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Wisconsin State Legislature Signs Off On $3 Billion Foxconn Incentive Package (venturebeat.com)
On Thursday, legislators in the state of Wisconsin approved a nearly $3 billion incentive package for the Taiwanese electronics manufacturer, Foxconn, in exchange for it investing approximately $10 billion in the state and building a factory that could employ up to 13,000 workers. The legislation is now headed to Republican Governor Scott Walker's desk, where he is expected to give it his seal of approval. VentureBeat reports: The bill passed the Wisconsin State Assembly on a 64-31 vote, after previously passing the state senate on a 20-13 vote. The move signals the start of what will likely be an important experiment in just how much generous incentive packages can do to help create new tech hubs. Governor Walker has said that the Foxconn factory â" the company's first in the United States -- will help transform Wisconsin into "Wisconn Valley." While on a trade mission this week to Japan and South Korea, Governor Walker told reporters that many of the companies he met with on the trip were already "every interested in how they could come to Wisconsin and partner for that new ecosystem." However, there are still a few details that need to be finalized before Foxconn can start breaking ground -- most notably, where the company will build the factory. The factory was set to be built in either Kenosha or Racine County, Wisconsin, before Kenosha dropped out of the running earlier this week.
This is for building a factory, and much like pipeline deals, after it's built the number of jobs will be much less. You can't manufacture and assemble in the USA without it being automated, these are mostly robot jobs. I doubt they will reach thier full subsidy long term, it's more likely they will employ management, a handful of engineers and some machine/assembly robot techs and that's it. The manufacturing jobs aren't coming back.
...investing approximately $10 billion in the state and building a factory that could employ up to 13,000 workers. ...
What is the timeline for the $10 billion to be invested? Surely, a sum that large has some planning behind it. How soon will it be before the entire $10 billion is invested? Also, what is the timeline for the ramp-up to 13,000 new employees?
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https://www.bloomberg.com/view...
...Let's clarify this: Foxconn promised to invest $10 billion and create 3,000 jobs initially, but those numbers are squishy. As Bloomberg Businessweek observed:
Just this past year, Foxconn is reported to have pledged investments of $5 billion in India; $3.65 billion in Kunshan, China; and $8.8 billion in Guangzhou. It's too early to know if those sums will ever be spent, but including Wisconsin, the tally now stands at $27.5 billion of commitments. That's more than Hon Hai (the company's publicly traded flagship) has spent in the last 23 years.
Those promises are mostly that and little more. At best, this is a wildly optimistic hope for new jobs in an era when U.S. manufacturing employment been in long-term decline. At worse, it is a giant grift, a taxpayer-funded photo op that will yield little in terms of job gains, other than a few hundred heavily subsidized positions....
US labor laws are often first-line enforced by state-level boards of labor, and there are large gaps in federal law that not all states make up. A friend of mine was having issues with an employer not allowing breaks, but it turns out that breaks are not federally mandated, nor are they mandated by this particular state either. We ended up having to take a different tack (turns out the boss had two businesses would avoid paying employees time-and-a-half overtime by switching which company they worked for during the week, this got them slammed with a requirement to pay all that OT plus some heavy fines from the state) but there's no guarantee that states will do their job to enforce workplace protections or to mandate them in the first place. Given what Wisconsin has been up to lately I would be surprised if they did enforce them adequately.
Do not look into laser with remaining eye.
Job targets probably don't need to be long term, can probably cover construction jobs while building the factory and very likely can include low paid jobs as well.
Foxconn will go from using cheap labor in China to people working like "Sure you can have a job, the government is actually paying your salary and a bonus to us for hiring you.
My guess will be that if Foxconn does it properly, they should be able to enter the state, and run operations for three years, eliminate sea shipping costs, establish an American trucking industry... preferably with cheap labor or self-driving trucks, run their factories with little regard to environmental issues (was in the deal) and then downsize operations and start moving out.
If they do it right, then they can play states off of each other and start negotiating a similar deal with another state and probably go 9-10 years being paid to operate in America and kill off as many jobs as possible in other sectors by gaining a strong foothold on American soil.
I am all for competition and market forces in private enterprise. But pitting state or city governments against each other to see who will give you the biggest tax break is just wrong IMHO. The entire reason people create a government is because they want to be treated fairly. Giving tax breaks only to specific individuals or companies defeats government's reason for existing
If you want to create new economic activity by instituting a tax break, give it to all companies, not just one specific company. Government should be in the business of improving society overall. Not in the business of favoring companies and individuals who can leverage what they can offer society into tax breaks. Cities and states should compete with each other to attract business on the basis of offering the lowest overall tax rate, not compete by giving tax breaks to only a select few.
You're assuming that the economics of this type of deal is zero sum. It's not. It's positive sum. When a new factory is built (and there is market demand for what the factory is producing), everyone wins - the factory, its employees, the surrounding community and government, and the customers of the products the factory produces. Yes someone is probably getting the better end of the deal, but it's not as important if everyone comes out a winner. You are still better off for doing it, than not doing it. (The sports stadium deals where the local government pays to build the stadium are an exception, since it involves actual cash expenditures, not giving up increases in future tax proceeds. The expenditures means the accounting balance for the deal can shift into the red.)
My gripe is with how this type of deal destroys a level playing field between Foxconn and its competitors who don't get the same tax break. You're preemptively shutting out a potential future factory which could have generated even greater benefits than the Foxconn factory. The government shouldn't be placing bets on horses - that's the role of private enterprise (where someone who picks a loser bears the cost of a bad choice themselves, not forces all of society to pay for it).