This week we learned that state and local governments had given over $1 billion to ThyssenKrupp. I still wonder how much locally owned businesses and local communities could have used that $1 billion dollars. Nevertheless. a new report, as discussed in the New York Times, calls into question the sole operating philosophy of economic development in Alabama.
“We hope that states will fix their rules to make sure that their programs are creating lots of jobs, and good jobs, with wages tied to the economy and with health care, so companies aren’t getting paid to pull wages down,” said Greg LeRoy, the executive director of Good Jobs First, who added that such deals should be watched even more closely in a downturn. “There’s a real tension between economic development spending and the maintenance of vital services.”
States rarely have accurate measures of how many jobs such programs create, but they are discovering that many such programs fail to live up to their billing. Pennsylvania found in a 2009 legislative report that many business in its Keystone Opportunity Zone program “are not creating jobs or generating capital investment.” A recent study that New Jersey commissioned of its Urban Enterprise Zone program found that the $2.17 billion it spent over six years had produced “limited economic impact.” New York changed its old Empire Zone program, which was supposed to give tax breaks to companies to create jobs in poor areas, after auditors found that some businesses had received tax breaks but lost jobs, while others were being rewarded for hiring in wealthier areas.
“Over time, the programs get deregulated in ways that make them windfalls instead of incentives,” Mr. LeRoy said.
The new report singled out some states for praise. Nevada and North Carolina’s programs were applauded for having strong wage standards, requirements that employers provide health coverage and pay part of the premium, and requirements that subsidized facilities stay open for a set period of time.
Money for Something rates the performance standards and job quality requirements of 238 key subsidy programs from the 50 states and the District of Columbia. Each is rated on a scale of 0-100. Findings:
- Only 135 programs have a performance standard relating to job creation, job retention or training of a certain number of workers.
- Fewer than half (98) of the 238 programs impose a wage requirement, and only 53 of those are tied to labor market rates.
- Only 11 of the wage requirements raise pay levels by mandating rates somewhat above existing market averages. Wage requirements vary from just above the federal minimum to more than $40/hour in limited cases.
- Only 51 programs require that a subsidized employer make available healthcare coverage, and only 31 require an employer contribution to premiums.
- The states with the best average scores among their programs: Nevada (82), North Carolina (79) and Vermont (77). The worst: the District of Columbia (4), Alaska (5) and Wyoming (10).
And if we are not going to invest in locally-owned businesses , continue being bullied around, and pay the extortion of the out-of-state corporations, let’s at least demand transparency and accountability.