Why Government Job-Growth Initiatives Fail to Produce Results

The following is adapted from More Good Jobs.

When a city struggles to create jobs, citizens tend to turn to the government to fix the problem. Politicians then attempt to allocate tax dollars for economic development or pass laws and regulations with the intent of stimulating job growth. However, as voters and taxpayers, we have to be asking – how often do these initiatives work out?

Not as often as they should. While many, if not most, elected officials are well-intentioned and truly want to do what they can to help stimulate job growth, the traditional paths fail to create results promised when initial announcements are made. 

When we look at past examples of government initiatives and break down the go-to methods of economic growth, it becomes clear that not only do these approaches fall short, but the government might be the wrong entity to stimulate the economy entirely. 

The Problem with Government Initiatives 

First, let’s look at the traditional path the government takes to stimulate job growth: tax-dollar allocation and building properties. 

There’s a core problem we see on both of these paths: the common belief that it is possible to create new jobs from the top down. Politicians tend to see job growth as something predictable and under their control, so we often encounter what I’ll refer to as the Field of Dreams mentality, a nod to the 1989 baseball film starring Kevin Costner. Think, “If we build it—a factory, office building, etc.—the jobs will come.” 

At an abstract level, this sounds completely logical. The problem is that it doesn’t work in reality. Couple the “build it and they will come” belief with the short-term focus politicians have in order to impress voters before the next election cycle, and you have a recipe for a lot of impressive-seeming actions without substantial results.

Politicians approach the problem from this angle because that’s what they’ve done for the last fifty years, and it fits the mold of top-down behaviors that look good in a press release. However, they’re trying to solve today’s problem with an old set of tools.

A History of Failed Projects

You don’t have to look far to find examples of failed government job creation projects. One notable instance in recent years was the New York State Film Hub based in Syracuse. 

In 2014, Governor Andrew Cuomo announced with great fanfare that the $15 million in taxpayer funds being invested to construct a new facility would create more than 350 high-tech jobs by having a university-operated hub blend cutting edge nano-technology with film production. “Hollywood comes to Onondaga County,” Cuomo said. 

Yet, three years after opening, the gleaming 52,000 square foot building sat virtually empty, having been used for a few short projects, and never coming close to living up to the Governor’s hype.

In 2018, after failing to secure commercial tenants or traction with film projects, the state transferred title to the facility to Onondaga County for $1, effectively writing off the $15 million taxpayer investment in the ill-conceived belief that the government can create businesses and jobs by funding construction of a building – much less the larger film industry subsidy issue which corporate subsidy experts roundly criticize. “Every state analysis I’ve ever seen finds that taxpayers get back only dimes on the dollar from film production tax credits,” says Greg LeRoy of the D.C.-based corporate subsidy watchdog Good Jobs First.

Not only did the film hub project fail to create jobs, but it also showed how the cozy relationships between politicians and property developers have the potential for corruption to creep in. In this case, the film hub developer was the governor’s largest campaign contributor at the time and also the sole firm to submit a bid on the $15 million project. 

A More Effective Way to Create Jobs

Patterns of “build it and they will come” and tax-dollar spending are not unique to New York State. They are repeated all over the country with similar results. 

Politicians allocate taxpayer dollars to build a building in a heartbeat, but that effort does nothing to actually create jobs beyond the construction phase, nor does it have any impact on accelerating the launch of new startup companies. 

What does work?

Despite the poor record of tax-and-construction projects, politicians need not be the enemy when it comes to creating good jobs. When they take the long-term view and understand the needs of entrepreneurs, public officials can be strong allies. 

Most of them got into politics because they truly care about helping people, and if entrepreneurs like you help them see a better path to serve the community, some will get on board in ways that support job-growth ambition. 

Most importantly, with or without politicians’ help, job growth and change needs to come from the bottom-up, not from the top-down. Entrepreneurs understand far better than politicians what creates jobs. Therefore, we can use time and resources to most efficiently change our local economies. 

 

For more insights on how to transform local economies toward job growth in newer industries, you can find More Good Jobs on Amazon.

