June 11, 2004
Can We Afford to Buy New Jobs?
A good economic developer, the old joke goes, is someone who “shoots anything that flies and claims anything that falls.” There certainly is an element of desperation in the job of constantly putting forth your own community as the best place to do business, when thousands of other communities are all doing exactly the same thing. So can we blame those who are responsible for the growth of the economic base if, in the parlance of a famous television game show, they occasionally want to “buy a vowel?”
But can and should governments and communities step around the obstacles and challenges to economic growth in their own back yards and simply buy the jobs that they covet? And how much should we pay?
That’s the situation facing officials in Indiana and a dozen or so other states as they eye the prize of 2,000 high paying jobs being dangled in front of their eyes by the medical device manufacturer Guidant. Spun off from Lilly ten years ago and headquartered in Indiana , the company’s product – drug coated stints used in coronary care – fits in with the life sciences development thrust dozens of states have committed themselves to. If other states are getting out their checkbooks to try to land the company’s proposed new production facility, can Indiana afford not to get in the game?
That’s a very difficult question to answer. The opportunity to seemingly add thousands of jobs in a single, bold, stroke is too rare, and too enticing, for many politicians to resist. But when the glare of the headlines recedes and the bills come due, is the economy served for better or for worse?
Even if companies like Guidant do come through on their promises of jobs and investment, the state that wins the bidding war to attract those jobs within its borders can still be a loser. In fact, the more competitive the bidding, the more likely this outcome becomes.
No state or community would knowingly bid more to land a new job than it delivers in economic benefits, of course. But with prices in recent bidding wars for automobile assembly plants exceeding $100,000 per job, the return to the public investment can be bid down significantly. And when that return falls below what governments could get spending that money on other projects – or returning the dollars to taxpayers – the economy is worse off as a result.
But the very existence of a return on public investment in attracting big employers supposes that the tax breaks, infrastructure improvements and other goodies used as enticement actually affect the company’s location decision. Did BMW locate in South Carolina because of the tax breaks, or because of its non-union work force and its proximity to a deep-water Atlantic port? The company was happy to accept the tax benefits offered, but those dollars were wasted if the company would have chosen the state anyway.
The strategic aspects of “buying” the jobs we covet are frequently overlooked by those who pursue them. If our governments occasionally open up their pocketbooks to lure big employers, does that not mean that all jobs are now for sale? Ask the leaders of Cincinnati, still smarting from the breaks it surrendered to Proctor and Gamble just to keep the long-tenured company from expanding someplace else.
There isn’t enough money in the public till to simply pay companies to create jobs where we want them. Even in an economy where employment is relatively stable, a steady flow of job creation is needed to offset the inevitable job destruction caused by competition, technology and obsolescence. Paying for them all is beyond our means, pure and simple. And paying for some of them can be dangerous.
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