Don't Put Lipstick on Corporate Pigs

V.2, N.74

For 27 years, Good Jobs First has been producing world-class research to expose the folly of the corporate “incentives” game foolishly played by economic developers everywhere. Study after study has shown that efforts by cities to “attract and retain” nonlocal corporations through subsidies are completely counterproductive. Among the reasons:

• Companies that receive these subsidies consistently underdeliver their promises, and many split town after the gifts run out.

• The jobs created frequently pay miserable wages, and about 90% are taken by outsiders who move into the communities. This, in turn, requires infrastructure investments (roads, schools, water systems, etc.) that are never tallied as costs.

• The structure of the incentives industry puts cities at a terrible disadvantage. Agents represent companies looking for their Payday, not cities looking for economic development.

• The secrecy around these deals makes public accountability almost impossible, and makes public corruption among participating officials, who are greasing the wheel in the shadows, almost inevitable.

I was therefore irked to see a press release from Good Jobs First titled “Economic Development Done Right,” which discusses strategies a few cities have employed to ensure that incentive beneficiaries stay longer, create better-paying jobs, and cover more infrastructure costs. For example, the Minneapolis Tax Increment Financing (TIF) Program is applauded because it “promotes affordable housing, living wages, targeted mixed-use development, and incentivized participation of women- and minority-own businesses.”

This argument is complete nonsense. It ignores the biggest problem with corporate subsidies—opportunity costs. What else could Minneapolis do with the same dollars it’s wasting on its TIF programs?

Here’s what we know: Corporate subsidies, even with a cornucopia of community benefits, are now paying nonlocal companies $500,000 to $1 million per job created. As I document in my book, The Local Economy Solution, local businesses often create jobs for about $1,000-$2,000 of incentive money, and some well-designed economic development programs, like certain types of business incubators, can create jobs while actually making money. A 2021 study from Nova Scotia showed that government incentives around investment in local businesses wind up costing about $500 per job created. When opportunity costs are considered, corporate attraction is always a dumb choice for economic development.

But don’t take my word for it. If your city really wants the best buy for new jobs, issue a public RFP for business expansions and then allocate money to the cheapest bids first. I guarantee you that the winners will all be local businesses that inherently bring community benefits. You can then dispense with all these dumb subsidy and community benefits programs altogether.

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Our paying subscribers will find other articles of interest as well:

• Boston’s new Co-Purchasing Housing Pilot Program helps two or three families purchase a larger home for multifamily living.

• Co-op Cincy, inspired by Mondragon in Spain, has built a thriving network of worker-owned cooperatives in the Cincinnati region that provide fresh food (Our Harvest), energy efficiency retrofits on houses (Sustainergy), home and office cleaning (Cincy Cleaning Co-op), regenerative landscaping (Old Growth), child care (Shine Nurture Center), and web design (Comp.coop).

• The Venezuelan co-op, Cecosesola, has organized 50 community organizations and multiple co-op businesses, engaged in everything from providing food to burial services, across a country widely regarded as a failed state.

• A growing interest of impact investors in the United Kingdom is local investment. (We will have a special report on this topic coming out soon!)

• A new book, Remaking Money for a Sustainable Future, by Ester Barinaga, a professor of social entrepreneurship at Lund University in Sweden, provides great insights into local money.

Finally, a shout-out to Devin Thorpe, of Superpowers for Good, who has a great interview with our esteemed editor, Jennifer Risley. You “hear“ my voice a lot in these pages, but 90% of the work done to publish The Main Street Journal every week is done by Jen. Many thanks to her for her amazing efforts behind the scenes.

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