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Corporate Welfare / Doesn’t boost employment

Despite its popularity as a job-creation tactic, corporate subsidies tend to redistribute jobs from one community to another, not create new ones, says Milke. Last month, Kellogg’s announced it was shutting down a plant in southwestern Ontario and shifting some production to a company plant in eastern Ontario that had received millions in provincial support. “People see the obvious and supposed jobs created when politicians cut a ribbon and give money to a particular company,” he says. “What they don’t see is the competitor across town, across a provincial border or across international borders, that lays people off.” Sometimes governments are so desperate to bring jobs to economically depressed regions, they ignore obvious warning signs. In 2011, Ontario gave $7 million to a new company called Global Sticks, run by a former restaurant-supply salesman from B.C., who promised to create 130 jobs in Thunder Bay by reshoring production of popsicle sticks and wooden tongue depressors from China. The factory operated for six months before running out of money. It declared bankruptcy, owing $15 million to creditors. The plant equipment is to be auctioned off next month.

Companies have become well-versed in how to play governments against each other, says Silverman. In a typical scenario, a manufacturer that wants to move to upstate New York will ask Ontario and Quebec for bids, even if it has no intention of investing in those provinces. What’s more, governments that advertise the most generous deals are usually the ones that end up attracting the worst kind of investments. “When we talk to a company and it tells us it’s looking to go somewhere based on the incentives, it’s almost a red flag,” Silverman says. “What usually ends up happening is something bad. The company says, ‘We’re done here; we’re going to the next place.’ We want a company that’s going to come and stay for 20 to 30 years or more.”

Chosen excerpts by Job Market Monitor. Read the whole story at Why corporate welfare doesn’t boost employment – Business, Canada – Macleans.ca.

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