NEW REPORT:
Migration: Millennials and the wealthy moved in. Most Vermonters stay put
Read the report
Read the report
New evidence finds that public investments that help build a skilled workforce and improve the quality of life for local residents are more likely to create jobs and build a strong economy than tax cuts and attempts to lure businesses with financial incentives.
In State Job Creation Strategies Often Off Base, a new report from the Center on Budget and Policy Priorities, Senior Fellow Michael Mazerov and Michael Leachman, Director of State Fiscal Research, show that the vast majority of jobs are created by businesses that start up or are already present in a state.
They conclude that “many state policymakers pursue economic development strategies that are bound to fail” because they ignore this fundamental reality about job creation. When states offer financial incentives, they divert resources needed to help home-grown startups and young, fast-growing companies deliver maximum job growth and to build a climate that supports their growth with public investments in schools, transportation, and thriving communities.
In the past, a lack of useful data limited research about which kinds of firms create jobs. Now the federal government has developed databases that track over time the job-creation record of specific businesses of various sizes and ages while accounting for ownership changes. The U.S. Census Bureau has developed two such “longitudinal” databases. The U.S. Labor Department has developed one as well, and a private company using the Dun & Bradstreet business registry has created another.
Research using these data provides a new understanding about which businesses create jobs, and where they create them–calling into question the value of tax cuts and other tax financial incentives that states offer businesses to move in or stay. Among the facts that counter the financial incentives strategies:
The report notes that state and local governments are experimenting with various ways to boost the number and success rates of startups and young, fast-growing firms in an effort to determine which strategies work best. In the meantime, the report’s authors encourage policymakers to reject tax cuts and business financial incentives, and to reconsider those already enacted.
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Thank you. I have been wondering about this for quite a while.
Thanks. Glad to see the CBPP weighing in on this. I first wrote about this ten years ago in the Vermont Job Gap Study.
http://www.pjcvt.org/dbpjc/wp-content/uploads/2010/03/Phase-9-Addendum.pdf
And again in 2010.
http://www.pjcvt.org/dbpjc/wp-content/uploads/2010/03/JobGapPhase10.1.pdf