Paying $230,000 For Your Job

Would you pay a potential employer $230,000 to create a manufacturing job for you? And as an additional enticement, would you permit the firm to ignore rules that protect the environment in your community?

What if your potential employer is a Chinese company with no history of manufacturing in the United States? And what if it once strung up giant nets along the sides of its buildings to catch suicidal employees who jumped out of its windows to escape terrible working conditions?

These are not merely theoretical questions. Wisconsin recently approved a $3 billion incentive package for the Chinese firm Foxconn to build a television production facility in America’s Dairyland. The firm hopes to hire as many as 13,000 employees, which would yield a government subsidy of approximately $230,000 per job.

And what about Foxconn’s labor record? Eighteen of its employees attempted suicide in 2010, fourteen of whom died as a result. Twenty more employees were “talked down” before jumping. An investigatory panel found that low pay and poor working conditions instigated the attempts, and the firm employed giant catchment nets as part of a multi-faceted plan to deter future suicides.

Foxconn has also been criticized by environmental activists for contributing to “high levels of nickel and copper in the sediment near discharge vents from the Foxconn manufacturing facility near Shanghai …” To be fair, those discharges represented outputs of factory operations, whereas the environmental waivers that Wisconsin granted to Foxconn affect the approval process for factory construction.

Wisconsin Governor Scott Walker, a fiscally conservative Republican whose budget slashing tactics triggered massive public protests in 2011, defended the deal to Fox Business News by asserting that:

“These LCD displays will be made in America for the very first time right here in the state of Wisconsin and we think it’s transformational, which is why we are calling this region ‘Wiscon Valley,’ because we think it will not only help Foxconn but all the other businesses related to it. It will help put Wisconsin on the map all around the world.”

Perhaps it will. Nevertheless, there are seven million unemployed persons in the United States. If the government were to pay private firms $230,000 to create jobs for each of them, American taxpayers would need to pay more than $1.6 trillion to employ them all.

Although such largesse is unlikely to occur in the future, many government incentive packages will continue to be granted to corporate applicants. Hopefully, though, some of those applicants will be American firms with stronger labor and environmental track records than Foxconn’s.

After all, if President Trump is correct about China “stealing” American manufacturing jobs, why would United States taxpayers wish to pay $230,000 per employee to Chinese firms for returning what they had supposedly stolen? Especially if those very firms have no record for adhering to American labor and environmental standards?

Regrettably, these questions were not answered before Wisconsin approved Foxconn’s $3 billion request. We can only hope that they will be addressed before the next subsidy request is approved by government officials.

Connecticut’s Red Flag

Three weeks ago, Connecticut Governor Dan Malloy acknowledged that Aetna would likely move its headquarters out of his state. The 43rd largest company in the United States would thus follow GE, the 13th largest firm, which left last year.

GE’s corporate headquarters had resided in the Constitution State for more than forty years before moving to Boston. And Aetna has been a Connecticut native since its ancestral founding as a fire insurance firm in 1819. It is reportedly focusing on New York City.

What was Malloy’s response to the news of Aetna’s likely departure? In essence, he waved a red flag, saying:

While we have not been notified by the company of their intention to change their footprint in Connecticut … some amount of change is coming, and … it will likely include a change in their headquarter designation …

… this has more to do with their desire to have executive leadership operate in a larger, more vibrant urban center than Connecticut can currently offer.

We all know that employers – especially large employers – are attracted to city centers. We know that now, more than ever, we are in competition across all industries – not just with Massachusetts or New York state, but more specifically with Boston and New York City …

Let’s be clear: Hartford is not ever going to be New York or Boston.

But is the Governor correct? Are small cities like Hartford relatively unattractive to large corporations? Let’s consider the facts.

In reality, half of the cities that are home to the ten largest American firms are even smaller than Hartford. Walmart, the largest company in America, is based in Bentonville AR. Third ranked Apple resides in Cupertino CA. And UnitedHealth, CVS Health, and Ford are also in the Top Ten. They are based in Minnetonka MN, Woonsocket RI, and Dearborn MI, respectively.

What about the eleventh through the twentieth largest firms in the United States? Five of them are also based in cities that are smaller than Hartford. They are Amerisource in Chesterbrook PA, Cardinal Health in Dublin OH, Costco in Issaquah WA, Walgreens in Deerfield MI, and Chevron in San Ramon CA.

