With the nation still grappling with high unemployment and depressed tax revenues, many states are stepping up efforts to lure jobs from neighboring states -- paying firms a fortune to jump state lines. Wisconsin Governor Scott Walker, for instance, is actively trying to poach jobs from Illinois and changed the Wisconsin welcome signs to proclaim "Wisconsin -- open for business."
This "business recruitment strategy" is nothing more than job piracy -- a practice that is highly costly to taxpayers, disruptive to workers and has almost no effect on job creation, according to a new report by the public interest group Good Jobs First.
According to the report, The Job Creation Shell Game: Ending the Wasteful Practice of Subsidizing Companies That Move Jobs from One State to Another: "This interstate shell game is both wasteful and incredibly unfair to existing in-state employers, whose expansions and start-ups account for virtually all of the job-creation action. The costs are very high: we catalog numerous examples of eight- and nine-figure subsidy packages in just a sampling of the states. Yet the benefits are extremely low: analyses from several states by researchers of diverse orientations, using a remarkably detailed business census called NETS, consistently conclude that interstate job relocations have microscopic effects on state economies -- positive or negative."
No wonder Wisconsin is having no luck with this strategy and ranks 42nd in the nation in job creation.
Keel-Haul the Pirates and End the Interstate Poaching
The authors of the report are critical of state policymakers that spend billions poaching jobs from other states instead of focusing on the creation of new jobs in their own state.
"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. "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."
For a 50-state set of selected profiles of costly deals of all kinds, click here.
To cool the destructive and costly job theft, authors recommend that states "demonetize" this fraud. States need to stop using taxpayer money to subsidize companies for "creating" already existing jobs that are regarded as "new" simply because their location has changed.
The authors also recommend that states "end their business recruitment activities that are designed to pirate existing jobs from other states: no more direct solicitations, targeted relocation offers, billboards, ad campaigns, websites or other effort specifically designed to poach jobs." Finally, they want Uncle Sam to give a small amount of aid to states to encourage them to amend their incentive codes to make existing jobs ineligible for subsidies and to stop certifying job raiding.
You can read the new report which uncovers high-dollar job piracy schemes in dozens of states here. Earlier this year, Good Jobs First did a study debunking the economic theories of the American Legislative Exchange Council. Their report, Selling Snake Oil to the States: The American Legislative Exchange Council's Flawed Prescriptions for Prosperity, can be accessed here.