The Foxconn Company formally announced that it intended to invest as much as 10 billion dollars to build a flat panel display plant in Wisconsin. Not just anywhere but in Paul Ryan’s district.
Before the euphoria regarding a big investment overtakes us there are some factors we should take into consideration.
Foxconn as an employer in China earned notoriety when it invested in nets on the high rise dormitories it uses to house workers to prevent deaths from suicides. The intensity of the work drove workers to distraction and depression.
There is no reason to believe that the machine paced high intensity workplace which distinguishes Foxconn’s operations will be any different in Wisconsin.
But we should have other concerns.
Foxconn is a highly profitable company. A company builds and operates a new plant to make a profit. To be successful a plant needs to be profitable without a subsidy. IF this factory is to be a real long term employer, FOXCONN has determined that it will be profitable without any subsidy- otherwise once the subsidies go, so does the plant. So in one sense the whole process of competing subsidies is really icing on the cake for the firm
And “icing” does not do the Wisconsin proposal justice. Foxconn will receive a 3 billion dollars in subsidies. Various experts note that the various subsides per job for this plant equal $15, 000 to $19,000 annually. The usual incentive for investments like this is $2457 per job. (NYT Friday July 28)
There is no agreed upon estimate of how many jobs will actually be needed to produce the profits the company seeks. As manufacturing techniques improve, as they have been doing, we DO know that the number of employees may decrease over time-again assuming the firm is committed to building and operating a plant to the highest manufacturing standards.
As for the construction part- there is no guarantee- quite the opposite that these jobs will be union jobs. In fact the Walker administration has also moved to overturn the prevailing wage system which prevents contractors from using government subsidies to lower construction bids. A big project like this will encourage nonunion contractors thus potentially pushing down wage rates in the industry.
As we go forward it is not completely clear where the 3 billion will come from, but it is worth noting that for years the Republican assembly and senate have preached fiscal responsibility and railed against subsidies especially when it comes to education, healthcare, and transportation.
Then there is what could be called lost opportunity costs. Could three billion dollars generate more wealth, more jobs and better economic growth throughout the state than this subsidy? In other words is an investment by the state worth more to the people of Wisconsin than a huge subsidy to Foxconn?
The answer is most probably a “yes” A billion dollars for the UW system, for example could mean lower tuition, and more investment in research. The huge success of bio tech spin offs from UW is well known- creating at this point more jobs for Wisconsin than contemplated by Foxconn and at considerably lower expense to the state.
Or think of a billion dollar investment in a modern rail transportation network linking the cities like Wausau, Lacrosse, Eau Claire and Green Bay with Chicago, and Minneapolis. Or what a one billion dollar investment in public education would do for the state.
Foxconn has a history of big promises and no follow through. Such promises include 5 billion dollar proposal in Indonesia as well as a 30 million dollar investment in Pennsylvania. None came to fruition.
On balance does 3 billion for one company make sense? Probably not. What Wisconsin needs is an economic development strategy based on investment both intellectual and physical.
Dr. Frank Emspak is Executive Producer, Workers Independent News, Professor Emeritus, University of Wisconsin Extension, School for Workers, Former Director of the Center for Applied Technology, Massachusetts- Program manager Advanced Technology Project, and advisor to the Director, National Institute of Standards, US department of Commerce.