Home > Microeconomics > More Jobs Isn’t Always Better

More Jobs Isn’t Always Better

lazy2

I’m surprised sometimes at how naive people are about the necessity of job losses for prosperity. A business becomes more productive through, say, new technology. It sheds workers, reducing its costs. Those workers are certainly worse off, but still have the ability to produce–something!–and their labor can be redeployed to another use, maybe in another industry.

Simply employing more people doesn’t make an economy better off, and a company that can produce more with fewer people doesn’t make an economy worse off because it sheds workers, it makes it better off.

If that doesn’t make intuitive sense to you, consider the case of PDVSA, the Venezuelan oil producer:

In 1999, when Chávez took office, PDVSA had 51,000 employees and produced 63 barrels of crude a day per employee. Fifteen years later, PDVSA had 140,000 employees, and produced 20 barrels of crude a day per employee, according to an Aug. 14 report by the France Press news agency.

Venezuela’s net oil exports have plummeted from 3.1 million barrels a day in 1997 to 1.7 million barrels a day in 2013, according to U.S. Energy Information Administration estimates.

More jobs is always politically popular. But if the additional employment doesn’t mean more production, it may well produce more poverty, not less.
Advertisements
Categories: Microeconomics
  1. No comments yet.
  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: