Where Are All Those Jobs?

March 25, 2014

Inside Insight

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toray industries

WHAT THEY WON’T SAY AT RIBBON-CUTTING CEREMONIES

Toray Industries’ decision to locate in Spartanburg County should be good news for South Carolina. Toray is an important supplier to North Charleston’s relatively new Boeing facility, and the company’s impending arrival announces South Carolina’s intent to be an important cog in advanced manufacturing and the aerospace industry. This agglomeration of industry is potentially a good thing.

But just how good is it, really?

As usual, state and local representatives were out front touting the benefits of a reported $1 billion investment and the creation of 500 jobs. Gov. Nikki Haley states that the investment and jobs “will be a real game changer for the Upstate and all of South Carolina.” However, it may not be as much of a slam-dunk as citizens are being led to believe.

Analysis of other similar development projects has found that for every 100 new jobs “created,” the actual long-run gain for local unemployed job-seekers is only seven jobs. Up to 16 additional jobs may be created for local residents who are voluntarily out of the labor force due to prolonged unemployment or other personal reasons. The remaining 77 out of every 100 jobs created go to workers that move into the area as new or existing firm employees.

A more realistic projection from the announced 500 jobs created by Toray Industries is that unemployed locals will see around 35 new job opportunities with the potential for 80 additional discouraged locals entering the workforce at some point. The actual long-run impact on Upstate residents is likely to be a more modest 115 jobs total. The other 385 positions will come from people who don’t currently reside in the area. Obviously, this effect on local job growth is much smaller than officials would like for you to believe.

Of course, a case can be made that the estimated 385 workers moving to the area is an economic benefit by itself. They will bring their families and more purchasing power. They will buy houses, purchase services, eat out and shop. However, they will also represent a significant increase in demand on already stressed infrastructures like public schools and roads. When economic development occurs, growth has to occur in other areas as well. Schools have to expand; roads have to be maintained and patrolled; and public safety districts are stretched. Think about the last time you sat in traffic on Interstate 85. It’s doubtful you thought to yourself, “We really need another three to six hundred vehicles rolling through here daily.”

In economics, it’s often said that the cost of what you get is what you give up. Little has been revealed about the entire incentives package used to lure Toray Industries to the Upstate of South Carolina. Both the state and Spartanburg County gave up something in the negotiations. There are direct and indirect costs related to economic development – especially when business location incentives are used. Perhaps we won or perhaps we did not. The answers will not be revealed at ribbon cutting ceremonies. And since the deals are kept secret – Freedom of Information requests invariably contain redacted numbers – the real answers may not be available for a long time to come.

Jonathan Keisler is a Ph.D. candidate in policy studies at Clemson University. He is also a policy consultant with expertise in economic development, local public finance, and state and local government policy.