Indeed, some of the highest-profile deals between manufacturers and U.S. states have a spotty track record of long-term job creation.
Boeing has shed nearly 16,000 jobs in Washington state since winning the largest share of a 16-year, $8.7 billion incentive package, and cut nearly 1,200 jobs in South Carolina after securing multi-million-dollar incentives there.
“States should always be skeptical of any job projections. That’s why incentives should contain provisions to limit the costs per job-year, and to claw back incentives if a company leaves,” said Tim Bartik, senior economist with the Kalamazoo, Michigan-based W.E. Upjohn Institute for Employment Research.
The WEDC, formed in 2011 as part of Republican Governor Scott Walker’s push to create jobs, helped negotiate the deal with Foxconn that offers $3 billion in total state subsidies.
The May audit also found the agency did not penalize companies even when it became aware they did not meet targets established in their contracts. It allowed one unidentified business to keep $1.4 million in tax credits after missing job-creation quotas and forgave a combined $1 million in loans to two businesses after the they missed job targets, auditors found.
“WEDC cannot be certain about the numbers of jobs created or retained as a result of its awards,” the state’s auditor, Joe Chrisman, said in his report.
Walker, who negotiated the Foxconn deal along with the WEDC, did not respond to a request for comment.
Wisconsin lawmakers this week raised questions about Foxconn’s commitment to job creation. The state’s memorandum of understanding with the company commits Foxconn to creating up to 13,000 plant jobs, meaning that number is a goal and not a minimum.
“The thing that is missing is if they don’t live up to the job creation on a short-term basis and hit the benchmarks moving out from there,” Wisconsin Senate Majority Leader Scott Fitzgerald, a Republican, told WISN-AM in Milwaukee.
Foxconn said in an emailed response to questions that its Wisconsin project is expected to create “tens of thousands” of jobs in the state but declined to say if it would commit to a specific number.
Some lawmakers expressed skepticism after the non-partisan Wisconsin Legislature Fiscal Bureau estimated it will take at least 25 years for the state to break even on its tax break even if Foxconn creates 13,000 jobs.
The payback period would grow longer if that many jobs do not materialize, the bureau found.
Under the deal with Wisconsin, Foxconn would pull in a $1.35 billion construction credit and benefit from $139 million in sales tax exemptions and $252 million in nearby highway improvements, regardless of how many it hires.
Only the projected $1.5 billion in payroll tax credits could drop based on hiring, pushing Wisconsin’s break-even point “well past” the projected 25 years, the report found.
Concern over Foxconn’s promise to create jobs is based in part on the company’s record around the globe.
In Brazil, government officials had predicted as many as 100,000 Foxconn jobs if the company expanded its plant capacity, but a new factory proposed near Sao Paolo never materialized, leaving the country with fewer than a tenth of the jobs envisioned.
Likewise, a multibillion-dollar factory in Indonesia never materialized, and Foxconn has yet to start construction on a $30 million plant promised in Harrisburg, Pennsylvania.