Entrepreneurs alone can’t create jobs. They are only a part of the machinery that creates jobs. They set up new companies or fund loss making ones and thereby create employment. True. But they don’t hire people just because they have money in the bank. They hire because there is a demand for their product or service in the market.
If there is low demand or lack of demand, no entrepreneur will hire people. Only when there is evidence of people buying their products or indications that they would in the near future, will an entrepreneur invest in product improvement or resources.
Less taxes on the rich
The belief that rich people create jobs has prompted many countries to levy less taxes on the rich as it is felt that with heavy taxation their profits would go down and they will not be in a position to create jobs; in fact they may even have to reduce the number of jobs that they have on offer.
This argument seems flawed in my opinion, if applied to entrepreneurs. When we, as entrepreneurs or businessmen, start a business, we invest money (either our own or borrowed from financial institutions, venture capitalists etc), we hire people and get going. So we have created jobs. But if my business does not succeed, if nobody wants to buy what I have to sell, my business will collapse and all the jobs will disappear. So what keeps jobs is the demand for products and services by ordinary consumers. If demand dries up, so do jobs.
Effective, economic ecosystem
Entrepreneurs engage in business and hire people only if they know that their venture can produce what consumers want. An increase in demand fuels their urge to become entrepreneurs and make even more money than they have. Thus it is an effective, economic ecosystem that keeps the wheels running. The company’s customers buy the company’s products. The proceeds of the sales go back to the company and are used to hire people to produce, sell and service those products. Hence, if demand disappears so will jobs, regardless of what the entrepreneurs, investors and financiers do.
The role of the entrepreneur is important no doubt – without him there would be no business or company. Without the investors and financiers there would be no capital. They create jobs, initially. But if the company is to grow, if the jobs are to be permanent and self-sustaining, entrepreneurs and investors are not enough by themselves – what is needed are customers and their ability and willingness to buy and pay for the company’s products.
This is similar to when you plant a seed – the seed (like the entrepreneur and investors) starts the creation of the tree – but the tree will grow and sustain only if the soil, sunshine, water, atmosphere and nutrients are suitable for it. It will not grow in the absence of these elements – it will die.
Demand is in the hands of the masses
Jobs will die if not bolstered by demand for the business’ products and services. Demand is in the hands of the masses – not the rich and super-rich. The rich have more money than they can spend – the excess (and it is huge!) is invested and earns even more for them. It does not create extra demand for anything. But if this amount was to be distributed in the hands of many middle-class people, they would spend it on things they required.
So rather than one super rich spending say Rs 10 lakhs and saving Rs 40 lakhs, we could have 1000 customers with Rs 5000 each spending the entire amount of Rs 50 lakhs on goods and services. Thereby creating more jobs for the workers and consumer and of course more profits for the rich – thus benefitting all sections of society.