High-Tech Mega-Incentives and the State of New York State

What price do New Yorkers pay for high-tech jobs?

I listened to Andrew Cuomo deliver his first State of the State speech on the radio this afternoon. Though it was admirably public and occasionally downright rousing, the speech—perhaps like Cuomo’s political agenda itself—came across as schizophrenic, at least to this listener.

Cuomo seems to be trying to balance contradictory impulses – (purported) fiscal conservatism and (alleged) political progressivism. On one hand, he committed to a broad spectrum of laudable social justice goals: green jobs, minority and woman-owned businesses, reformed juvenile justice facilities, marriage equality and urban green markets.

On the other hand, he squarely placed responsibility for the past and future success of New York State in the hands of industry. Cuomo exclaimed that a vibrant private sector is what made our state great and declared that under his governorship, New York will once again be “business-friendly.”

If there was one message that Cuomo, Assembly Speaker Sheldon Silver and Majority Leader Dean Skelos—uncomfortably sharing their first stage—all agreed on, it was “Less government, more jobs.”

I find this sentiment baffling. Why do political leaders on both sides of the aisle insist that the best way to add jobs to the economy is to, in Skelos’ words, “Empower business to succeed, and then get out of the way,” when taxpayers often pay an enormous price for jobs created in the private sector?

In my book, I talk about the price we pay, as community members and workers, for high-tech economic development. I write at length about the costs of high-tech growth: environmental degradation, increasing social inequality, political disenfranchisement, and amplified economic vulnerability for poor and working-class women and families.

For today, we’ll ignore more abstract costs to focus on direct taxpayer contributions to the “innovation economy,” the sector praised by Sheldon Silver as the solution to New York State’s unemployment woes. Let’s take just one example: the $4.2 billion semiconductor manufacturing plant being built in Malta, NY. Over the next 15 years, GlobalFoundries will receive $1.37 billion in financial incentives from the state to complete this project, including a $665 million capital grant and $700 million in Empire Zone credits (Pinho 2009).

In return, GlobalFoundries promises the state of New York 1,400 new permanent semiconductor manufacturing jobs, 5,000 permanent “indirect” jobs, 1,600 temporary construction jobs, and 2,700 temporary construction-related jobs.

So let’s do the math.

$1.37 billion in cash incentives and uncollected tax revenues

DIVIDED BY

Permanent Employment:
1,400 new semiconductor manufacturing jobs
5,000 projected* indirect jobs
= 6,400 permanent jobs

2-Year Construction Phase Employment:
1,600 construction jobs
2,700 projected* construction-related jobs
=10,700 total jobs.

EQUALS

Cost to New Yorkers:
$978,571 per manufacturing job
$214,063 per projected permanent job
$128,037 per projected job (of any kind)

The 1.37 billion dollar taxpayer price tag does not include infrastructure investments in the Luther Forest Technology Campus, where the plant is being built. Nor does it include funding of research centers at local colleges and universities (such as Albany NanoTech) or the cost of educational undertakings to train workers for chip fabrication facilities.

What’s more, these numbers don’t say nearly enough about the quality or wages of the jobs GlobalFoundries has promised to create. They expect the plant to have an $88 million annual payroll when at full production, an average wage of around $66,000 for full time workers, and that “indirect” jobs will have an average salary of $40,400** (GlobalFoundries 2009).

It is well-documented that information economies are bifurcated, or two-tiered, with a small percentage of jobs going to highly-educated “knowledge” workers and a much larger percentage of jobs being created in the service economy that supports those workers. So, very conservatively, let’s estimate that 1/2 of the indirect jobs promised by GlobalFoundries will go to workers in the traditionally low-paying service industries.

Based on this estimate, New York taxpayers are paying $128,037 each for 10,700 jobs, even though 6,800 of those jobs (64%) will only last two years and/or will pay below a self-sufficiency wage. So if we count only decent jobs–those that last more than two years and pay above a poverty wage–New Yorkers are paying $351,000 a pop!

Incentives for business in New York State have become so expansive that the media invented a new name for them: Mega-Incentives. Mega-incentives beg big questions. In the drumbeat of “Jobs, Jobs, Jobs!” why aren’t we talking about good jobs, jobs that can lift New York families out of poverty? And, for that matter, what would that 10 billion dollar budget gap everyone screamed about during the State of the State Address look like with all the ill-considered business incentives removed?

In these financially austere times, maybe we should consider taking high-tech industry off welfare.

* All of these job numbers are projected by GlobalFoundries. As no one else has thought to check their numbers, I guess we’ll just take their word for it.

** The average salary for indirect jobs will put many workers below the threshold of economic self-sufficiency in Saratoga County. For example, in 2010, the self-sufficiency wage for one working adult with a pre-school-aged child was $41,812, while the self-sufficiency wage for one working adult with an infant and a pre-schooler was $54,604 (Pearce 2010).

References
GlobalFoundries 2009. “GLOBALFOUNDRIES Breaks Ground on World’s Most Advanced Semiconductor Foundry,“ July 24, 2009 Press Release, available at: http://www.globalfoundries.com/newsroom/2009/20090724.aspx. Accessed Jan 5, 2011.

Pearce, Diana. 2010. “Self-Sufficiency Wage for Saratoga County, NY, 2010.” Available online at: http://www.nyscommunityaction.org/SelfSuffStandardFiles2010/CountyStats/NY10_Final_All_70_Families_Table_Saratoga.pdf. Accessed January 5, 2011.

Pinho, Rute. 2009. “Comparison of Tax Incentives for Manufacturers in New York and Connecticut.” Document 2009-R-0425, State of Connecticut General Assembly. Available online at: http://www.cga.ct.gov/2009/rpt/2009-R-0425.htm Accessed January 5, 2011.