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Holding Subsidized Companies Accountable

Posted by Karen Traeger on Dec 19 2011
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By:  Bob Lucore

With the economy still in the doldrums, most state and local governments continue to face severe budgetary challenges. The need for vital government safety-net programs is growing at the same time when tax revenues are falling. Yet, an estimated $70 billion in state and local taxpayer dollars is given away each year in the form of subsidies for businesses, according to a cautious appraisal by Kenneth P. Thomas at the University of Missouri-St. Louis.

What do states and cities get for the money they spend on these subsidies? Such subsidies are promoted to the public on the basis that they will lead to economic development. They are advertised as job creation engines. However, increasingly the public wants to know whether such programs are creating substantial numbers of good jobs. They want to know if the recipients of this government aid are being held accountable for their promises of job growth.

A new study, titled Money for Something, takes a closer look at this controversy. Issued by the research and advocacy center Good Jobs First (GJF), the study examines major state subsidy programs to see whether they contain accountability mechanisms. Are the companies receiving them required to create the promised jobs? The GJF report also examines whether state subsidy programs for businesses require jobs created to meet wage and benefit standards. Are recipients required to create good jobs?

Nearly 50 percent of the subsidy programs examined in the study do not contain standards requiring that jobs will be created in return for the money. So states are handing over billions of dollars in corporate subsidies, with no guarantee the actual jobs will be created.

In addition, the study finds that fewer than half have any kind of wage requirement attached to them. Clearly tax payers have a right to expect that companies do not get subsidized to create jobs that pay below market rates. Furthermore, tax payers would be right to expect that subsidy recipients do not hire for jobs where the workers end up requiring social safety net programs to subsist. Yet only 11, of the hundreds of programs examined in the GJF study, had requirements that jobs created pay above market rates.

The study ranks the 50 states and the District of Columbia on whether their subsidy programs require recipients to create jobs, whether they require that those jobs pay above standard rates, and whether they include health benefits. Information for each state is available.

GJF has many suggestions for redesigning subsidy programs, so that recipients will be held accountable. State and local activists would be well advised to call on GJF as a resource when faced with governments that are attempting to draw in corporate investment by creating lucrative subsidies.


Bob Lucore, a long-time ADA board member, is the former Director of Research and Policy for the United American Nurses and has worked for the Teamsters and the Department of Economic Research at the AFL-CIO. . He taught economics for several years at Centre College and Colorado State University and is currently a student in the School of Library and Information Science at San José State University. Bob is a member of UAW Local 1981, the National Writers Union.



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