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Thursday, July 14, 2011

New Good Jobs First study shows micro-examples of nationwide problem

On July 7, Good Jobs First released a new study ("Paid to Sprawl," of subsidized relocations within the Cincinnati and Cleveland metropolitan areas. It found that from 1996 to 2005, 164 small and medium-sized enterprises received tax breaks to move, affecting an estimated 14,500 jobs. The moves took place using subsidies from the state's enterprise zone and  community reinvestment area programs. This is a noteworthy study giving us excellent documentation of a tip of the job piracy iceberg.

The study also found that 75-80% of the moves were away from the regional center, even when they were suburb to suburb. Collectively, the moves made thousands of jobs newly inaccessible to mass transit.

What is especially striking here is that we aren't talking about large companies like American Greetings or Sears, which have recently moved or threatened to move. It should remind us that although we can get transfixed by the mega-incentives going to automobile chip assembly plants or chip fabrication facilities, the subsidy issue affects tens of thousands of companies every year, which collectively add up to billions of dollars.

Job piracy should be the easiest subsidy-related problem to solve because it's obvious* that there is no benefit to a metro area, region, state, or country when a firm just moves jobs from City A City B. But two voluntary interstate agreement (Great Lakes Governors' Association in the 1980s, CT-NJ-NY in the 1990s) both collapsed as soon as they were signed. New York City has seen its firms targeted by New Jersey and Connecticut, losing some and paying large retention subsidies to keep others. Kansas City, Missouri, is in a similar situation on a smaller scale, as cities just across the border in Kansas target its companies.

Metro area agreements are being discussed in both Cleveland and Cincinnati, and I hope they're successful. Studies like "Paid to Sprawl" can help provide political impetus.

* Tim Bartik argues that moving jobs from a low unemployment area to a high unemployment area makes a region better off overall. Theoretically, this should be true, but there is little evidence that most subsidized relocations do this.

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