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Greg LeRoy at Good Jobs First's "Clawback" blog reports that Sears has now announced 100 layoffs in its headquarters in Illinois, despite receiving a subsidy of $275 million (nominal value) to stay in the state when it threatened to move last year. It's bad enough that Sears threatened relocation in order to extract subsidies from the state, as Julie Irwin Zimmerman ably discussed in December. What's more troubling, as LeRoy points out, is that under the agreement Sears can lay off a total of 1750 headquarters workers (which would take the firm from its initial 6000 jobs to 4250) without penalty. This is a stunning capitulation that represents backsliding from a trend to require more of subsidized companies (see the December 2011 Good Jobs First report Money for Something).

But it's not the only example of this sort of backsliding. As I reported in September, the state of Tennessee did not include clawback clauses in huge subsidy agreements with Electrolux, Hemlock Semiconductor, and Wacker Chemie. The jobs crisis apparently has made some states afraid to assert themselves in investment incentive negotiations.

Sears is only one high-profile example of actual or threatened relocations that resulted in subsidies. As Good Jobs First reports on Minnesota (2006) and Ohio (2011)  have documented, 250 companies and over 24,000 jobs were relocated on the taxpayer's dime over various study periods in the Minneapolis/St. Paul, Cleveland, and Cincinnati metro areas alone, with sprawl-enhancing effects in all three cases.

To see how widespread subsidized relocation is, I performed a simple search in the Nexis news database (subscription required). It was:

relocat! AND "tax incentives" OR "tax breaks"

With the wildcard "!" symbol, Nexis searches for all variants of the word "relocation." When I set the time period for articles in the last year, I got 1,000 results, the maximum it will return. Searching for the last six months: 1,000 results. Searching for the last three months: 998 results. Only when I narrowed the search to the last month did I get a mere 519 results.

Of course, not all the stories are from the U.S., many are not about job piracy, and there are often duplicate articles. But these huge numbers over such a short period of time suggest that there is a great deal we have yet to discover about relocation incentives, and they may be far more prevalent than I would ever have imagined.

Originally posted to Kenneth Thomas on Tue Feb 21, 2012 at 12:58 PM PST.

Also republished by Land of Lincoln Kos.

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Comment Preferences

  •  When businesses play states against each other, (0+ / 0-)

    The states lose.

    The competitio­ns of commerce would be another fruitful source of contention­. The States less favorably circumstan­ced would be desirous of escaping from the disadvanta­ges of local situation, and of sharing in the advantages of their more fortunate neighbors. Each State, or separate confederac­y, would pursue a system of commercial policy peculiar to itself. This would occasion distinctio­ns, preference­s, and exclusions, which would beget discontent­. The habits of intercours­e, on the basis of equal privileges­, to which we have been accustomed since the earliest settlement of the country, would give a keener edge to those causes of discontent than they would naturally have independen­t of this circumstan­ce. WE SHOULD BE READY TO DENOMINATE INJURIES THOSE THINGS WHICH WERE IN REALITY THE JUSTIFIABL­E ACTS OF INDEPENDEN­T SOVEREIGNT­IES CONSULTING A DISTINCT INTEREST. The spirit of enterprise­, which characteri­zes the commercial part of America, has left no occasion of displaying itself unimproved­. It is not at all probable that this unbridled spirit would pay much respect to those regulation­s of trade by which particular States might endeavor to secure exclusive benefits to their own citizens. The infraction­s of these regulation­s, on one side, the efforts to prevent and repel them, on the other, would naturally lead to outrages, and these to reprisals and wars.
    Federalist 7
    We just call it the "race to the bottom".

    Supply follows consumption. You cannot stimulate consumption by crushing the consumer. Deal with it.

    by Zera Lee on Mon Feb 27, 2012 at 11:00:54 AM PST

    •  Real competition (0+ / 0-)

      Yeah.

      The Econ books speak of companies competing against each other by price. What we see more often is states competing against each other for big companies.

      Cuddling other people's babies for fifty years.

      by Frank Palmer on Fri Mar 09, 2012 at 09:40:33 AM PST

      [ Parent ]

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