Essay about States Attracting Businesses: A Negative Outlook

Submitted By tcostello423
Words: 1914
Pages: 8

Have you ever wondered why high school super athletes will live and grow up in a state, play ball there all their life, and pass by the opportunity to play for their state’s university just for a few extra incentives? Do incentives play a large role in their decisions or is it just the nominal notion that they are playing there just to make a considerable amount of money in the future? The same question is apparent in the debate amongst states attracting jobs to other business and businesses having the capability to truly create prosperity for the towns and cities in which they inhabit. Just like college recruiters use different tactics to attract high school super-athletes, states and local governments have been using tactics, particularly monetary incentives, to attract businesses that they believe will create jobs. For years, states have been using monetary incentives to try and attract jobs to their most desperately needed cities and towns. Taxpayer money has been used as fuel to attract these businesses, and has worked out in the short run by providing temporary assistance to needy cities and towns. However, the long term effects from these short term policies have been the catalyst to a detrimental slippery slope effect to cities and towns in dire need of job availability. In this essay, I would like to point out ways in which policymakers can better attract jobs to their respective communities: first by pointing out the current pitfalls of policy making in attracting jobs and secondly, by proposing a more effective policy process that will prove that the current state of job attraction by local and state and federal government is ineffective, and should be revised to appeal to a more long-term agenda for the attraction of jobs to states.
The first pitfall that states make in attracting jobs is that economic development subsidies have severe long term effects. Take for example, Gannet Newspaper Publishing Company. After the state of Oklahoma gave them a large tax incentive of $260,000 in tax credits, the company decided to reside there, and created over 500 jobs for the residents of Tulsa. However, only 4 years later, the company would move out of the state to seek business elsewhere. Authors Kirsten Valle Pitmen and Tim Funk point out the flaws in this tax-credit based system by noting that tax incentives have been a problem for a while, and deserves attention. They argue that incentives became a problem when they became a key element to states’ attracting jobs. They argue that, “For decades, states relied on business climate and the cost of living and quality of life to draw in businesses. But eventually, tax grants and tax breaks, worker training programs and other perks, gradually became the paradigm to key business location decisions.” This draws considerable attention to the policies that states enact in creating jobs, and is another reason why there are more negative effects than positive effects brought forth by economic development subsidies given by states to businesses to attract jobs. (1) (Pitmen ,2011, Idahostatesman)
Furthering my point that economic development subsidies have severe long-term effects. I would also like to point out that these subsidies elicit interstate competition amongst states that is often not beneficial to the long-term growth and prosperity of the states in which they reside. In an economics point of view, one might argue that competition amongst states would allow the business to find the best possible place to reside and gradually grow their business. After all, tax break incentives and other subsidies would cut costs and allow for the best possible profit-maximization opportunity, right? That is a valid point, however, professor of economics at Cal State University, Robert W. Wassmer, argues otherwise. He argues that, “Although some states may rank high in economic-climate measures, that those states may not have ‘other things’ that businesses need to thrive, such as access