 

Martin Babinec founded NYSE-listed TriNet, a Silicon Valley cloud-based HR service, where he served as CEO for the company’s first twenty years. Relocating to his hometown of Little Falls, New York, he founded nonprofit Upstate Venture Connect, StartFast Ventures, and UpVentures Capital, all of which help grow, support, and invest in transforming Upstate New York’s economy toward job growth in the newer industries. As an independent candidate for New York’s 22nd Congressional District in 2016, Babinec also founded the Upstate Jobs Party (UJP) to influence political discourse on better solutions to grow jobs and reverse regional population decline.

 


Vote, then find your tribe to drive change that matters

As a newbie author, I am finding lots of exposure opportunities to spread the message of More Good Jobs through the expanding medium of podcasting.

Each podcast interview I’ve been invited to has been interesting and generated great discussion. Enough so that now we’re working on putting show notes on the More Good Jobs press section with the aim of helping our community dive right into the particular themes they’re most interested in.

With today’s election being top of mind for everyone, I’ll highlight last week’s MergeLane podcast with host Elizabeth Kraus. She pressed me on certain issues as no interviewer had done, including on topics that set up an interesting dialog about how we as entrepreneurs, investors and community leaders can do more than just show up at the voting booth if we want to drive systemic change.

The total podcast is about an hour long. The first half hour or so sets up More Good Jobs themes profiled in the book, along with Elizabeth sharing perspective about her view of startup community from being based in Vail, Colorado.

All good stuff, including Elizabeth pushing back a bit on my assertion around the difficulty of attracting VCs to invest outside the Magnet Cities known for being tech hubs.

However, the last third of the interview is where we start diverging from standard MGJ interview themes.

You can access the interview here:

Episode 36: Pre-Election Advice for VCs + The Value of Talent-Exporting Communities, with TriNet Founder Martin Babinec

The following show notes may help in navigating directly to the time in the interview for these political and cause related topics:

43:02 – What led to my deciding to become involved in the political realm, including running as an independent candidate for U.S. Congress in 2016?

46:34 – How can entrepreneurs and investors (who have lots of choices and competing demands) balance their professional ambition with a desire to bring about bigger change for a cause they believe in?

49:40 – What are the structural issues accelerating such polarization between our two parties? What can we do about it?

54:07 – Whatever cause we are passionate about, how do we go about building a tribe of like minded people that might come together to do something about it?

56:10 – What is one non-obvious thing every VC and entrepreneur should do before the election?

Here are some of the organizations and resources mentioned in the podcast:

Upstate Venture Connect – Non profit building startup ecosystem across Upstate NY (profiled in More Good Jobs)

Upstate Jobs Party – Independent body and PAC building voter and political engagement to increase Upstate NY’s talent retention and grow stronger communities

Unite America – Non profit leading advancements in political reform to drive structural changes in the electoral process

Right To Start – Non profit campaign to rebuild the American economy by unleashing entrepreneurial opportunity for everyone

Yes on 2 – ballot measure in Massachusetts for Ranked Choice Voting

Ballot Ready – Company that activates and empowers an informed and engaged electorate.

Many thanks to Elizabeth for an engaging interview that stimulated great discussion. I hope some of what we shared might stimulate more thinking around options we have to help bring about change we believe in, well after we leave the voting booth.


The Problem with Public Money Going to Private Companies

The following is adapted from More Good Jobs.

A long history exists of government funding that targets healthcare, environment, defense, or other societal needs. While it makes sense to allocate some public dollars toward research being conducted by colleges and companies, a grayer area creeps in when public funds go into commercializing a new technology or expanding production capacity, both of which become assets owned by a private company to grow their business. 

The attractiveness from a political standpoint is clear: let the government write a check to a company as part of an economic development effort to create jobs. But who really wins with these initiatives?

More often than not, the private company wins, the government comes out looking like they’ve made an effort, or nobody wins at all. But despite the public footing the bill, citizens like us almost never see real benefits. In fact, what is meant to be a major job-creating effort turns out to be a waste of money. 

