April 6, 2012

More Economic Freedom, More Jobs

Antony Davies

Senior Affiliated Scholar
Summary

The economy added 120,000 jobs in March, but it needs to add at least 110,000 jobs a month just to keep pace with population growth. Subtract jobs that are needed by new people entering the work force and that leaves us with only a 10,000 job reduction in unemployment. At this rate, it will take 50 years to eliminate the 12.8 million jobless.

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The economy added 120,000 jobs in March, but it needs to add at least 110,000 jobs a month just to keep pace with population growth. Subtract jobs that are needed by new people entering the work force and that leaves us with only a 10,000 job reduction in unemployment. At this rate, it will take 50 years to eliminate the 12.8 million jobless.

To get unemployment back down to its pre-recession level, we need 600,000 jobs a month for the next 12 months. But the more money the government spends trying to create jobs, the more it crowds out the private sector and the more the labor market stagnates. Washington needs to stop working from a flawed business model and realize government doesn't create jobs - the private sector creates jobs.

Instead, Washington should encourage economic freedom like removing restrictions that prevent new workers from entering the job market, entrepreneurs from starting businesses, and reducing the growth in government employment that crowds out private sector employment. According to Economic Freedom of North America, at the height of the recession the 25 states with the most labor market freedom had unemployment rates averaging 8.1 percent  versus 8.8 percent for the 25 states with the least labor market freedom.