The myth of government job creation
The creation of jobs is used as justification for innumerable government-enabled projects. Job creation is a mantra used to promote a wide variety of corporate welfare. When a project such as a sports stadium, mall, factory or corporate "campus" is assisted by forgiven taxes, expensive infrastructure additions, or even tax funding, we are lured with promises of hundreds of new jobs to be created by the project. We are given the impression that the "new" jobs will mean prosperity for many, and increased spending and taxes to the community.
Some states have formal programs to entice corporations to locate within their borders. Minnesota's version is called JOBZ, short for Job Opportunity Building Zone. It has been in place for 2 years and is scheduled for 10 more years. JOBZ businesses do not have to pay property tax on improvements of the land they use, sales tax on what they use or consume, or corporate income tax. They may also receive tax credits if they pay their workers a high enough wage. To date, 200 JOBZ projects have been completed and 3,000 jobs "created". The businesses involved have reaped $6.4 million in tax benefits and breaks.
Tax benefits and breaks is money lost to the state... money that all of the state taxpayers will have to pony up in some other way, so the JOBZ program has cost taxpayers $6.4 million. If it created 3,000 new jobs, that would calculate to a cost per job created of $2,133.
That doesn't sound so bad, does it? 3,000 new jobs. Well... sort of. It seems that some of those jobs are part-time, and some are only planned jobs, not actual jobs. The 3,000 is really the equivalent of 1,195 full-time jobs. I guess that the taxpayer cost per "job created" would then actually be more like $5,355 each. Seems to me that virtually ANY business could create new positions with that kind of subsidy. Truth is, the state, as represented by the Department of Employment and Economic Development (DEED), is not sure of even those numbers, but promises that monitoring of the businesses for compliance will be closer next year. Of course, the tax benefits to the businesses continue year after year.
But... let's think a little more about these "new" jobs being created at taxpayer expense. A job has not been effectively "created" until an appropriately skilled person is in the position. A job with no employee in it is worth nothing.
Even when that job has been created, it is not a "new" job unless it is manned by someone who was previously unemployed. If a newly-created job is manned by someone who left another job to take the new one, it cannot be counted as an addition to total employment... it's simply replacing one job with another.
While new job opportunities may be great for workers in the area, perhaps at a higher wage, or more convenient, or providing better working conditions or benefits, there is also a downside to every worker movement. Someone gained a new employee, but some other business LOST an employee. Some businesses got significant tax breaks, but all other businesses will end up helping to foot the bill. What projects such as those subsidized by JOBZ and other government business-assistance programs actually do is give benefit to SOME businesses at the expense of other businesses.
Imagine how you would feel, as the owner of a business you built, to see your employees lured away to other jobs in a project you're actually being forced to subsidize with your taxes. Imagine how you would feel, as an employee, to see your employer fail because it couldn't compete with a subsidized competitor.
In Minnesota, JOBZ is being challenged as unconstitutional, but I suspect that even if it is so declared, the state will make enough changes in the program to get around any court ruling. Subsidies please the people who receive them, which gathers votes and campaign contributions, and that is, after all, what drives politics. Politicians giving away taxpayer money are buying votes. One of the principles our nation was founded on was equal opportunity. Whenever government plays favorites, subsidizing some at the expense of others, it destroys the equality of opportunity.
Government subsidies in the name of job creation are a farce. Real jobs are created when businesses have enough in sales and profit to expand their enterprise. Lowering or eliminating taxes for all of us is the only way government can enable natural jobs growth. The next time you hear about a government program being promoted or praised for job creation, recognize that you're being conned.
Some states have formal programs to entice corporations to locate within their borders. Minnesota's version is called JOBZ, short for Job Opportunity Building Zone. It has been in place for 2 years and is scheduled for 10 more years. JOBZ businesses do not have to pay property tax on improvements of the land they use, sales tax on what they use or consume, or corporate income tax. They may also receive tax credits if they pay their workers a high enough wage. To date, 200 JOBZ projects have been completed and 3,000 jobs "created". The businesses involved have reaped $6.4 million in tax benefits and breaks.
Tax benefits and breaks is money lost to the state... money that all of the state taxpayers will have to pony up in some other way, so the JOBZ program has cost taxpayers $6.4 million. If it created 3,000 new jobs, that would calculate to a cost per job created of $2,133.
That doesn't sound so bad, does it? 3,000 new jobs. Well... sort of. It seems that some of those jobs are part-time, and some are only planned jobs, not actual jobs. The 3,000 is really the equivalent of 1,195 full-time jobs. I guess that the taxpayer cost per "job created" would then actually be more like $5,355 each. Seems to me that virtually ANY business could create new positions with that kind of subsidy. Truth is, the state, as represented by the Department of Employment and Economic Development (DEED), is not sure of even those numbers, but promises that monitoring of the businesses for compliance will be closer next year. Of course, the tax benefits to the businesses continue year after year.
But... let's think a little more about these "new" jobs being created at taxpayer expense. A job has not been effectively "created" until an appropriately skilled person is in the position. A job with no employee in it is worth nothing.
Even when that job has been created, it is not a "new" job unless it is manned by someone who was previously unemployed. If a newly-created job is manned by someone who left another job to take the new one, it cannot be counted as an addition to total employment... it's simply replacing one job with another.
While new job opportunities may be great for workers in the area, perhaps at a higher wage, or more convenient, or providing better working conditions or benefits, there is also a downside to every worker movement. Someone gained a new employee, but some other business LOST an employee. Some businesses got significant tax breaks, but all other businesses will end up helping to foot the bill. What projects such as those subsidized by JOBZ and other government business-assistance programs actually do is give benefit to SOME businesses at the expense of other businesses.
Imagine how you would feel, as the owner of a business you built, to see your employees lured away to other jobs in a project you're actually being forced to subsidize with your taxes. Imagine how you would feel, as an employee, to see your employer fail because it couldn't compete with a subsidized competitor.
In Minnesota, JOBZ is being challenged as unconstitutional, but I suspect that even if it is so declared, the state will make enough changes in the program to get around any court ruling. Subsidies please the people who receive them, which gathers votes and campaign contributions, and that is, after all, what drives politics. Politicians giving away taxpayer money are buying votes. One of the principles our nation was founded on was equal opportunity. Whenever government plays favorites, subsidizing some at the expense of others, it destroys the equality of opportunity.
Government subsidies in the name of job creation are a farce. Real jobs are created when businesses have enough in sales and profit to expand their enterprise. Lowering or eliminating taxes for all of us is the only way government can enable natural jobs growth. The next time you hear about a government program being promoted or praised for job creation, recognize that you're being conned.
posted by Robert Ronald Smith at 12:01 AM
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