Jobs “Created,” But at What Cost?

This N&O article, which describes how North Carolina state government is now subsidizing jobs paying below-average wages, should come as no surprise.

During a recession, politicians eager to make it appear they are “doing something” about job creation get more and more desperate.

A significant side of the story that goes untold, however, is the actual cost of jobs being subsidized. For instance:

The city of Durham and the state awarded ACW $120,000 in incentives in January after the company said it would open a manufacturing plant and create 155 jobs. The average annual wage for the jobs is $33,457, well below Durham County’s average of $57,772

But the cost to employ those 155 people isn’t just the $33,457 in salary, it also costs the $120,000 in incentives being granted by the government. That $120,000 needs to be removed from the economy in order to award it to the politically-connected company that was able to curry enough favor with politicians to acquire the handout. So that $120,000 is no longer available for investment that would have created other jobs.

Moreover, when government gets involved in granting favors to specific companies, the market process of allocating resources into the hands of those entrepreneurs who can most efficiently create goods and services to satisfy the needs of consumers is distorted. This market distortion disrupts the wealth creation process, and society is left less prosperous than it would have been otherwise. And those at the margins of employment and lowest skill and income levels are always most severely affected by stagnant economic growth.

North Carolina should stop politicizing the economy and allow the complex market process to proceed without disruption. The end result would be more, and higher paying, jobs.