October 8, 2024

States Pay to Train Workers, to Companies’ Benefit

The primary beneficiary is undoubtedly Caterpillar, a maker of industrial equipment with rising profits that has a new plant about 10 miles away in Winston-Salem.

Yet North Carolina is picking up much of the cost. It is paying about $1 million to help nearly 400 workers acquire these skills, and a community college has committed to develop a custom curriculum that Caterpillar has valued at about $4.3 million.

Caterpillar is one of dozens of companies, many with growing profits and large cash reserves, that have come to expect such largess from states in return for creating jobs. The labor market is finally starting to show some signs of improvement, with the government reporting on Friday that employers created 200,000 jobs in December.

Although the sums spent on training are usually small compared with the tax breaks and other credits doled out by states, some critics question the tactic.

“The question is, why shouldn’t the company pay for this training?” asked Ross Eisenbrey, the vice president of the liberal Economic Policy Institute. “It’s for their benefit.”

Critics suggest the programs may not even be in the best interest of workers if the resulting jobs pay low wages or simply disappear after a few years, leaving employees with narrow skills that do not help them land new positions. In North Carolina, for example, people are still smarting from the departure of a Dell factory that put nearly 1,000 people out of work just five years after the state spent close to $2 million on training.

Various studies have long questioned whether states get their money’s worth from incentives for companies that build facilities or expand existing ones. In a report last month, Good Jobs First, a nonprofit research organization that tracks such spending, found that states often attract companies that create few jobs, pay low wages or scrimp on health insurance.

But customized job training for a specific employer still holds favor with public officials, who often argue it may be an effective use of taxpayer dollars, especially when so many workers have been displaced. Targeted programs can be preferable to the more general training paid for by the federal government, programs that have been used by hundreds of thousands of Americans yet have left many participants still out of work.

“On the whole spectrum of things that are done to attract businesses, this is one of the best investments and highest return for the invested dollar that our state and many other states do,” said J. Keith Crisco, North Carolina’s secretary of commerce.

Caterpillar, which is investing $426 million in the new factory, is one of several companies supported by North Carolina, where the unemployment rate hovers around 10 percent and thousands of textile, furniture and other manufacturing workers have lost their jobs in recent years. The training support is part of a $51 million package of incentives from the state to lure Caterpillar to Winston-Salem.

The state is also paying to train workers for a new Honda Aircraft factory in Greensboro, an expanding Siemens plant in Charlotte and an existing call center in Winston-Salem for US Airways, which relocated 200 jobs from Manila last year.

According to the state, North Carolina spent about $9.4 million to train workers as part of projects that created nearly 4,500 jobs in the 12 months through June 30. (The total cost per job rises sharply beyond the $2,000 in training because of voluminous tax breaks and other incentives.)

Business executives argue that government-subsidized training is a fair payoff given what the companies bring to the table.

“At the end of the day we’re creating more jobs for the state of North Carolina,” said Mark Pringle, director of operations at a Siemens gas and steam turbine plant in Charlotte that has received close to $1.2 million worth of training from the state for about 700 new workers. “There’s no doubt it’s a competitive process,” he added.

Article source: http://feeds.nytimes.com/click.phdo?i=5fa1867756abb835e2ca16039a7c4132

Economix: A ‘AAA’ Q.&A.

Why did Standard Poor’s lower the credit rating of the United States to AA+?

The rating agency thinks the United States has too much debt, or at least will: “Under our revised base case fiscal scenario — which we consider to be consistent with a AA+ long-term rating and a negative outlook — we now project that net general government debt would rise from an estimated 74 percent of G.D.P. by the end of 2011 to 79 percent in 2015 and 85 percent by 2021.”

Why is the debt so high?

One reason is that the government had to spend huge sums to bail out the banks and try to offset the impact of the deep recession caused by the financial crisis.

FLOYD NORRIS

FLOYD NORRIS

Notions on high and low finance.

Did S.P. issue warnings when the mistakes leading to the financial crisis were being made?

No. One cause of the crisis was that S.P. and its competitors handed out AAA ratings to almost anyone who wanted one for a mortgage-backed security. They did that even for securities whose only source of repayment was subprime mortgages issued to buyers with poor credit who had taken out what were known as “liars’ loans” because no one checked to see if they had any income at all.

Why did they do that?

They had models that showed a lot of such mortgages would never default.

Are those securities still AAA?

No. Many of them are rated in the lower regions of junk. It turned out there were a lot of defaults.

Does this mean that S.P. thinks the U.S. ability to meet its obligations is in question?

No. It knows the United States borrows in dollars, and also has a dollar printing press. The recent Congressional circus raised some fears the country would refuse to pay, but that seems to have passed.

There have been complaints that the rating agencies are always behind the market. Is that true this time?

No. In recent months, Treasury borrowings costs have declined, because investors around the world engaged in a flight to safety. The market thinks there is nothing safer than a Treasury bill,

How have other AAA countries done?

Generally O.K. But rates have gone up in France because of worries about the euro and a recognition that France, unlike the United States, does not have the ability to print the currency it must repay.

So the market seems more concerned about France, but S.P. does not. Is that because France has less debt outstanding?

No. S.P. believes that in 2015 France’s debt will be 83 percent of its GDP, compared to 79 percent in the U.S. But it thinks France will do a better job of bringing down budget deficits.

So the market seems to have a different view than does S.P. of the relative merits of U.S. and French debt? Whom should I believe?

That is up to you. But the market figured out subprime mortgage securities were junk long before S.P.

So the U.S. debt is up partly because S.P. was incompetent before the financial crisis. Is there any particular reason to assume they know what they are doing now?

Next question.

What impact will this have on trading in Treasuries in coming days?

There is no way to be sure. Anything that causes a lot of people to sell a security is likely to cause prices to fall. But it is hard to see there is any new information in S.P.’s report.

Article source: http://feeds.nytimes.com/click.phdo?i=c74e844385e9c9456e658b94e0562776