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Wednesday, August 16, 2017

Transformative: Walker's Foxconn Deal Pays To Create Fewer Jobs

On Foxconn deal, "3,000 jobs cost #WI taxpayers more than $3 billion in tax giveaways. Break it down: more than $1 million in taxpayer dollars per job."
— Rep. Melissa Sargent, Aug. 2, 2017 tweet

Given what little facts we knew about Gov. Scott Walker's deal with Foxconn at that point, I was amazed to see Politifact fall over themselves in their zeal to argue against basic math when they tackled Sargent's profoundly accurate statement.

Yet despite the good math, Politifact gave Sargent a "false" rating for that one based on a third party analysis showing the amount paid per job is riding on an inverted sliding scale.

Politifact Excerpt:
An analysis projects the per-job cost at $219,000 per job if 13,000 jobs are created and $587,000 per job if 3,000 jobs are created.

Only $587,000 per job? Well that's comforting.

I don't know the formula they used or how it relates to the $10B capital investment Foxconn promised to make, so I won't dispute their numbers. Apparently however, Wisconsin taxpayers will pay Foxconn $1.761 B for 3,000 jobs or $2.847 B for 13,000 jobs. That of course means Walker's program to incentivize the creation of more jobs actually pays less per job for anything above 3,000.

But isn't it about the jobs?

Again: If more jobs are created, the incentives paid per job is less. How crazy is that?

In a conventional sense, an incentive package for 3,000 jobs with a goal of encouraging 13,000 over a period of 15 years should read something like this: (values are example only)

For the first 3,000 jobs - $1,000 per job.

After 3,000 jobs. The next 1,000 jobs - $1,200 per job. (But only for those 1,000 jobs)

After 4,000 jobs. The next 1,000 jobs - $1,400 per job. (But only for those 1,000 jobs)

After 5,000 jobs. The next 1,000 jobs - $1,600 per job. (But only for those 1,000 jobs)
...and so on. If the employee pool shrinks. Simply reverse the order.

I'm not condoning our current system of economic development through market distorting capital incentives, but that in my opinion is how government should incentivize job creation - if it's government that must provide.

Obviously, as it currently reads, Wisconsin's Foxconn package is the exact opposite. It provides Foxconn a DISINCENTIVE for creating more jobs beyond the 3,000 baseline when its purpose (supposedly) is to foster the development of more jobs. In Walker's jobs program, it's simply more efficient and lucrative for Foxconn to hire as few employees as possible.

But things just got even worse.

Wisconsin state republicans have now offered an amendment that brings the 3,000 jobs floor down to only 1,000. According to Sen. Jennifer Shilling, state taxpayers could then be paying Foxconn as much as $1,500,000 per job!!

Wheeler Report Excerpt:
According to Substitute Amendment 1 introduced by Assembly Republicans, if Foxconn were to create 1,000 jobs and retain those positions over a 15 year period, the company could receive a check from the state for $1.49 billion – approximately $1.5 million per job created. Given the high volatility in the electronics industry, workforce shortage issues and the company’s stated desire to automate its manufacturing operation, it is unclear how many of the promised jobs will materialize.

Basic math strikes again.


American Prospect - Trump, Walker, and the Foxconn Con

Chris Rickert - Foxconn has GOP embracing government-run economy

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