Why the GOP's 'Job Creators' Are Hard to Find

Republicans want to cut taxes to stimulate job growth—even though many companies don't create jobs.

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If you're a "job creator," raise your hand. It would be nice to know who you are, exactly.

Republicans negotiating with President Obama over a fix for the nation's debt problems have been rolling out the heavy buzzwords lately, and there must have been a fresh memo about the sonorous ring of "job creators." House Speaker John Boehner repeatedly decries tax hikes on job creators, with congressional colleagues such as Paul Ryan and Jeb Hensarling forming a job-creators chorus behind him. House Republicans recently published a "Plan for America's Job Creators" (but not for everybody else, presumably) and if you're an aggrieved job creator, you can let House Majority Leader Eric Cantor know what's bugging you by filling out a brief form at http://jobs.majorityleader.gov/.

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The trouble is, job creators are an endangered species these days. The biggest problem in the U.S. economy, in fact, is a shortage of job creators to reward and protect. Companies are barely hiring, and there are about 7 million fewer jobs now than there were at the end of 2007, when the Great Recession began. Part of the Republicans' plan is to lower taxes, streamline regulation, open more trade and take other steps that will stimulate job creation. But we've already tried some of that, including several rounds of tax cuts since 2008. Most job creators are still hiding.

Big companies employ a lot of Americans, but over the last few years they've been better at job destruction than job creation. Between 2007 and 2010, companies with more than 1,000 employees shed about 2.6 million jobs, according to the latest data from the Labor Department. Many big companies have rebounded sharply from the recession, with impressive profits and a lot of cash on hand. But even some of the most successful big companies aren't doing much job creation--not in the United States, anyway. Here are a few examples:

General Electric, which is run by the same Jeffrey Immelt who chairs President Obama's Council on Jobs and Competitiveness, axed 32,000 jobs worldwide between 2007 and 2010, according to information from GE's annual reports. About 22,000 of those lost jobs were in the United States. No job creation there, even though GE earned about $12 billion in profits in 2010.

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Exxon Mobil has added about 2,800 jobs worldwide since 2007, but the giant oil firm doesn't break out how many of those new hires work in the United States. Since Exxon earns nearly 70 percent of its revenue from overseas, it's a good bet that's where most of the new jobs are, too.

Wal-Mart has added about 40,000 jobs in the United States since 2007, largely because the discount retailer has been a beneficiary of pinched consumers desperate to save money. But it has added about 150,000 jobs overseas during the same time--nearly four times the U.S. tally. Still, Wal-Mart seems to be one company that can legitimately call itself a job creator.

IBM has added about 40,000 employees since 2007, but like Exxon, it doesn't say where. About 65 percent of IBM's revenue comes from abroad, and that's where almost all of its revenue growth has come from since 2007. IBM's U.S. business is actually down from 2007 levels, so it's possible that most or all of IBM's new hires have been overseas.

Big companies, in fact, aren't considered a big source of new jobs. While they generate a lot of profits, they also tend to be mature enterprises more likely to swallow other companies and consolidate market share, which tends to eliminate jobs, not create them. "It's the job of big firms to shed jobs," says Carl Schramm, CEO of the Kauffmann Foundation, which promotes entrepreneurship. "Big firms want to lower costs, which means lowering labor costs."

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Young firms, Schramm says, account for virtually all net job creation in the U.S. economy over the last 30 years. That's because startups that survive their first couple of years tend to be vibrant, fast-growing companies that create new industries and hire a lot of new workers. Think Microsoft and Oracle in the 1980s, and Amazon, eBay, and Google in the 1990s. Today, new technology-based firms like Facebook, Twitter, Groupon, Zynga, and LinkedIn represent one of the fastest-growing sectors of the U.S. economy. However, they're the last companies that need any kind of tax relief--and they're not about to ask for special treatment from Washington, either. They became transformative companies without Washington's help, and they'd like to keep it that way.

Politicians routinely extol the virtues of "small business," but that's not really where the job creators are, either. Conventional small businesses--dry cleaners, nail salons, delicatessens, independent professionals like lawyers and doctors--tend to be important pillars of their communities, but they also come and go without generating a lot of new jobs, on balance. During the third quarter of 2010 (the most recent quarter for which there's data), firms with fewer than 20 employees eliminated 34,000 jobs, according to the Labor Department. The biggest gains were among firms with 500 to 999 employees, which created 37,000 jobs.

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So if Republicans want to modify the tax code to reward and encourage job creators, they need to come up with a scheme that offers the lowest tax rates to fast-growing startups, some medium-sized firms, and a few select multinationals. Of course, they might prefer to lower taxes on everybody who could be a job creator--because that includes almost everybody. If you ever spend money, that makes you a job creator, in the most expansive sense of the phrase, since somebody gets paid to provide whatever you buy. But then we'd have to figure out whether to reward American consumers for helping create jobs in China, Japan, Sri Lanka, or wherever the imported goods they purchase come from, or to reward people who spend money that helps create American jobs. So if you buy a Lexus made in Japan or Gucci loafers made in Italy, you're not really a creator of American jobs and you shouldn't be eligible for favorable tax treatement. But if you have your kitchen remodeled by a local contractor or go to a chiropractor for back pain, you qualify. It's not so easy being a job creator. Or locating one.

Twitter: @rickjnewman

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