MEDIA RELEASE: Strategic public investments in key sectors improve effectiveness of North Carolina’s incentive programs
Incentives in “mediated” industries increase job creation
RALEIGH (October 8, 2012) – North Carolina’s economic development incentive programs could be made more effective through strategic public investments, a new report finds.
Due to high unemployment and a sluggish economic recovery, state leaders have lately been scrutinizing the effectiveness of the state’s economic development incentive programs in generating employment growth. These programs offer cash assistance to individual firms to induce investment and job creation in North Carolina.
According to a new special report from the Budget and Tax Center, a project of the North Carolina Justice Center, the state’s incentive programs could be more effective at job creation if these subsidies were attached to strategic public investments in targeted, growing sectors of the state’s economy. This process is called “mediation”.
The process of mediation helps the state’s incentive programs—both those designed to recruit new firms to North Carolina and those designed to retain existing firms within the state—produce meaningful employment growth within those industry sectors directly or indirectly connected to sector-specific, targeted, strategic planning, the report finds. Leveraging strategic public investments such as community college and workforce development programs promote more strategic—and more effective—industry retention and recruitment efforts.
“Given the prevalence of taxpayer-subsidized incentives in the midst of the current jobs crisis, it’s critical to make sure these programs actually work and produce the job creation they’re intended to create,” said Allan Freyer, a public policy analyst with the Budget and Tax Center and co-author of the report. “The good news is that we can improve the effectiveness of the state’s incentive programs by integrating them with strategic public investments in community colleges, workforce development programs, and special coordinating institutions like the N.C. Biotech Center, and doing so in targeted growing, high-wage industries.”
While North Carolina’s discretionary incentive programs (including JDIG and OneNC) succeeded in generating meaningful employment growth in both retention and recruitment projects from 1996 to 2008, incentives to firms in mediated industries yielded even better results, the report shows. In industry retention projects, firms in mediated industries (ie, those industries with sector-specific strategic investments) that received incentives created almost 30 percent greater employment growth than similar firms that had not received incentives in the same industries, the report said, while incentive-backed recruitment projects in mediated industries created an average of 27 more jobs per firm than were created in non-incentivized firms in the same industries.
The report finds that incentives integrated with public investments through mediation help drive positive incentive impacts – public investments that in turn make North Carolina’s incentive programs work better. Providing skilled labor and technical assistance helps industry-specific mediating institutions help create locational advantages for the state, giving firms cost-saving opportunities not available in other states and reducing their incentives to locate or move elsewhere.