Wednesday, October 7, 2009

Incentivizing poverty

It appears that North Carolina is preparing to pay economic incentives to a company that will provide 375 jobs that pay wages near the poverty level.

The Raleigh News & Observer reports
A Roxboro parachute manufacturer is on a hiring binge to fill 375 jobs and meet a major order for the U.S. Army.

North American Aerodynamics plans to increase its work force from 45 people to about 420 by next year to rush out parachutes for use in Afghanistan. It is investing $900,000 for a new factory.

The creation of jobs on that scale during a recession is so unusual in Person County that the company qualified for as much as $600,000 in state and local incentives, although the jobs will pay considerably less than the county average. The average wage will be $23,834, well below the Person County average of $31,824.
The poverty threshold this year for a family of four is $22,050. If the average wage is $23,834, it is very likely that some of the jobs will pay less than the poverty level. Even at $23,834, four-person households with no other income would qualify for food stamps, free school lunches and breakfasts, subsidized medical care, and the Earned Income Tax Credit.

The news story indicates that the company will need roughly five years to fulfill its contract. Once that contract ends, the extra jobs could well be gone.

With alarmingly high unemployment and only the faintest signs of economic growth, North Carolina needs jobs. Also, jobs need to be available at different skill levels. Nevertheless, $600,000 in incentives for poverty-level employment that may only last a few years is a bad investment.

1 comment:

Pino said...

It depends. If we are actually paying that company money out of the state's coffers, it's a bad investment. On the other hand, if it simply represents a tax break, then it's a fantastic investment.