand, we, the workers will have to be paid more.  Either that or Gas/Oil, Energy and Food will have to reduce prices to see an increase in demand.  Either way, corporate profit margins will have to fall and the culture of paper profits will have to go away.  Right now, our economy is driven by Investors putting their money in the right earning entity.  We will need to get back to the times where Hard Work making things, contributing to the good of society and being self sufficient drive the economy - where we invest in living our lives, not some corporate fiscal creation.  We need to get away from our most profitable businesses being Insurance, Credit Card and Financial companies.  The United States are built on Industry - creating things, providing services - not moving money from one balance sheet to another.

My solution would be to have every company, where the CEO makes more than 50 times what the average worker earns, lower CEO pay and give every employee a raise to bring that gap back down to 50 or under.  More people with more money = higher demand for everything = more jobs = even more people with more money = even more demand = more jobs.  The trick is to know when that levels off and be able to adjust in order to maintain.

(PS: Dude from Harvard Business Review agrees with me! Time for a new $5 day!)