One of the more frowned-upon techniques of economic development is so-called “job poaching,” where states or local governments try to lure companies to jump across municipal or state borders with various incentives or giveaways.
While it might look good for a politician to say he “created 100 new jobs” by getting a company to relocate, the broader net impact is generally minimal. In cases where subsidies are involved, these efforts can actually prove an economic loser for taxpayers.
Those problems are laid out in a new national report called “Job Creation Shell Game” from the Washington-based think tank Good Jobs First. The report says state and local governments waste billions of dollars each year on economic development subsidies given to companies for moving existing jobs from one location to another rather than focusing on the creation of actual new positions or companies.
Some of the worst examples cited in the report are an ongoing Missouri vs. Kansas border battle and practices in Georgia, which the report nicknames the “Poach State.” Wisconsin is mentioned over its efforts to keep Mercury Marine from moving away.
“The result is a vast waste of taxpayer funds, paying for the geographic reshuffling of existing jobs rather than new business activity,” says Greg LeRoy, executive director of Good Jobs First. “By pretending that these jobs are new, public officials and the recipient companies engage in what amounts to interstate job fraud.”
The report apparently has not yet reached the desk of Wisconsin Gov. Scott Walker or state Rep. Erik Severson, R-Osceola, who are busy these day encouraging Minnesota businesses to relocate across the border to the Badger State.
Walker has spent the past two years trying without much success to get businesses to move from Illinois. In a recent Twitter post he added Minnesota to the job shuffle talk.
“In '11, IL raised taxes on income by 66% & businesses by 46%. Now MN Gov is proposing a $2 bil tax increase. WI is Open for Business” Walker tweeted.
Also trying to get in on the action, Severson issued a press release this week urging Minnesota companies to cross the border to avoid a new business-to-business sales tax Gov. Mark Dayton is proposing. Minnesota is facing a $1.1 billion budget deficit this year and the Democratic governor is looking for new revenue sources to close the gap.
“I believe it is important to outline the options for businesses in Minnesota by letting them know that here in Wisconsin we value job creators,” says Severson. “We are moving Wisconsin forward by promoting job growth through lower taxes on families and small businesses.”
In a political smackdown, however, Dayton took a shot at Walker during his State of the State address on Wednesday, noting that Minnesota was 12th in the nation in job creation last year while Wisconsin “which, by the way, is ‘open for business,’ helped bring up the rear at 42nd.”
Dayton kept up the drubbing: "And, help spread the word across the St. Croix, their unemployment rate last month was 20 percent higher than ours, while our per-capita income was 12 percent higher than theirs."
Also left out of the discussion is that Minnesota has seen its wages and incomes increase over the past decades while Wisconsin has been going in the opposite direction.
Louis Johnston, a blogger for MinnPost, has enjoyed a field day of late with Walker as his target, highlighting Minnesota's lower unemployment rate (5.5 percent compared to Wisconsin's 6.6 percent), better job growth and higher per-capita income.
“Wisconsin’s per-capita income relative to the national average has, in the best light, stagnated since the 1950s. Minnesota passed Wisconsin in the late 1960s and the gap has grown every year since then,” he writes.
Considering that payroll is usually a much larger business expense than taxes, perhaps Johnston could offer Severson and Walker a new line to pitch: Wisconsin “the low-wage alternative.”