Newspaper article St Louis Post-Dispatch (MO)

Nicklaus: Missouri Understands Part, but Not All, of New Job- Creation Math

Newspaper article St Louis Post-Dispatch (MO)

Nicklaus: Missouri Understands Part, but Not All, of New Job- Creation Math

Article excerpt

When state leaders discuss economic development, they usually tout various bribes they can offer to a business willing to relocate.

Tax breaks and other handouts have been at the center of state job-creation strategies for decades, but a new study says these subsidies are misguided. States should focus instead on basics such as schools and roads, the study's authors say.

The critical insight of the analysis, written by Michael Mazerov and Michael Leachman of the Center on Budget and Policy Priorities, is that most jobs are created by new and homegrown companies, not the prize out-of-state lunkers that governors like to brag about.

Incentive programs "take resources away from public investments and what does help create jobs: good schools, good roads and bridges, and safe communities," Mazerov says.

For the median state between 1995 and 2013, 87 percent of new private-sector jobs were homegrown. They were created either by startups or by firms already located in the state. Most of the rest were at new branches of out-of-state companies; only 3 percent came from business relocations.

The percentages are remarkably consistent from state to state. Texas, which is known for offering large relocation incentives, is just as dependent on homegrown jobs as less-generous Maine or Missouri.

"The data provide a clear argument against company-poaching strategies," Mazerov says. "Supporting homegrown startups and young fast-growing in-state companies is likely to be a better strategy for creating jobs."

Does Missouri understand this new jobs math? Sort of. In the last couple of years, the Legislature has increased funding for the Missouri Technology Corp., which supports entrepreneurship programs and invests directly in early-stage companies.

The Show-Me State, though, hands out plenty of traditional subsidies, too. As I mentioned in a column last year, 89 percent of the money from the Missouri Works program goes to large companies. …

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