The major economic news in Chicagoland today is that Motorola Mobility (MMI), now wholly owned by Google, is cutting 4000 jobs worldwide. 700 of those job cuts will be made in Chicago’s northern suburb of Libertyville, IL. This will reduce Motorola Mobility’s Illinois work force from 3000 to 2300. The significance of that 2300 number is laid out below the fold.
When Motorola Mobility spun off as a separate company early in 2011, there was much concern that the company would pick up and move out of state. To keep the jobs in Illinois, MMI was promised an $11 million dollar annual tax credit for $110 million overall, on the condition that they keep at least 2500 jobs in Illinois. When Google bought MMI, the tax credit deal was extended to Google and Google agreed to the offer.
After today’s layoff announcement, MMI’s work force will fall to 2300, below the required 2500 Illinois jobs. Google today acknowledged that the tax cuts would be suspended, although they did indicate more workers could be hired in the future. The move was hailed as a cost cutting decision.
So there we have it. Google could have chosen to keep 200 workers employed and keep the tax credits. Instead, they chose to cut their labor costs and accept a tax increase. If tax cuts were the only factor companies use to hire and fire people as the GOP so often claim, then Google would have kept the jobs. They would have found newer productive roles for the workers, growing the company while paying fewer taxes. Instead, Google chose to shrink the company and lose the tax credit.
Google has proven what we all know is true. Companies focus on much more than just the tax rate when adding and cutting jobs. Tax cuts alone do not by themselves create jobs. And an economic policy focused only on tax cuts cannot guarantee economic growth.