By Madeline Janis
This column originally appeared in Forbes.
It stands to reason that taxpayer dollars—public dollars—should be used for the public good. But what appears to be reasonable or obvious isn’t always so.
Across the United States, enormous public resources are given to manufacturing companies that often make grand promises but actually eliminate or undercut good American jobs.
One of the most egregious examples of this involves President Trump and United Technologies, the parent company to Carrier, a furnace manufacturer. On the 2016 campaign trail, Trump declared that United Technologies “would have to pay a consequence” if the company moved one of its Carrier plants from Indiana to Mexico. All bets were off once Trump was elected.
As the Center for American Progress noted, a deal negotiated by then-Indiana Governor and Vice President-elect Mike Pence in December 2016—gave United Technologies $7 million in state tax breaks over the course of a decade. In return, the company would move about two-thirds of the 2,100 jobs originally planned to go to Mexico and keep the plant open. Classic case of addition by subtraction.
But in May 2017, despite the tax breaks, Carrier notified the state of Indiana of its intention to lay off 630 employees. Carrier’s CEO also indicated that the investments would go toward automation technology that would further reduce the number of jobs.
Carrier is not alone.
As one of the five appointees to the governing Committee of the California Competes Tax Credit Program, I am regularly asked to approve tax credits in the tens of million dollars to private companies—very often manufacturers to create jobs in the state.
The Speaker of the California Assembly appointed me to this role because while I am a strong supporter of this important economic development program, I take my fiduciary role on behalf of California’s taxpayers very seriously. For many of these proposed tax credits, I ask the applicant companies whether this funding will create a net positive number of good jobs with career paths and real training. Will the precious taxpayer resources really make a difference in the lives of working people, particularly those who have often been excluded from good manufacturing jobs, such as women and people of color? If not, I am always prepared to say no. Unfortunately, in occasionally saying no, I am almost always alone.
This past November, the Committee debated a number of requests to grant tax credits to national companies wanting to do business in California. They all came in with big proposals promising to create better communities and increase jobs. Unfortunately, when I looked behind the curtain, that was not always the case.
Take Kroger for example. Kroger is the largest supermarket by revenue and second largest general retailer in the country. The corporation is now partnering with the British automation giant Ocado to create huge, fully automated fulfillment centers throughout the U.S.
Kroger asked the Committee for a $3.3 million tax credit in exchange for hiring 234 full-time employees. Sounds good, right? Wrong. When pushed, Kroger admitted that the automated fulfillment center would be almost entirely run by robots. The “highly skilled” workers at the end of automated assembly line would be paid close to minimum wage—between $31,000 and $42,000 a year—for full-time work.
The final exchange between the Committee and Kroger was typical: without the tax credit, Kroger threatened to take its business to Nevada. I’ve seen this bullying tactic used time and time again. In Kroger’s case, I felt the threat to go elsewhere did not outweigh the fact that the jobs would not be family-sustaining ones. The workers would earn low wages and lack a collective voice to push for better wages, benefits, and working conditions.
At that same meeting, the Committee approved an $800,000 subsidy for Systems Machine Automation Company Corp.—a robotic equipment manufacturing company in Carlsbad, California—to manufacture robotic fingers that would, according to the available evidence, eventually eliminate jobs. And, yet again, there was a threat to move business elsewhere—this time expanding its work in New Hampshire.
I’ve voted “no” on proposals that stand to create more harm than good, all of which are examples of how the process of awarding public subsidies rarely involves consideration of how corporations will impact workers or communities.
One thing is clear: we need new, transparent processes for these important decisions. That’s why I proposed to the Committee, and have been encouraging elsewhere, the establishment of Technology Impact Assessments. These Assessments would require corporations to provide full information on the quantity and type of jobs to be created or eliminated, so cities and states would have the knowledge needed to determine if an investment of public resources will benefit communities.
We need to examine the consequences when handing out tax credits, taking into account the needs of the entire community. Who wins, who loses? Do the gains from these subsidies far exceed the subsidies themselves? Are we insisting on and enforcing high labor standards to ensure public subsidies aren’t used to create minimum wage jobs without benefits? Or worse, that the subsidies will support new technologies that ultimately result in a net job loss because of automation.
But we should aim for more than “do no harm.” Public officials should also use the power of our public dollars to address historic and contemporary disparities in access to good jobs, ensuring that millions of workers—especially people of color, women, and workers with low wages—are first in line for jobs and training in the workforce of the future.
We must use the power of public dollars to address economic injustices amid rapid technological change. We need strategies and actions that move us towards an inclusive, clean economy.
Put simply, if corporations want to make a “home” in cities through public contracts and incentives, they must do so by committing to make honest investments in their workers and the communities in which they live.
That’s public dollars being used for the public good.