Central Mississippi is getting 1,000 badly needed jobs, but taxpayers are paying a hefty price for them.
Friday, June 29, 2012
Central Mississippi is getting 1,000 badly needed jobs, but taxpayers are paying a hefty price for them.
Yesterday, Gov. Phil Bryant and officials from Nissan of North America made the announcement that the automobile manufacturer would expand operations for its Canton plant by adding the 2013 model of its popular compact Sentra to the production line.
The plant already makes Altimas, Armada sport-utility vehicles, Titan pickup trucks and NV vans. Later this year, the Canton facility will commence production on Frontier pickups and Xterra SUVs that the company shifted to Mississippi from its other U.S. facility in Smyrna, Tenn.
Bryant, a Republican in his first term as governor, praised the move as evidence of Nissan's trust in the state's work force and proof that Mississippi's business-friendly environment is helping create jobs. Mississippi's seasonally adjusted unemployment rate of 8.7 percent as of May 2012 is slightly higher than the U.S. average of 8.2 percent.
"Nissan has been a valued member of our state and local business communities and a leading employer in Mississippi for nearly a decade," Bryant said in a statement.
To facilitate the project, the state's taxpayers paid $7.5 million--or $7,500 per job Nissan plans to create--through the Mississippi Development Authority's Mississippi Industry Incentive Financing Fund for infrastructure and job training.
The fund has helped other companies with projects around the state, including Soladigm, which makes energy-efficient glass; KiOR, a renewable-fuels developer; Stion solar panel manufacturers; G.E. Aviation; and Roxul, which makes insulation materials, MDA spokesman Dan Turner said.
Altogether, Mississippians have spent $377.8 million in incentives to Nissan for its 3.5-million square-foot facility in Madison County, or $83,955.56 for each of the 4,500 jobs that the company will have created when the expansion is complete.
Before the Canton plant opened, the state provided $363 million in incentives to help with its construction. In 2011, the state gave Nissan $7.3 million for infrastructure-related expenses to bring the Frontier and Xterra models to Mississippi.
Nissan's latest jobs announcement comes as the United Auto Workers labor union is engaging in a campaign to organize workers at the plant. According to union representatives, Canton workers have complained of stressful conditions and low pay compared to Nissan's Smyrna plant.
Update: The line "... that the company plans to create" in the 8th paragraph was edited for clarity.
Comments
blackwatch 11 years, 9 months ago
Corporate welfare at it's finest. Where are the Tea party zealots protesting the Governor about the "wasteful" spending at Nissan. Over $600 million of taxpayers' money to a private entity so that they can employ less than 1% of the citizens in this state, at less than exempliary wages at that? Where's the outrage?
donnaladd 11 years, 9 months ago
Where are the Tea Party zealots?
http://www.jacksonfreepress.com/news/...">Complaining about women voting.
RichardASunCFA 11 years, 9 months ago
I don't like "buying jobs" either. But these jobs cost a lot less than either the Federal governments green jobs (Solyndra et al) or Barbour's green jobs (KiOR et al). KiOR I think cost $50-75,000 per job and Nissan is much more likely to be a survivor than the Solyndra/KiOR green jobs which come with venture capital level of risk.
If you intent was to bash a Republican then so be it. If your intent was fair competent journalism than you should have done the research to compare the cost of the Nissan jobs to other "bough jobs" and measured them by how secure those jobs are.
I am not a development professional, but I think $7,500 job is probably a bargain as these things go and may even be a net positive (cost free) when you consider the taxes paid by those workers and the money they spend in the community (unless that was already factored in).
Those collateral benefits are hard to calculate and are often hyped when the cost per job is $50-75,000.
Richard A. Sun, CFA
tstauffer 11 years, 9 months ago
Richard: After talking to R.L., I made a quick tweak above; the number you're asking for it there, but the wording may have obscured it. For the 4,500 jobs Nissan will have created by the end of this expansion, the final "price per job" will be the $83,995 number.
Maybe the marginal cost of the 1,000 jobs that are being added here isn't so bad, but you have to decide for yourself if that's the whole story or not. Frankly, this might not be a bad thing if those jobs remain stable over another 10 years or so. (And if they morph into good paying Union jobs... hey, then that'll be very interesting.)
For context, it's not exactly GOP bashing to point out what the Nissan jobs have cost when you consider it was a Democratic governor (Ronnie Musgrove) who signed on initially.
RichardASunCFA 11 years, 9 months ago
Todd, I saw the high cost of the first round but did not comment on it because they may well have been too dearly bought. I focused on the incremental jobs which seem to be a bargain.
Thanks for clarifying that a Democrat brought in the high cost jobs. Rather than comment that the Republican got his jobs cheaper, I will mention that Bryant probably could not have gotten those jobs without Musgrove's original commitment.
Generally both parties are offenders here, which is why I mentioned both Solyndra and KiOR.
