When word broke that Chicago, a Top 20 finalist for the Amazon Hunger Ga… I mean… HQ2 bid winner, it was no surprise. The city is rumored to have offered Amazon $1.32 billion in tax incentives if the online retail giant chooses the Windy City. That’s a tremendous amount of money, until you consider that the winner of the bid will add 50,000 jobs with an average yearly income of $100,000. These numbers are regional game changers, making the winning city THE place to work and live. But what if Chicago, or any city for that matter, took those tax incentives and courted local businesses, innovators and job creators instead? What if we showed the same financial enthusiasm to small and midsized local businesses like we did retail supergiants?
Let’s break the aforementioned numbers down. If you divide $1.32 billion by 50,000 jobs created at a $100,000 annual income average, you’re talking about subsidizing approximately one quarter of the first year salary for each employee added ($1.32B / 50,000 = $24,600). Let’s take that same percentage and translate it to a reasonably livable wage job for a small city in Upstate New York like Utica, Schenectady, Binghamton, etc. What if these cities provided tax subsidies for local job creation at the clip of 25% of the new employee’s salary for the first year? For example, a Utica-owned company that does screen printing for T-Shirts could hire one new employee at $40,000 and receive $10,000 in subsidies for that employee’s salary for the first year? What if a Schenectady-based internet startup would receive $12,500 in tax subsidies for one new $50,000 job?
That sounds like a lot of money, but consider this… these would be subsidies to help LOCAL EMPLOYERS create local jobs, keeping the money in the area economy instead of incentivising big-box corporations to take profits out of the communities they serve.
And we could put several conditions on these local job creation subsidies… one might be that the employer would have to live within a certain number of miles from his or her business in order to receive the incentive. This directly ties the employer to the environment in which his or her business exists, creating a sort of connection to the surrounding neighborhood. This closer connection lends to a greater understanding of how the employer’s business impacts the local community.
Another stipulation might be that the subsidized position must be employed at the same rate for 5 years, or the business will have to pay back the subsidy. This ensures that the subsidy pays for the new job for a pre-determined duration.
The math is a bit rough. The examples are a bit simplistic. Furthermore, I’m not a big fan of many forms of subsidized job creation. But if we are going to bend over backwards to lure massive big-box employers that ultimately take profits out of our communities, why don’t we take that money and invest it in job creators and innovators who keep profits local? In a world where employment is everything, keeping jobs local is our unsung hero and our greatest victory. With this in mind, finding creative ways to invest in local job creators is the big picture, long term silver bullet that slays so many of our urban demons.