State and local governments waste billions of dollars annually on economic development subsidies given to companies for moving existing jobs from one state to another—or on “job blackmail” paid to prevent possible relocations. That’s the main conclusion of The Job-Creation Shell Game, Good Jobs First’s new study released today.
What was long ago dubbed a Second War Between the States is, unfortunately, raging again in many parts of the country. The result is a vast waste of taxpayer funds, paying for the geographic reshuffling of existing jobs.
By pretending that existing jobs that are relocated are “new” (or perhaps technically “new to the state”)—and thereby qualifying them for eight- and nine-figure subsidy packages—public officials and the recipient companies engage in what the report calls “interstate job fraud.”
Interstate job piracy is wasteful and unfair. The costs are high and the benefits low, given that a tiny number of companies get huge subsidies for moving a small number of jobs.
The strategy is low impact: detailed studies consistently find that the net impact of interstate job relocations—plus or minus—is microscopic for a given state.
The study includes eight case studies on metropolitan areas such as Kansas City, Charlotte, New York and Memphis, where companies get subsidized to move short distances across state borders. It also profiles states such as Texas, Tennessee, Georgia, New Jersey and Rhode Island that are aggressive users of relocation subsidies as well as states such as Illinois and Ohio, which have given big retention or “job blackmail” packages.
The report recommends that states “de-monetize interstate job fraud” by no longer dishonestly calling existing jobs “new” just because they have been moved across a state line. It further reveals that states already know how to do this: four-fifths of the states already refuse to pay for intrastate job relocations.
The report also recommends that states end their business recruitment activities that are explicitly designed to pirate existing jobs from other states. It also suggests a modest role for the federal government: reserving a small portion of its economic development aid for those states that amend their incentive codes to make existing jobs ineligible for subsidies.
Good Jobs First, sponsor of this Clawback blog, is a non-profit, non-partisan research center based in Washington, DC that promotes corporate and government accountability in economic development and smart growth for working families.