If we can make Mississippi workers more productive and regulation fair to workers without being unduly burdensome to business, we can get these jobs cheaper across the board. Generally the states that pay have to pay the most to buy jobs have the least productive workers and are the higher cost states (measured by excess regulation, taxes, etc.)
Richard A. Sun, CFA
tstauffer 11 years, 9 months ago
Understood, Richard, and I agree with the spirit of your comments if not every letter of them. (For instance, one man's "excess regulation" is sometimes another man's still-attached arm or leg.)
Obviously the Nissan plant is considerably more successful than some other government investment, so it deserves the praise due.
It might be even more exciting if the profits from this endeavor stayed in the country, but I guess in this day-and-age we take what we can get. :)
scrappy1 11 years, 9 months ago
There is a small difference between Nissan and Solandra and that happens to be for $500 million there are no jobs at Solandra and the taxpayer is left holding the bag. A Republician Governor spends millions to create actual jobs and a Democrat President gives away $500 million to his political friends.
tstauffer 11 years, 9 months ago
... OR for a slightly more balanced (and, frankly, very informative) summary on Solyndra, we turn to the Washington Post: http://www.washingtonpost.com/blogs/t...">http://www.washingtonpost.com/blogs/t...
donnaladd 11 years, 9 months ago
Reading this, I must say that I hate how many potentially good conversations are derailed by accusations about partisan bias. Our state isn't alone in having officials of all parties who are ripe for criticism.
As for the actual topic -- the cost of the Nissan jobs -- I asked R.L. before this published to look more indepth into the costs of different types of economic development, how these jobs (and what they fare) actually contribute to our economy and various other questions. But I told him to publish this piece in the daily in the hopes of getting an intelligent conversation going.
I think the public has the right to know how much these jobs cost, which most media round here don't bother to expose in their breathless reporting. It's up to all of us to decide if they are worth it to us. Reporting those numbers is not the same thing as saying that the costs aren't worth it, as anyone reading this without a partisan lens could see.
If you argue that identifying Bryant's party is the same as a partisan attack, I would call B.S. on it. We typically identify elected officials' party because, well, that is a long-time journalistic tradition.
And ask anybody: I'm not exactly a Musgrove apologist. I even withdrew an endorsement of him one time.
donnaladd 11 years, 9 months ago
And facts do matter on all these issues. The beef plant comes to mind; that was a bipartisan muckup (remember Barbour's letter of support?), but you wouldn't know it from all the partisan windbags pointing fingers. I really hate partisanship. I'm much more interested in actual facts and wherever they fall, they fall.
scrappy1 11 years, 9 months ago
You hate partisanship when it shows you how partisan you are. Has pointing out the waste in the Obama administration brought about your bipartisan change of heart? Remember your," where are the Tea Party Zealots now comment"? The Tea Party has been constant in calling for less government and less government spending in both major parties. Maybe you are trying to prove women shouldn't vote, huh?
tstauffer 11 years, 9 months ago
This comment was removed by the site staff for violation of the usage agreement.
donnaladd 11 years, 9 months ago
Point of information, scrappy. The comment "Where are the Tea Party Zealots now?" was not mine. I quoted it from the post above it and then linked to http://www.jacksonfreepress.com/news/...">a very intriguing interview we ran this week with the local Tea Party (you're in another state, right?) that has gotten a lot of attention because of something a local Tea Party president said about her fellow women.
Perhaps you don't know that the Tea Party here, anyway, is very inconsistent about what it calls for; many local Tea Partiers want more government in terms of regulating individual rights and behavior, for instance. It's anything but "constant." You probably haven't read the JFP long enough to know, but I actually have a slight libertarian bent ("until it gets stupid" we like to say). I also like President Obama, although he's not perfect, and I agree with him on many issues. But that doesn't make me partisan; it makes me prefer President Obama to other presidential candidates at the time. People who view everything through a partisan lens have a hard time understanding people who think like I do, but that's their problem, not mine.
KendallVarnell 11 years, 9 months ago
Thanks for clarifying that Donna. It was not obvious to me at first glance that "Where are the Tea Party Zealots?" was a quote. It just looked like you were being snarky.
I would love to see a more indepth article about the whole Nissan process and how it has fared as an investment by Mississipians.
donnaladd 11 years, 9 months ago
No problem, Kendall. Todd actually pointed out to me that it wasn't originally italicized. Not sure why, but we're all still getting used to how this (wonderful) new website works. Hope it's clear now.
More ahead on Nissan. We welcome informed input on future stories in whatever direction. Write [email protected]. We especially encourage Nissan employees to get in touch.
donnaladd 11 years, 9 months ago
And Kendall, I was being a bit snarky even in my link. But it was well-placed snark, in my opinion. That is, a reader asked where the Tea Party was on a very real expenditure of taxpayer money -- in a way that might turn off libertarian types -- and I linked to the article where the president of the Central Mississippi Tea Party seemed more concern about women she doesn't agree with.
My snark, thus, was to convey that the local tea party might be more worried about cultural wars than they are government expenditures, especially when politicians they like are involved, as opposed to expenditures pushed by politicians who are on the other side of the culture war from them.