The Government Can’t Pick Winners

The biggest problem with public money going to private companies is that it puts the government in the position of picking winners. 

History has shown us the government’s track record for picking winners is horrible. A recent paper from Columbia Business School and Princeton claimed researchers found no evidence that tax incentives given to individual companies increased overall economic growth. Furthermore, the study found that almost a third of total state economic development incentive spending “went to .0072% of new firms and 1.41% of all jobs created by those firms.”

Professional investors with their own money at stake have a hard enough time predicting which companies will grow. Even the best professional startup investors in the world pick more losers than winners. To expect a government bureaucrat to be able to outperform these investors is ridiculous. 

Publicly Funded Publicity Stunts

Putting politicians in charge of deciding which companies will be the beneficiaries of public support starts going down a slippery slope, with economic consequences that are rarely transparent. It opens the door for corruption, where instead of choosing the company best positioned to create jobs, politicians might give the benefits to a political donor or other special interest. 

At best, the results are that these efforts underperform and fail to create the promised number of jobs. At worst, they’re little more than a publicity stunt for the politicians and companies involved. 

When the government is in the position of choosing private beneficiaries without transparency, taxpayers aren’t shown the magnitude of tax dollars invested per job created or have awareness of any other alternatives that might grow more jobs. Instead, all attention is given to the ribbon cutting photo op with a collection of politicians vying for the opportunity to lay claim in saying, “Look at what I did for you.”

Often, it doesn’t matter to the politicians whether or not their initiative was successful, only that it reflects well on them. Suffice it to say, in this scenario, the public loses. 

Even Successful Companies Can Fail to Deliver Results

You might think, politicians simply need to choose the right companies to support, but even successful corporations regularly fail to meet expectations. 

For example, New York State under Governor Andrew Cuomo spent $750 million to build a solar panel factory to be used by Tesla, which had promised to create 5,000 high-paying, high-tech jobs upstate—3,000 of them in Buffalo. Yet the company has fallen short of its 2020 job creation goals. Worse, the state then lowered expectations from what was originally promised. 

According to the Albany Business Review: “A Vanity Fair story in August found the state quietly changed the requirements Tesla must meet in exchange for its $1 lease on the Buffalo factory. The requirement for 1,460 “high-tech” jobs at the factory was watered down to jobs of any type. An agreement to hire 900 people at the factory within two years of construction ending in 2017 changed to 500. And the timing for creating additional jobs was extended to 10 years after the factory was completed.”

This example shows that even when relatively successful companies are involved, government efforts often fail to create meaningful jobs in the numbers needed to help our communities thrive. 

It’s Time to Ditch the Top-Down Model

In the quest to create good jobs, public money going to private companies is not the answer. Tax incentives, government-built properties, and other benefits fail to produce results. These strategies have not proven their ability to create more good jobs at a cost that makes sense to taxpayers. 

Instead, when we look at the places where true, organic creation of good jobs has happened, we see that it hasn’t been fueled by top-down policies or tax incentives. Good jobs come from the bottom-up, in which the best job generating communities embrace innovators and attract young, educated workers. Local entrepreneurs and community leaders in these talent magnet cities foster environments in which startups and innovative companies can thrive. 

If more communities embrace a long term commitment to embrace these principles, we’ll have a chance to see tax dollars spent on more meaningful community investments – as opposed to the overhyped and underperforming ploy of putting our money into the coffers of private companies. 

For more insights on how to transform local economies toward job growth in newer industries, you can find More Good Jobs on Amazon.

Martin Babinec founded NYSE-listed TriNet, a Silicon Valley cloud-based HR service, where he served as CEO for the company’s first twenty years. Relocating to his hometown of Little Falls, New York, he founded nonprofit Upstate Venture Connect, StartFast Ventures, and UpVentures Capital, all of which help grow, support, and invest in transforming Upstate New York’s economy toward job growth in the newer industries. As an independent candidate for New York’s 22nd Congressional District in 2016, Babinec also founded the Upstate Jobs Party (UJP) to influence political discourse on better solutions to grow jobs and reverse regional population decline.