Tuesday, July 08, 2014

Study: the jobs "created" by big municipal projects were never really "created" at all

Recently I cited a bunch of evidence that debunked the urban myth that building new ballparks results in net gains for economic development in neighborhoods. The prospect of economic development is one of the rationalizations used by Karl Dean's office to defend Metro's support of First Tennessee Park in its Jefferson Street location.

Another prominent rationalization used to defend Metro's financial support of the park--that subsidies create jobs for North Nashville--is open to debate in the wake of a study that finds that subsidizing capital projects does not do anything of the sort:

a recent study by the Kauffman Foundation suggests that the money [from public subsidies and tax breaks] only shifts jobs from one state to another and doesn't necessarily create them. State and local incentives rarely target the new and young businesses that actually do create jobs.

The subsidy escalation that states have entered has become a zero-sum game in which a largely fixed set of jobs shift from one state to another as companies search for the highest bidder. And even when new jobs are created, companies would likely have needed to add them anyway, and the cost per position to taxpayers can be astronomical.

The 2011 embarrassment of the failed move of IQT Solutions that Karl Dean went through a few years ago drove the point home that the "creation" of jobs in Nashville would cost Canadian workers their jobs if the company had not eventually gone bankrupt. To a certain extent common sense should tell us that the relocation of companies often comes at great cost to the places they leave. But studies help reinforce the point.

If you build it, they will relocate.
At last year's community meeting on the ballpark proposal, Dean's Director of Finance, Rich Riebeling admitted (perhaps in a moment of candor?) that Metro is subsidizing the project because that is how other cities do it. But otherwise, the refrain from ballpark supporters is that transferring money to private companies "creates" jobs; as if those companies do not use the money for purposes other than creating jobs.

How many livable wage jobs (I'm not talking about construction jobs, which end in a few months when the building is erected) are going to be created by First Tennessee Park? The latest research indicates that we will not see enough jobs to equal the $65 million investment that we are dumping into the development.

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