And are the jobs any good?
Economic development programs cost states and cities billions of dollars a year, but many programs require little if any job creation, fewer than half call for wage standards, and fewer than a quarter require the companies to provide health care for their workers, according to a study of program requirements scheduled to be released Wednesday by Good Jobs First, a nonprofit research organization that tracks corporate subsidies. Some merely require companies to invest in plants or new equipment, which could actually enable them to reduce their head counts.
States’ desperation to hold on to jobs was vividly illustrated this week in Illinois, which is so short of money that it has been unable to pay its bills on time in recent years. After Sears and the Chicago Mercantile Exchange were courted by other states, the Illinois Legislature passed large tax breaks to keep them where they are, over the objections of protesters who unfurled a “Stop Corporate Extortion” banner in the Illinois House chamber on Monday.
The new tax breaks will save Sears — which got a big retention package just over 20 years ago, when it left the Sears Tower in Chicago for suburban Hoffman Estates — an estimated $15 million a year. They will save the state’s financial exchanges an estimated $85 million a year.
Such deals are hardly unusual. Companies routinely seek tax breaks to relocate or to stay put. But the new report found that many states lack safeguards to make sure that the money they give companies creates long-lasting, well-paying jobs.
“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.
Other programs were criticized for their lax safeguards, with programs in Washington D.C., Alaska and Wyoming singled out as having some of the weakest requirements.
With stubbornly high unemployment rates bedeviling states and little new investment, companies find themselves aggressively courted. Chiquita, the banana giant, plans to leave its Cincinnati headquarters for Charlotte, N.C., which lured it with incentives valued at some $22 million.
Tax breaks in the name of economic development were an explanation given last week when another study found that some Fortune 500 companies had paid no state corporate income taxes in recent years. But no governor wants to see jobs flee.
After Illinois lawmakers passed tax breaks for Sears and the Chicago Mercantile Exchange — as part of a package that also cut taxes for the working poor — Gov. Pat Quinn, a Democrat, defended the move. “Every state in the union has, on the books, tax incentive measures that have been passed by their legislatures to try and get jobs from another state, and other businesses from another state,” he said Tuesday.
Article source: http://feeds.nytimes.com/click.phdo?i=9a19f02df4c0b7b19c443aa09b89d915
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