“It’s a zero-sum game,” Nathan Jensen, a political science professor formerly at Washington University in St. Louis who recently started teaching at George Washington University, said during a recent conference held by the Kauffman Foundation.
Simply shifting companies from one state to the next does nothing, at least not right away, to create new openings for the millions of still unemployed Americans, Jensen added while presenting some of his latest economic development research. Nevertheless, nearly every municipality across the country offers some type of tax incentives to encourage existing companies to relocate, costing taxpayers around $70 billion annually.
Often, the hope is that those incentives will not only prompt employers to bring their existing jobs to this state or that city, but that it will also accelerate the company’s future growth and generate additional jobs for residents down the road. [source]
Ending Job Piracy, Building Regional Prosperity
Local job piracy – the use of subsidies to attract businesses from nearby communities in the same metro area – generates heavy costs for regions in terms of both lost tax revenues and externalities associated with sprawl while failing to create new jobs. But anti-piracy agreements used by the Denver, Colorado and Dayton, Ohio regions have cultivated an economic development ethos that is focused on shared regional prosperity.
Evaluating Firm-Specific Location Decisions
The use of financial incentives to attract and retain companies has become one of the most common economic development strategies of U.S. states and municipalities. Despite the widespread debate on the effectiveness of these programs, few systematic academic studies have examined how incentives affect job creation and local economic development. The result is that policymakers often lack objective data from which to draw conclusions about the benefits of these programs...
... Incentives recipients are statistically not more likely to generate new jobs than similar firms not receiving incentives.
The Job Creation Shell Game
State and local governments waste billions of dollars each year on economic development subsidies given to companies for moving existing jobs from one state to another rather than focusing on the creation of truly new positions, according to a study released today by Good Jobs First, a non-profit, nonpartisan research center based in Washington, DC.
“What was long ago dubbed a Second War Between the States is, unfortunately, raging again in many parts of the country,” said Greg LeRoy, executive director of Good Jobs First and principal author of the report. “The result is a vast waste of taxpayer funds, paying for the geographic reshuffling of existing jobs rather than new business activity. By pretending that these jobs are new, public officials and the recipient companies engage in what amounts to interstate job fraud.”
Interstate job piracy is not a fruitful strategy for economic growth, LeRoy noted: “The costs are high and the benefits are low, since a tiny number of companies get huge subsidies for moving what amounts to an insignificant number of jobs.” LeRoy added: “The flip side is job blackmail: the availability of relocation subsidies makes it possible
for companies that have no intention of moving to extract payoffs from their home states to stay put.”
Summarizing studies demonstrating that interstate job relocations have microscopic effects on state economies, the report reviews the history of economic competition among the states and presents eight case studies of those areas of the country where job piracy is currently most pronounced.
