New York Dodged an Amazon Bullet. Wisconsin Still Faces a Bazooka.
(Bloomberg Opinion) -- Amazon.com Inc.’s decision to ditch its plans for a New York headquarters doesn’t augur well for governments and corporations intent on using taxpayer money to fund job-creation schemes.
Many in New York, and on the left, are celebrating their victory over big, bad Amazon; they should spare a thought for the people of Wisconsin who are stuck with the boondoggle known as Foxconn.
From the outset, I warned that it was a deal with all the hallmarks of Terry Gou deal-making. Gou is the founder and chairman of Foxconn Technology Group, the Taiwanese electronics giant that makes Apple Inc. iPhones and almost every other tech gadget in the world.
From Brazil to Indonesia, and throughout China, Gou has a history of schmoozing with politicians who become enchanted by his zeal and are left with the belief that their beloved town will become the next iPhone City. My parody letter from Gou to President-elect Donald Trump served as a warning.
That didn’t stop Scott Walker, the governor of Wisconsin at the time, from becoming the latest leader to be hypnotized by the perceived greenbacks and glory from cozying up to Foxconn. The result was one of the largest corporate welfare packages in U.S. history, with Trump himself happy to take the credit.
What Amazon got out of New York pales in comparison to the largesse Wisconsin offered Foxconn.
In its Nov. 13 press release announcing the New York deal, Amazon noted that it would receive $1.525 billion of direct incentives based on the creation of 25,000 jobs — $61,000 each. That figure climbs when you consider other incentives and tax credits. The initial deal with Foxconn had Wisconsin dishing out as much as $1 million per job.
Amazon announced that it would invest $2.5 billion in Long Island with $10 billion in incremental tax revenue over 20 years as a result of that investment and the jobs created. Foxconn said it would invest $10 billion in Wisconsin to manufacture high-end LCD panels for televisions, computers, cars and other devices staffed by an initial 3,000 jobs that would rise to 13,000. Not even Terry Gou would be bold enough to claim they would assemble iPhones in the state.
That $10 billion figure should have been the first warning sign for the people of Wisconsin — including those responsible for looking after the interests of its citizens — because it’s more than Foxconn spends in five years worldwide.
Amazon’s $2.5 billion figure looked relatively sedate, but deserved close examination.
Also worthy of inspection is the salary claims each made. Amazon said its jobs would have an average salary of $150,000 a year. According to data compiled by Glassdoor, level II software development engineers at Amazon earn an average of $115,917 a year (going as high as $158,000), while warehouse associates pull in $26,775 annually. Remembering the law of averages, for every job paying $100,000, Amazon would need to create a job paying $200,000 just to maintain that magic $150,000 figure.
Over at Foxconn, the target was far more modest: just $54,000 a job — but that’s backed by as much as $1 million of incentives for each of them. The state’s economic development corporation, which handled negotiations, even made the unlikely claim that the project would create 10,000 construction jobs just to build the Foxconn factory with an additional 6,000 indirect positions.
If the truth of Foxconn’s Wisconsin plans hadn’t yet become clear, then a January admission by Gou’s right-hand man and key negotiator Louis Woo solidified reality: Instead of actually building displays in Wisconsin, which would have created blue-collar manufacturing jobs, the company would hire far less factory staff and turn their attention to research and development at the site. That proved what I had already warned: Plans for a U.S. panel factory didn’t make sense.
Austin Carr’s brilliant investigative piece for Bloomberg Businessweek rounds out the tale of Foxconn’s Wisconsin adventure.
“Interviews with 49 people familiar with Foxconn’s Wisconsin project, including more than a dozen current and former employees close to its efforts there, show how hollow the boosters’ assurances have been all along.”
With Amazon pulling out of New York, maybe some residents felt that they dodged a bullet. Yet 800 miles to the west, Wisconsinites are still looking down the barrel of a bazooka.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.
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