Monday, January 2, 2012

Super Simple Job-Killing Calculator

It seems like everyone is talking about job-killing this and job-killing that, but nobody gets into the specifics. Who is killing the jobs and how many jobs are they killing?

Who is killing jobs?

Find a business that is making a profit. That profit represents money the business is bringing in that is NOT being paid to any employees. So if you’ve found a company making a profit, you’ve found a job-killer.

Fortune has listed the top 50 American job-killing companies here (although instead of “job-killing” they use the euphemism “profitable”).

How many jobs are they killing?

Let’s say the cost of a full-time employee (including, wages, benefits, etc..) comes to about $60,000 per year (according to Department of Labor numbers referred to here and some guessing).

Here’s the super simple calculation to determine how many jobs a company has killed:

JOBS_KILLED = $PROFIT / $60,000

Using that formula, and Fortune’s list of job-killing companies, here’s a list of how many jobs have been killed by the top 20 American job-killing companies in 2010.
Company# jobs killed
Exxon Mobil507,667
AT&T331,066
Chevron317,066
Microsoft312,666
JP Morgan Chase289,500
Wal-Mart273,150
IBM247,216
Apple233,550
Johnson & Johnson222,233
Berkshire Hathaway216,116
Proctor & Gamble212,267
Wells Fargo206,033
Coca-Cola196,817
General Electric194,066
Intel191,067
ConocoPhillips189,300
Citigroup176,700
Hewlett-Packard146,017
Google141,750
Goldman Sachs139,233

That’s 4,743,480 jobs killed by just the top 20 American companies.

What and where are the jobs being killed?

We’ve seen who is killing jobs, and approximately how jobs many are being killed. That part is super simple. To understand what jobs are being killed you have to know the particulars of the industry. I’m a Silicon Valley computer programmer, so I really understand only two of those companies in Fortune’s list of top-20 job-killers: Apple and Google.

It’s super simple to understand how Google kills jobs. Google is in the advertising business, and have by far the most efficient advertising model ever created. For every advertising dollar that goes into Google, an advertising dollar is not going somewhere else (where the advertising dollar would have been used less efficiently). In other words, each Google employee is replacing multiple people that used to be in the advertising business somewhere else (advertising agencies, advertising artists, pitchmen, newspapers, many levels of middlemen, and so on).

How Apple kills jobs is more complicated only because they’re in more businesses. The iPhone business, for example, is hugely profitable, which is just another way of saying it kills a lot of jobs. What jobs has the iPhone killed? Tons of jobs at Nokia, Motorola, RIM, and everyone else that were making an inferior mobile phone. For another example, Apple is also hugely profitable selling music through iTunes, and again by “profitable” I mean “job-killing” where the jobs are tons of people in the old music-supply chain who are now jobless (everyone from evil music industry executives down to the offbeat employees of record stores that used to exist in every mall and main street).

But aren’t profitable companies the top job creators?

Yes, profitable companies are the ones creating jobs. But for every one job created at profitable company A, there are probably about four jobs lost at companies X, Y, & Z. Again, taking Apple and Google as examples, they each employ about 1 person for every 4 jobs they’ve killed (Apple: 60,000 jobs created versus 233,550 jobs killed; Google: 31,000 jobs created versus 141,750 killed).

Lesson Learned: Do you want to create a profitable business? Figure out how to do something with one person that used to require five.

Why are these job-killing companies the same ones politicians praise as “job creators”?

Because politicians are stupid or hypocritical, or because they know we are.

How about this “tax repatriation holiday” to bring money in to create jobs?

Oh please, that’s hardly even worth a reply! (Who writes these idiotic questions?) These companies use shenanigans to sequester profits offshore, and then ask for a tax holiday to bring the money back to the US to “create jobs”? If the goal of these companies were truly to “create jobs” then they wouldn’t have those profits in the first place. If their true goals were both to create jobs and to avoid taxes on $1 trillion in profits, as they claim, then they would have hired $1 trillion in employees already, and their taxes on profits would be zero.

Who are you to pass judgment?

I’m not passing judgment. I’m just explaining economics and jobs in simple terms. As a computer programmer, I’ve written lots of code that has led to small teams being hired at the expense of large (inefficient) teams being fired. I’m a job killer. That’s why I’m paid the big bucks. I’m not against profit (especially my own), nor am I against replacing lots of workers with a few workers being more efficient.

I’m just against lying about what creates jobs and what kills them. Profits are generated by killing jobs. That's pretty simple.



Update May 1, 2012

For the case of Apple, Business Insider just published an interesting breakdown of exactly where those jobs were killed that correspond with Apple's profits. If you're on the committee determining who should win the Nobel Prize in Economic Science, remember that I published first!

2 comments:

  1. You skipped the top company Exxon. How does Exxon kill jobs, according to your theory?

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    Replies
    1. Here's a super simple way to picture how Exxon kills jobs:

      Exxon is in the oil business. They sell fuel to power stuff. For example, when I went to the grocery store today I drove there and back, powering my car with a little bit of fuel purchased from Exxon for something like $1. As an alternative to spending that $1 for fuel I could have hired four strong people to push me and my car to the store and back, which they could have done in about an hour. Car-pushing is not a high-skill career so I might have hired each of those car-pushers for $8/hour, or $32 for all four of them for one hour.

      So instead of hiring four people for one hour for $32, Exxon provided a way for me to get the same service for $1. So in just this one little case I helped Exxon killed four jobs.

      You may think this example is an oversimplification, and it is, but just barely.

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