That is, this kind of inconsistency is very important to consider. It speaks to motive.
RichardASunCFA 11 years, 9 months ago
Donna, I would heartily endorse any unbiased work on the cost of incremental jobs. Both as a state and country we are spending a lot of money in the name of jobs at a time when we are and will be facing increasing pressure on those government budgets. This is an extremely hard area on which to do neutral research. If you look at the research by the major think tanks they break out on ideological if not partisan lines. Consider the widely varying estimates of the jobs produced or saved by the Federal stimulus spending.
Another difficulty is that companies like Nissan carry very low technology and business risk while the renewable and early-stage companies have a much higher fail rate as businesses. This on a risk adjusted basis, we can spend more on Nissan risk level jobs than we can on KiOR level risk. While the automotive manufacturing business is not risk free and the big companies move incremental investment and production between their global location, the probability of those jobs being in Mississippi five years from now are higher than for the early stage green jobs.
When I read the article in this morning's New York Times on New York City financial institutions moving their mid-range jobs to Salt Lake, North Carolina and Jacksonville, it made me wonder what would it take to have gotten some of those jobs here? Apparently a trade processing job paying $100,000 in NYC pays $60,000 in Salt Lake. Are we not in the hunt for those jobs because of worker skills? Or poor marketing / outreach by MDA?
Richard A. Sun, CFA
RichardASunCFA 11 years, 9 months ago
Joe Nocera's column this morning in the NYT had a description of a program designed to create the skills for such mid-level jobs. (http://www.nytimes.com/2012/07/03/opi...">http://www.nytimes.com/2012/07/03/opi...)
In our focus on manufacturing jobs, we sometimes miss the attractive office jobs that can sometimes be the stepping stones to knowledge worker type high paying jobs.
Todd-- the phrase "regulation fair to workers without being unduly burdensome to business" in the sentence that preceded "excessive regulation" should have put you on notice that I had no intent of putting workers at undue risk when I used the phrase "excess regulation". Risk can be reduced, it can be manged, it can not be eliminated. Too much of our current regulation is written by people with no experience in the area they are regulating and no sense of balance. The Feb. 18, 2012 cover story on over regulation in The Economist is a good read on the topic.
tstauffer 11 years, 9 months ago
Fair enough. I read the Economist piece you sent via e-mail (it read a bit more like a column than a cover story, but maybe they're just being European). I agree with the term "over-regulation" when it applies to such things as the different between Dodd-Frank and Glass-Steagall. Dodd-Frank may well be too complex, hence "over-" regulatory; Glass-Steagall, I would argue, was stronger regulation, perhaps both for its simplicity and the severity of its purpose. Is that "over-" regulation?
Apparently Dodd and Frank thought so, unfortunately. (And clearly that's an oversimplification, as Dodd-Frank is a complicated spaghetti designed to deal with some very modern problems; I don't know how tenable a simpler, more profound, law would be in this day-and-age.)
I don't know that the argument that "excess" regulation is one of the primary factors slowing down job growth in states in a strong one; I feel fairly certain that's not Mississippi's issue, and yet the state is clearly paying significant money to locate businesses here. I think training, education and opportunity are much closer to the top. (And it's worth noting that even some heavily regulated states seem to be able to grow technology and knowledge worker jobs.)
Edit: And, I'm not even 100% bought-in on that notion; I think the ideal, somehow, is "smart" regulation, which isn't exactly the opposite of excess; it's more the opposite of "dumb." Clearly one could write a book...
RichardASunCFA 11 years, 9 months ago
Todd, The Feb 18 issue had Over Regulation as its cover story. The piece I sent was what The Economist calls a leader; it is a summary and synthesis of the following articles. There where three more specific and detailed articles also in the issue that I have copied you on.
We probably agree that regulation should be elegant in the mathematical sense--short, clear and effective. Many other countries use "principles-based" regulation rather than "rules based". Principles-based regulations are typically shorter and impose far lower compliance costs. Both systems have their advantages and disadvantages.
The complexity of modern commerce and finance may not require longer regulations, but it certainly requires different more advanced regulation. Complexity may support an argument for principles-based regulation because no legislator or reguator can possibly understand modern finance or commerce.
I listened to much of Jamie Diamond's recent testimony to the Senate Finance Committee and the level of ignorance of both parties was stunning and appalling. They could not make the simple differentiation between gambling and investing which any financier and any regulator/legislator should be able to do in two or three simple sentences.
I agree with you that as a State, regulation is not a relative weakness for Mississippi. Federal regulations apply everywhere and, in my opinion, their poor quality, unintended consequences, etc. suppress growth in all states, except the DC suburbs of Maryland and Virginia where many of the regulators live.
Job growth can occur in high tax and regulation states where there is a specialty cluster like finance in NYC and ICT in Silicon Valley. But some of the jobs that could have been in those states are being moved to lower overall cost states with well trained work forces--per the job transfer highlighted by the NYT piece).
Richard A. Sun, CFA
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