So when Governor Malloy claims that large employers are naturally attracted to metropolises like Boston and New York, places that offer larger urban centers than Hartford, he fails to describe half of the cities that host America’s Top Twenty companies.

That uncomfortable fact raises an equally uncomfortable question. If the ninth largest firm in the nation can be comfortable in little Woonsocket, Rhode Island, why can’t the 43rd largest firm be comfortable in Hartford?

To be sure, there may be all sorts of reasons why Connecticut is no longer attractive to large employers. And some of those reasons may fall outside of the Governor’s control or influence.

But the claim that small cities are naturally non-competitive with larger ones in the market for corporate headquarters? That’s simply not supported by the facts, and one can only wonder why the Governor of the nation’s fifth wealthiest state is waving a red flag and accepting the departure of Aetna’s headquarters with such a statement.

Monopoly: The Metaphor

Are you looking for a metaphor of the modern American economy? You might wish to glance in the direction of Monopoly.

No, I’m not referring to any of the real-world industries that are dominated by monopolistic organizations, although numerous examples abound of sectors in which one or two mammoth companies have bought out most of their competitors. I’m referring to Monopoly, Hasbro’s board game.

Last month, based on the results of an online social media competition, Hasbro retired the game’s Thimble, Work Boot, and Wheelbarrow tokens. The firm then announced the addition of Dinosaur, Rubber Duck, and Penguin tokens.

So why is this a metaphor for our contemporary economy? When the three retired tokens were first introduced decades ago, they illustrated common tools of manufacturing activities in America’s then-dominant industrial sector. Indeed, the icons represented the capabilities of the United States to generate its own wealth, a theme that reflected the goal of the Monopoly game.

But now these tokens have been replaced by an extinct beast, a toy creature, and an animal that is imported into American zoos from foreign lands. In other words, the original “plain but meaningful” icons of productivity have been replaced by a new set of “cute but irrelevant” icons of mass entertainment.

If Hasbro had wished to modernize its assortment of tokens, it might have chosen to adopt representations of mobile communication devices, surgical lasers, and sleek aircraft. But instead, it opted for a motley menagerie.

It’s an apt metaphor for the contemporary economy of the United States, isn’t it? Unfortunately, the American business tools of thimbles, work boots, and wheelbarrows are now as obsolete as the Monopoly tokens that recently portrayed them.

Play-Doh Returns

Well, it certainly isn’t the type of manufacturing activity that will ever employ thousands of American factory workers. And yet it is expected to create twenty new jobs for blue collar workers in the United States.

What is this activity? Hasbro, the Rhode Island based toy company, has decided to return Play-Doh production to America. The firm recently announced that it will contract with a foreign owned Massachusetts based facility to fabricate the goopy toy.

That’s not to say that Hasbro is actually shifting any of its existing Play-Doh supply stream away from its overseas vendors. Instead, it plans to utilize its new American made goods to supplement its Chinese and Turkish made inventories.

Should Americans be proud, or be embarrassed, that their nation is now competitively positioned to compete with China and Turkey for Hasbro’s Play-Doh manufacturing business? On the one hand, some may believe that any growth in production work will inevitably boost the national economy.

But on the other hand, others may believe that this business is precisely the type of simple-technology and limited-employee activity that more comfortably fits an emerging economy than an advanced economy. Indeed, at a time when China is striving to shift its economy towards the production of more advanced technological products, the return of Play-Doh to the United States may represent a portent of a backsliding nation.

Amtrak’s Nightmare Scenario

On the one hand, it’s difficult to argue with American citizens who believe that their national rail system should provide fast and frequent service between major cities. Metropolises like New York and Boston, for instance, are national engines of economic growth; smaller cities like New Haven and Providence provide similar benefits at the regional and local levels. Such municipalities certainly do need, and deserve, timely commuter service.

But on the other hand, it’s also difficult to argue with individuals who believe that the natural environment shouldn’t be sacrificed on the altar of economic growth. Connecticut and Rhode Island, the small states that occupy the geography between New York and Boston, possess magnificent beachfront shorelines, deep bays, and mighty rivers. The lands and waters that are now preserved for fishing, farming, eco-tourism, and passive environmental uses may be irretrievably harmed by massive transportation construction projects.

