The Uselessness of Economic Development Incentives – Jobs & Economy – The Atlantic Cities
When it comes to states, Texas leads them all in these corporate giveaways, with $19.1 billion in outlays per year, more than 2.5 times the next highest state, Michigan, with $6.6 billion in annual giveaways. Pennsylvania is third with $4.8 billion, followed by California ($4.2 billion), New York ($4.1 billion), Florida ($3.98 billion), Ohio ($3.24), Washington ($2.35 billion), Massachusetts ($2.26), and Oklahoma ($2.19). All in all there are 21 states that grant more than one billion in incentives each year and another 10 that give between $500 million and a billion.
Map by MPI’s Zara Matheson
Even more interesting are the Times’ figures on incentive dollars per capita. The map (above), by the Martin Prosperity Institute’s Zara Matheson based on the Times data, shows economic development incentives per capita across the 50 states. Alaska leads, spending a whooping $991 on incentive spending per person each year. West Virginia is second at $845 per person, Nebraska third ($763), Texas fourth ($759), Michigan fifth ($672), and Vermont sixth ($650).
With the help of the MPI’s Charlotta Mellander, I examined to what degree these economic development incentives are related to state economic performance. Mellander ran correlations between economic development incentives per capita and economic variables like wages, income, poverty levels, education levels, knowledge workers, and so on. As usual, I note that correlation does not mean causation.
Chart data source: U.S. Bureau of Labor Statistics; The New York Times
Our biggest takeaway: there is virtually no association between economic development incentives and any measure of economic performance. We found no statistically significant association between economic development incentives per capita and average wages or incomes; none between incentives and college grads or knowledge workers; and none between incentives and the state unemployment rate. The scatter-graph above illustrates the lack of any relationship between incentives per capita and wages.
The only statistically significant association we find is between incentives and the poverty rate. This is in line with other research by Robert Greenbaum and Daniele Bondonio, which finds economic development incentives to be more likely in poorer, more economically disadvantaged communities, especially those that have faced recent economic decline.