Center for Policy Alternatives
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High Road Economic Development

High Road policies promote high-wage, worker-friendly, and publicly-accountable economic development.
States and their municipalities give about $50 billion to private companies every year in the name of economic development—through corporate income tax credits, property tax abatements, low-interest loans, enterprise zones, tax increment financing, and economic development grants.1 These government subsidy programs tend to support “low road” economic development: the creation of low-wage, dead-end jobs that provide little benefit to employees or communities.2 A “high road” strategy uses government leverage to compel businesses to act in a socially responsible manner. High road policies result in better and more secure jobs, a stronger tax base, and economic growth that benefits employees, corporations and governments.3
Companies that pay low wages and provide few benefits create a burden on state governments.
When businesses provide low-wage, low-benefit jobs, their workers are forced to rely upon taxpayer-funded programs, such as subsidized housing, child care and Medicaid. Wal-Mart is a prime example. According to the company’s own internal study, about 65,000 Wal-Mart employees are covered by Medicaid and 27 percent of the children of Wal-Mart employees are enrolled in Medicaid or SCHIP.4 In Georgia, over 10,000 children with a parent who works at Wal-Mart—one child for every four Wal-Mart employees in the state—are enrolled in Georgia’s SCHIP program, at a cost of $10 million to taxpayers.5 Businesses that bring low-road jobs into a community displace other businesses, replacing good jobs with bad jobs.6
It is simply bad economics for a state to subsidize the creation of low road jobs.
It makes no sense for governments to spend taxpayers’ money to encourage the creation of jobs that ultimately burden the state. The state should get its money’s worth by supporting economic development that raises, not lowers, the living standards of working families. Public dollars should be spent to promote the public good.
A growing number of state and local governments are adopting High Road policies.
By 2003, at least 43 states, 41 cities, and five counties had attached job quality standards to some government contracts or subsidies. This represents an improvement over 2000, when 37 states, 25 cities, and four counties had job quality standards.7
It makes economic sense for states to require subsidy recipients to pay a living wage.
The federal minimum wage of $5.15 per hour is simply insufficient to support a family. A wage earner who works full-time at the minimum wage earns about $10,700 a year—$5,900 below the 2006 poverty line for a family of three, and $9,300 below the poverty line for a family of four. Clearly, the creation of sub-poverty level jobs does not lead to a self-sufficient workforce or provide the basis for sustainable economic growth.
It makes economic sense for states to require subsidy recipients to provide health insurance.
Seventy percent of the 45 million Americans without health insurance are full-time workers or their dependents. Only 55 percent of workers who earn less than seven dollars an hour have access to job-based heath insurance.8 Twenty-nine states have programs that require companies which receive government contracts or subsidies to provide health insurance—a major improvement over 2000, when just 17 states had such a requirement.9
It makes economic sense for states to require subsidy recipients to provide employees with training opportunities.
Unskilled workers in jobs with little or no opportunity to gain new skills can get stuck in a cycle of dependency as they try to provide for themselves and their families. Education and training are essential elements of any sustainable economic development strategy. To attract businesses over the long term, a region must develop the skills of its workforce.
The Minimum Standards for Subsidized Jobs Act requires businesses that receive state economic development subsidies to provide economically-sustainable jobs to their employees.
The model legislation requires that, in order to receive an economic development subsidy, a company must:
  • Pay a minimum hourly wage of at least one dollar more than the federal or state minimum wage.
  • Offer all full-time employees access to a good health insurance plan.
  • Offer job training programs to at least 20 percent of its workers.
  • Not have been adjudicated in violation of any federal, state or local laws for at least five years.
Endnotes
  1. Peter Fisher and Alan Peters, “The Failures of Economic Development Incentives,” Journal of the American Planning Association, Winter 2004.
  2. See Greg LeRoy, The Great American Job Scam: Corporate Tax Dodging and the Myth of Job Creation, 2005.
  3. For a full discussion of High Road economic policy, visit 
www.cows.org or www.highroadnow.org.
  4. Susan Chambers, Wal-Mart Executive Vice President for Benefits, “Supplemental Benefits Documentation: Board of Directors Retreat FY06,” Wal-Mart Stores, Inc. (internal document given to the New York Times), October 2005.
  5. Reed Abelson, “States Are Battling Against Wal-Mart Over Health Care,” New York Times, November 1, 2004.
  6. Philip Mattera and Anna Purinton, “Shopping for Subsidies: How Wal-Mart Uses Taxpayer Money to Finance Its Never-Ending Growth,” Good Jobs First, May 2004.
  7. Anna Purinton, “The Policy Shift to Good Jobs: Cities, States and Counties Attaching Job Quality Standards to Development Subsidies,” Good Jobs First, November 2003.
  8. Families USA, “Going Without Health Insurance,” March 2003.
  9. “The Policy Shift to Good Jobs.”
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