When urban cities exist side-by-side with suburban and rural communities, Amtrak is faced with the nightmare scenario of serving both interests simultaneously. Last month, when the Federal Railroad Administration (FRA) unveiled its vision for the northeastern United States rail corridor, it tried to meet this challenge.

Did it succeed? It attempted to please both constituencies by vowing to maintain its existing scenic (but structurally outdated) rail line along the shoreline of the Long Island Sound while building a massive new high-speed rail tunnel further inland. According to its vision, the existing line would continue to serve waterfront communities between New Haven and Providence, while the tunnel would facilitate dramatically faster travel times in a visually unobtrusive manner.

Perhaps predictably, constituencies attacked Amtrak from both directions. In Connecticut, for instance, urbanists at the Business Council of Fairfield County complained that the proposal did not visually enhance the Stamford train station, “which is an eyesore to the community.” Likewise, the city of Hartford failed to receive a direct rail line to its airport.

Environmentalists were similarly critical of the proposed pathway of the new inland tunnel, which would slice through many small towns. According to Connecticut Senator Richard Blumenthal, “A rail line that … proceeds through historic and environmentally sensitive areas is a non-starter — dead on arrival.

If you are optimistically presuming that the release of the vision statement may settle this debate in the near future, Rhode Island Senator Jack Reed has corrected your impression. He “… noted that the FRA expects detailed engineering and environmental (studies) … on the various pieces of the new plan … (to) take many years if not decades …

Decades? In that case, northeasterners won’t experience the economic benefits of modern rail service between New York and Boston any time soon. Of course, with the possible threat of a massive construction project lingering over the farms and villages of rural Connecticut and Rhode Island, environmentalists won’t be able to attract any new projects either.

In other words, both constituencies will find themselves locked in a continuing state of perpetual gridlock. It’s simply another reason why many Americans feel so frustrated about the dysfunctionality of their government agencies.

Baseball Economics, Connecticut Style

Baseball fans may remember that this year will mark the 60th anniversary of the Brooklyn Dodgers’ historic underdog victory against the New York Yankees in the 1955 World Series. Although the teams faced off five previous times for the championship, 1955 marked the first (and only) year that Brooklyn emerged victorious.

Two years from now, though, hardly any one in Brooklyn will celebrate the 60th anniversary of the Dodgers’ decision to move to Los Angeles. It was the first time ever that a successful team, one that enjoyed extensive hometown support, opted to move to a new location in pursuit of a more profitable economic deal.

Dodger owner Walter O’Malley received 315 acres of prime city land from the city of Los Angeles for making that move. Although he remains reviled in New York as the villain who stole the Dodgers from Brooklyn, other owners of professional teams — such as Robert Irsay, who moved the Baltimore Colts to Indianapolis in the middle of the night to avoid public reprimand — have subsequently engaged in such moves as well.

A similar event occurred in Connecticut last week, when the owner of minor league baseball’s New Britain Rock Cats broke ground on a new ballpark in Hartford. Despite enjoying a history of thirty years in New Britain, and a ballpark that was custom-built for it with city funds, the team is now decamping for Hartford.

Who is paying for the new Hartford ballpark? Hartford taxpayers are footing the bill, of course. The structure is a core component of a new municipal development initiative known as Downtown North, or DoNo.

The plan is somewhat similar to Bridgeport’s Steel Pointe Harbor development initiative. That project complemented the public funding of a ballpark for minor league baseball’s Bridgeport Bluefish, a team that was recently criticized for making a “cheap and tawdry joke” out of Brian Williams’ NBC News suspension in order to improve its “sagging attendance.” Steel Pointe, itself, finally appears to be attracting some real estate development activity after stalling in the early 1980s.

Meanwhile, the Rock Cats are finding that the shift to Hartford is not bringing a flood of new corporate support. “The problem with the Rock Cats is the organization is moving 10 miles,” said Oz Griebel, president and CEO of the Metro Hartford Alliance. “You have a lot of hurt feelings from New Britain that need to be addressed even as the team looks for new partners in Hartford.”

So it remains to be seen whether the Hartford relocation will prove to be a successful decision, or whether the team will simply abandon one fan base without ever being embraced by another one. And although Brooklyn has recently luxuriated in newfound economic prosperity without its Dodgers, the future may not be as promising for the forsaken city of New Britain.