Walker Building Yesterday’s Economy
GOP throws ever more money at declining manufacturers, gets nothing back.
Those looking for symbolism about which way Wisconsin is headed might want to consider the current hubbub over a possible Foxconn plant in Wisconsin. This is a company that is infamous for its poverty-level wages and horrible working conditions, with riots, worker suicides and violence at the Foxconn plant in China.
Yes, the company is likely to offer better pay and working conditions in America, but this is a contract manufacturer that specializes in cutting labor costs. How many of its jobs will pay a family-supporting wage?
The hope is that Foxconn could bring 10,000 jobs to the state, but other sources suggest the company could build plants in several states (five are under consideration) that each employ several thousand people.
Yet Wisconsin’s political leaders are scrambling to provide a package of incentives that could include “property tax abatements, income tax abatements, job creation tax incentives, infrastructure improvements, etc.” as the Milwaukee Business Journal reported.
The classic example is the Manufacturing & Agriculture Tax Credit, which slashed the effective rate of state corporate taxes for manufacturers to almost zero — from 7.9 percent to 0.4 percent. This will cost the state $206 million in lost revenue in 2016 and is expected to cost $299 million in 2017, according to the Wisconsin Budget Project. Nearly all of the tax break goes to the very wealthy, with just 7 percent going to those who earned less than $250,000, its analysis found. “In fact, just 11 claimants, all of which had incomes of $30 million or more, receive an estimated combined tax break of $22 million in 2017.”
And the impact on jobs? In the two years prior to adding the tax credit, total jobs in manufacturing rose 2.1 percent. In the two years after the credit, manufacturing jobs rose by exactly the same rate, 2.1 percent.
Or take the Wisconsin Economic Development Corporation, which has been mired in endless problems since its creation in 2011. Once again the strategy has amounted to throwing money at companies, and once again manufacturing companies have gotten much of the money. And the results?
A May 2017 Legislative Audit Bureau report found that of hundreds of millions in tax credits, grants and loans authorized since 2011, the agency “cannot be certain about the number of jobs actually created or retained as a result of any awards.” In fact only 12.5 percent of contract awards “even had an expected result of job creation or retention.”
Walker famously promised to add 250,000 new jobs in Wisconsin in his first four years and still hasn’t hit the target after nearly six years. His fixation on manufacturing jobs might help explain this. As a recent report by the Congressional Research Service (CRS) found, manufacturing employment continues to plummet in American, dropping from 17.1 such jobs million in 2000 to 12.4 million today.
For all Donald Trump’s talk about trade deals, a study by the Center for Business and Economic Research at Ball State University found that of the 5.6 million manufacturing jobs lost by the U.S. between 2000 and 2010, just 13 percent were due to trade. The rest were eliminated due to automation, robots or other efficiencies.
Since manufacturing hit bottom in June 2009, there has been a 21 percent increase in manufacturing output but only a 6 percent increase in manufacturing employment, the CRS study noted. It pointed to the steel industry, where its 84,000 workers in 2016 produced 3 percent more steel than nearly 400,000 workers did in 1980.
And increasingly, the employment growth in manufacturing is for those with a college degree or better. Between 2000 and 2016, the number of manufacturing workers with graduate degrees increased by 35 percent while those with high school degree dropped by 31 percent, the CRS study found.
“Even strong growth in manufacturing output could well have only modest impact on job creation and is unlikely to increase demand for workers with lower levels of education,” the study warned.
Foxconn is a poster boy for the manufacturers of today, non-union shops that specialize in driving down labor costs. And Walker and Republican legislators have assured that all private companies can now freeze out unions by passing the Right to Work law, which bars collective bargaining contracts from including a clause requiring company paychecks to collect union fees. States with such laws have driven down average wages and benefits, as Data Wonk columnist Bruce Thompson has concluded.
Wisconsin has ranked behind other states in employment growth in every year Walker has served as governor, and anemic manufacturing growth has been part of the problem. The state’s manufacturers “actually lost 3,784 jobs from December 2015 to December 2016, a drop of 0.8%… which was far steeper than the national average,” as the Milwaukee Journal Sentinel reported. And this decline in jobs came even though these companies now pay almost nothing in state corporate taxes.
Even as Walker and Republicans continue their efforts to bring back a golden era of manufacturing that will never return, they are seem hostile to the new economy. There is no more significant job engine than UW-Madison and its mother lode of research dollars and patents, which is spinning off bio-tech companies and other cutting-edge businesses. But Walker and the Legislature have cut state funding for the UW System, while their main interest in the biotech industry has involved efforts to end stem cell research.
Walker’s approach to energy has been just as backward looking: he has embraced coal and thrown up roadblocks to wind and solar power. Wisconsin spends more than $12 billion annually to import coal and gas, importing pollution to this state and exporting potential jobs to coal and gas producers elsewhere while failing to grow alternative energy jobs here. Walker and the Republicans really don’t have a vision for the future, just an ever more expensive portal to the past.
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More about the Foxconn Facility
- Op Ed: Loss of Talgo Train Hurts Foxconn Deal - James Rowen - Jul 20th, 2017
- Mayor Barrett Supports Siting Foxconn Facility in Southeastern Wisconsin - Mayor Tom Barrett - Jul 17th, 2017
- On the Air: How Likely Is It Foxconn Will Create 10,000 Jobs? - Urban Milwaukee - Jul 13th, 2017
- Murphy’s Law: Walker Building Yesterday’s Economy - Bruce Murphy - Jul 13th, 2017
- Eyes on Milwaukee: Foxconn Lands in Milwaukee - Jeramey Jannene - Jul 10th, 2017