Buildings Do Not Create Jobs--Let's Cut the Rhetoric

It’s time we put an end to the political rhetoric that “buildings create jobs.” Companies create jobs and a building is but one of the three classical components of production, along with labor and capital. But it has become the norm in every announcement of a new commercial building for the government official and/or private developer to announce that the building of “One XYZ Place will create 100 construction jobs and 600 permanent jobs.” The claims are pernicious because it is often the rationale for government approval or public financing for the building and for public infrastructure expenditures (see Assembly Square link).


Buildings do not create jobs. Companies create jobs and then, as needed, assemble the factors of production necessary to produce a product or service. One of these factors of production is land, which, for our purposes, can be considered commercial space. The other factor is capital, such as the machinery necessary to manufacture a product or the telecom system necessary in a new office. The third and most important is labor.

To say that one factor of production—land (or commercial space) -- creates another factor of production—labor-- is not only theoretically wrong, it is absurd on the common sense level. A building is a box. If, and the” if” goes to the very core of commercial real estate, the building attracts a user, it will still be a box. It will not create the jobs; it will only house the jobs. And if the company leaves, it will not sprout new jobs. It will still be a box.

Buildings do not create construction jobs either. If the building is constructed by and for a specific user, the user, by creating the building, creates the construction jobs. If the building is constructed on a speculative basis, derived from an investor’s perception of the need for commercial space, then the construction jobs are created by the investor, not by the building. Again, the building is a box, just one factor of production.

One might argue that this is an issue of semantics. I beg to differ, because the “buildings create jobs” battle cry is used as a justification for virtually every new commercial construction project. If a private investor constructs an office building purely on the basis of its judgment of supply and demand and exactly within the zoning and building codes, I have no problem with semantics. Of course, this happens in the Land of Make Believe. Every office building constructed in Boston, even those meeting zoning and building codes, must still receive Boston Redevelopment Authority approval at the design level. And then the sensational claims come gushing out about buildings creating jobs. And then come the requests for public financing or incentives. And then the taxpayers start coughing up money based on an untruth. This is not an issue of semantics when semantics become a weapon of deceit.

The citizens of Massachusetts have now learned the issue the hard way, spelled E-V-E-R-G-R-E-E-N. Taxpayers paid for the building to the tune of $58 million in direct subsidies, incentives, and tax breaks. Evergreen created the jobs. And then Evergreen eliminated the jobs. The building is empty. It is not “creating jobs.” It is just a big empty box, which is all that it ever could be. It may once again become an active factor of production if a user chooses to produce a product or service in the box. But until then, the building will not be creating jobs.

Unfortunately, the Governor had already drunk the “buildings create jobs” Kool Aid, and his erstwhile development director, Greg Bialecki, is still handing out cups of the stuff all over the state. And we all keep drinking it. By the way, Mr. Bialecki considers Evergreen as a minor mistake. Makes you wonder what a major mistake would be.

If you want an idea how deeply entrenched this wishful thinking extends, simply visit the Boston Redevelopment Authority website, look up any development project, and read how many jobs the project will create. It’s a complete farce. I know a lot of landlords who wish that their existing half empty office buildings started to suddenly create jobs one day.

Saying a building creates jobs is like saying that making a hammer will create jobs. It leaves out the fact that hammers do not stand up, grab some nails, and start pounding away. A person (let’s call that person Mr. Labor) picks up the hammer first. And someone (let’s call that someone Mr. Producer) informs Mr. Labor what he wants him to do with the hammer. And, if we all hold our breath, maybe Mr. Producer will find his way to Fort Devens and rescue us all from the Evergreen debacle.

I’m a real estate broker. If buildings created jobs, my profession would not exist.