The term “border wars” has taken on a new meaning for many states and cities across the United States that have been engaged in the practice of job piracy. However, a number of areas in the country are shifting away from this practice of luring jobs over state borders after recognizing that it is inefficient and does little to fuel job growth. Wisconsin policymakers should learn from the experiences in those states and localities and from the remedial actions they are taking.
On July 9th Good Jobs First released a new report exploring the issue of job piracy, also called job poaching, which wastefully exhausts economic development subsidies without incentivizing new job creation. The report, “Ending Job Piracy, Building Regional Prosperity,” provides examples of failing models of job piracy, including the border war that has been raging between Missouri and Kansas.
Missouri legislators have gradually come to the realization that job piracy is a zero sum game that is wastefully exhausting the economic development resources of both states. As a result, they have called for a “cease fire” by passing a bill to refrain from subsidizing Kansas companies that relocate into Kansas City’s eight Missouri counties, under the condition that Kansas passes a reciprocating bill within the next two years. Before this tentative agreement was reached, the “border war” had numerous adverse consequences for both states, including:
- Causing thousands of jobs to move in both directions across the border, while yielding little to no new job creation for either area;
- Forcing residents to endure even longer commutes to work; and
- Decreasing each state’s tax revenue (costing the two states an estimated $217 million over a 5-year period).
Wisconsin can expect to experience similar outcomes if state lawmakers continue their efforts in luring Illinois business across the state border with financial incentives. Governor Walker has been clear about his goal of moving Illinois jobs to Wisconsin through initiatives such as the new state manufacturing tax credit and the launch of the Milwaukee 7 effort to recruit Illinois businesses. However, despite the Governor’s repeated assertions that “Wisconsin is Open for Business,” reports show that the state is still 27,700 jobs away from returning to its pre-recession job level and was ranked 35th among the 50 states for job creation in a Quarterly report released by the Census Bureau in April 2014.
The new Good Jobs First report illustrates it is possible to establish a cease fire in border wars and situations of job piracy that is both economically and cost beneficial to everyone. For example, local governments around Denver Colorado and Dayton Ohio have created and implemented regional anti-piracy agreements that prohibit the direct solicitation of businesses located within the metro region. Wisconsin’s state and local policymakers should work towards implementing similar principles to promote regional prosperity and bring an end to the wasteful luring of businesses between our neighboring communities.