Economic development remains captive to failed notions of how to create a local economy that works for local people. Take, for example, the announcement that Wisconsin taxpayers are giving away a whopping $3 billion in tax incentives to lure Foxconn to the state. But corporate subsidies like these waste taxpayers’ dollars. And they don’t work. Our economic development dollars would be better spent preserving and expanding existing small and medium-size businesses through employee ownership.
The $3 billion in incentives is the fourth-largest incentive deal in U.S. history. White House and Wisconsin officials said the Foxconn factory would create at least 3,000 jobs initially. But do the math. That $3 billion for 3,000 jobs works out to $1 million per job. Who wouldn’t be willing to create one job if handed a million dollars?
Also troublesome is the abysmal labor record of Foxconn, exemplified by scores of workers committing suicide on their brutal iPhone assembly lines in China. Foxconn has also failed to deliver on similar deals in India, Vietnam, and Pennsylvania. It’s worth asking: Who really benefits from this use of state tax dollars? It’s not the residents of the state, but instead the absentee owners of this Taiwanese company.
The Wisconsin giveaway to Foxconn is only the most recent example of a practice that is business as usual for states and municipalities. Cities, counties and states give away more than $80 billion a year in tax subsidies to corporations. That’s an average cost to taxpayers of $658,000 per job. Many of these jobs are simply moved from one city to another — robbing Pensacola to pay Pittsburgh. Or robbing from everyday Americans to pay executives and shareholders at companies like Boeing, which got $8.7 billion from Washington state. Not incidentally, that same year its board voted to raise its dividend to stockholders by 50 percent, and approved an additional $10 billion in stock buybacks. More than 80 percent of stock in publicly traded companies is held by the wealthiest 10 percent of Americans.
There is another way — a more democratic way — to do economic development. A way that will create wealth for ordinary people. It’s employee ownership.
The Ohio Employee Ownership Center exemplifies this approach to economic development. That small center has helped create more than 92 employee-owned companies that employ more than 15,000 employees. The average cost? Just $772 per job. That’s right — $772, versus the $658,000 it costs to bribe a large corporation to create one job.
Jobs at worker-owned companies are more secure, more productive, and pay better wages. Employee-owners earn 12 percent more than workers in comparable jobs. They have more than double the retirement savings of other workers. Most importantly, these jobs stay in the states where their workers live.
With the looming retirement of baby boom entrepreneurs — who own 7 million businesses — our nation faces an enormous opportunity to grow employee-ownership. These businesses could be lured out of state, sold to competitors, or shut down. Or they could be sold to employees.
Using our economic development dollars to support employee ownership has the potential to create and preserve millions of good jobs. When businesses are locally owned, dollars recirculate locally. Wealth is created locally. Employee ownership is a way to begin rebuilding the middle class, a way to help ordinary Americans create economic security.
It’s local economic development that benefits regular people, local people. Imagine that.
Marjorie Kelly is executive vice president at The Democracy Collaborative, a nonprofit research and consulting organization working to create a more inclusive economy,where she cofounded Fifty by Fifty, aimed at catalyzing 50 million employee owners by the year 2050. www.FiftybyFifty.org
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