Connecting Corporate Subsidies and Living Wage Campaigns

Interested in living wages? Interested in corporate welfare? Then you should be excited, because the two go together like peanut butter and chocolate.

Corporate subsidies come in three basic flavors. First is direct financial assistance in the form of grants, or straight cash, which the company doesn't have to pay back. Second is indirect financial assistance in the form of training programs, marketing and site improvements; for example, the Motorola factory in Goochland County, Virginia — which has still never opened for business — received over $60 million in water treatment infrastructure and at least $25 million in other incentives like job training and improvements in the road leading to the factory. Finally, there are tax-based incentives and rewards, such as the $60 million in tax breaks Motorola will receive in exchange for 2,500 jobs.

Living wage campaigns push governments and public institutions to pay their employees an hourly wage that can realistically support a family. The figure varies from place to place. Many campaigns settle on something around $8 per hour, but with housing costs escalating, often a real living wage is much higher. In Virginia, according to recent studies, $11.68 is the hourly wage needed for a family to afford the average two-bedroom apartment while paying no more than 30 percent of their income in rent.

How do corporate subsidies and living wage campaigns come together? When a local or state government passes a law regulating the welfare it gives away to businesses, it usually looks to job quality standards as the main way of holding those businesses accountable. These standards are built into the contracts that they sign with industry. If industry doesn't meet the standards, then they don't get the money. These standards can include:

• Providing wages which support a family, plus adequate benefits.
• Investing in worker learning through ongoing training.
• Obeying labor and environmental laws.
• Filing timely reports with the locality or state, including the number of jobs created, wages of new and existing jobs, and other information.
• Agreeing not to relocate to another location offering more subsidies.
• Sometimes the contracts will include stipulations that will force the business to return the subsidy, plus interest, if it fails to meet its end of the bargain.

The costs to governments and taxpayers can be high if we allow our elected officials to give away money with no standards attached. In an October 12, 1999, article from The Sun, reporter Jay Hancock describes how South Carolina has given away so much in tax breaks that it finds itself unable to meet its growing budget.

“On its current course, South Carolina will deliver what incentives critics have been expecting for years: a striking case of incentives trauma,” Hancock wrote. Taxes are going through the ceiling for individual property owners and established businesses unable to join the race for public cash. Schools are crumbling away while students achieve the lowest SAT scores in the country. And the big BMW plant has never paid South Carolina a dime in taxes and probably never will.

But the argument for job quality standards in corporate subsidy deals is a hard one to make if you have no data to convince lawmakers. And most states, including Virginia, literally have no idea how much they are giving away to corporations. Disclosure laws are needed to reveal what has been given to whom.

Maine and Minnesota are two states that have passed disclosure laws after grassroots groups pushed campaigns through their state assemblies. Good Jobs First, an advocacy group working to hold corporations accountable, has used the data generated by those disclosure laws to reveal that many of the corporations receiving subsidies actually cut jobs,. And most of the new jobs which were created by public dollars paid below $10 an hour.

Unfortunately in Virginia, we have no such disclosure law. Even business records, which could be used to determine what companies receive what state dollars, are closed to the public. A first step toward creating statewide job quality standards for all subsidies would be to push such a law through our legislature. Disclosure laws can also be passed on the local level, allowing citizens of cities and counties to examine the subsidies given by their elected officials to attract new businesses.

Some argue that regulating corporate welfare creates another layer of government bureaucracy. But in fact, any attempts to monitor subsidies will cost less than the millions of dollars given away to corporations which produce no public benefit. Elected officials have a duty to safeguard taxpayer dollars, and they must know where the money is going and how it effects actual jobs in order to do it. If corporations find the reporting process too burdensome and refuse to take the money, then they clearly did not need the cash in order to run a profitable business.

Strong arguments exist in favor of attaching wage and other standards to corporate subsidies:

• Subsidized jobs should not create hidden taxpayer costs, such as forcing employees to use food stamps or Medicaid to get by.
• Capital is plentiful in this economy, but workers are not. It makes economic sense to reward labor.
• Schools and their tax base must be protected from corporate welfare.
• Favoritism to some companies is unfair to others.
• Corporate migration to places with better subsidies is a form of piracy, and it is indefensible. One locality loses due to another's gain.

Living wage campaigns and campaigns to regulate corporate subsidies fit together. Attaching living wage standards to corporate welfare will extend the benefits to far more workers than merely asking cities and counties to pay their workers a living wage. And corporate welfare campaigns can use the broad appeal of “living wage” to communicate the importance of job quality standards and the reporting needed to enforce them.

Thanks to Fiona Hsu at Good Jobs First for providing the background and much of the content of this article. GJF can be reached at goodjobs@ctj.org, and their website is www.goodjobsfirst.org. Look for their research paper, “The Policy Shift to Good Jobs.”