WRAL has a piece online today proclaiming, “Despite big job promises, incentives often fail to deliver.” Having looked at various incentive announcements by state and local governments over the past few years, I didn’t find the headline even remotely surprising, but I thought I’d see what they had to say.
Warning: the piece is long.
And because it’s long, it’s able to be fairly thorough, with lots of examples of the failure of recipients of state incentives to create the jobs they said they would. For many of those, we’re not talking about falling a little short. We’re talking about creating no jobs at all or very, very few. WRAL looked at 267 projects in various stages of their grant processes that had reported reported to the Commerce Department.
127 out of 267. That’s 48%.
And what about those that have created jobs? It turns out that even those fall woefully short.
…Perdue announced the creation of 39,562 jobs during her tenure.
Data show that only 38 percent of those jobs have been created, despite the projects being a cumulative 75 percent of the way through their grant cycles.
Even among the 146 projects closed out or past their ramp-up period, companies created 8,774 of the 19,537 announced jobs – less than 45 percent
Particularly telling, I think, is the story of Gates Corporation in Ashe County. In 2011, the governor announced the state was coming to Gates’s rescue with a $100,000 grant that would help create 58 new jobs. And this was after they’d been given a low cost loan of $400,000 by the state in 1997 to try to keep the doors open. Neither worked. Last month, the Jefferson plant closed.
Of course, supporters of incentives counter that the system is structured such that only those companies that actually create jobs end up receiving money. And in many cases, that is true. A lot of these companies never actually received grants, because they didn’t create jobs. (This does make me wonder if the primary purpose of these grants in the first place is really that job announcements and ribbon cuttings make for good political campaign material.)
But I say, if the state is getting it so wrong so often, then maybe the right conclusion is that the government just isn’t very good at picking winners and losers in the economy. And if they’re that bad at it, perhaps they shouldn’t do it at all, but should leave it to those who do it well – entrepreneurs and investors who invest where they believe they can make money, i.e. in industries and companies that will grow, create jobs, and contribute to growing the economy.