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Job-Creation Study Casts Doubt on Necessity of Incentives

A new study by the University of South Carolina’s Moore School of Business identifying the top job-creating companies in South Carolina might be notable as much for what it doesn’t say as for what it does, especially given the parties behind it.

The study, which was funded mostly with public money, says that a select few small and medium-sized companies based in the Palmetto State have created most of its new jobs over the past several years.

What the study does not say is that those “high-impact firms” grew South Carolina’s employment base evidently without the benefit of specially crafted tax breaks and other incentives that many state and local officials champion as key to economic development.

Yet despite those firms’ free-market success, the conclusion of the analysis could be seen as promoting public-sector endeavors specifically geared toward the biggest job-generating businesses.

“Economic development efforts to lure large branch plants to the state have achieved some notable success,” the conclusion says. “Yet new initiatives should be crafted to expand employment through support for successful, locally based firms.”

Whether “initiatives” equates to incentives is unclear. But regardless, special tax favors and the like apparently are not what job-engine entrepreneurs are seeking.

Rather, they are looking to bigger-picture ways to grow their businesses, such as reform of the state tax code and better access to capital.

At least that was the consensus of businesspeople who attended a conference in Columbia in April when the preliminary results of the study were unveiled, according to Garry Powers, director of economic development initiatives for CTC Public Benefit Corporation.

“Those were the two biggest concerns,” Powers says of the entrepreneurs naming tax reform and working capital.

CTC is a national nonprofit that promotes public-private economic development partnerships “involving government, industry and academia,” its website says.

Released Thursday, the USC study features some familiar names in the realm of public involvement in the private sector.

Doug Woodward, director of the Moore School’s research division, headed up the study. In South Carolina, Woodward is perhaps the most widely retained and most frequently cited academic in economic development matters.

The state Department of Commerce and New Carolina were partners in the study, it says.

Also known as South Carolina’s Council on Competitiveness, New Carolina is a mostly publicly funded nonprofit that promotes economic development in the state through the formation of clusters, or groups of businesses in the same industry.

CTC Public Benefit Corporation also was a partner in the study.

Exemplifying a tangled web among players in the state’s economic development efforts, Powers’ previous job was manager of strategic research at the Department of Commerce, his CTC profile says.

The study cost about $55,000, according to New Carolina director George Fletcher.

Nearly three-fourths of that money came from public sources.

Those, Fletcher says, were a $27,000 federal grant and $13,000 in matching funds from SC Launch, a venture capital program that receives $6 million per year in state support via tax credits for contributions to the entity.

SC Launch is an affiliate of the S.C. Research Authority, a state-created and state-controlled technology and real estate development/management firm.

AdvanceSC, a limited liability company Duke Energy formed to support economic development in Duke’s South Carolina service area, provided another $15,000 in matching dollars for the study, Fletcher says.

Seeking to identify the companies and industries that have spawned the most new jobs in South Carolina in recent years, the study focuses on the years 2004 to 2008. It is based largely on an annual census of South Carolina businesses.

A 35-page report on the findings does not explain why 2004 was chosen as the starting point, or why the review did not include 2009 and 2010.

(Click here to read and download the report from the USC website.)

The key findings include:


  • Companies employing fewer than 20 people account for 26 percent of total employment in South Carolina but they produced more than 50 percent of the state’s job gains during the review period.



  • Although small businesses were the main source of job growth, “a select group of high-impact firms that are larger than 250 employees have been especially successful in net employment generation.”



  • Most high-impact firms in the state are based in South Carolina, and just 2.7 percent of those “contributed 66.8 percent of all net employment gains.”



  • South Carolina’s biggest job-generating enterprises are mainly in urban areas but can be found across the state, including in economically distressed areas.



  • The state’s most prolific job creators are concentrated in professional and technical services, construction and building-related industries, machine tool products, distribution services, plastics, processed metals, and automotive products.


A few of the ones cited in the report are Fluor-CDM Space Services, an engineering firm in Greenville; Amick Farms, a poultry products supplier in Batesburg-Leesville; and Contract Environmental Services, a scientific and technical consulting company in Easley.

The word “incentives” is used in the report only once, but in a context that some observers might find unusually frank in light of the partners in the study.

Its introduction says “public policy is perceived to favor large companies,” because the economic development efforts that often receive the most attention in South Carolina center on courting out-of-state companies.

“Ribbon-cutting ceremonies for new plants with the promise of hundreds, if not thousands of new jobs, often get headlines in the press and photo opportunities for politicians,” the introduction says. “This so-called ‘buffalo-hunting,’ however, can be controversial. The incentives used to snare the buffalo are often seen as favoritism and an attempt to ‘pick winners.’”

In the very next breath, though, the report says South Carolina has been remarkably successful at this economic development sport: “Incentives have helped land trophy investments that include BMW in the Upstate region, Boeing in the Lowcountry and Amazon in the Midlands.”

The study also says that South Carolina excels in small business job creation, but struggles when it comes to start-ups growing into large, thriving companies.

“A significant challenge for South Carolina is growing small enterprises that become successful large firms that maintain local headquarters and hire top managerial and technical talent,” the report says.

Powers, the CTC economic development director, says the study was meant to provide information, not policy recommendations.

But in response to it, he says the Department of Commerce already is acting to establish a “small business portal.”

“They’re designing and building that now,” Powers says. “It’s basically to help small businesses find the resources they need.”

Reach Ward at (803) 254-4411 or eric@thenerve.org.

Incentives