Jobs Watch: Betting on the little guys

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Ben Jacklet
Wednesday, August 04, 2010
Can a state agency create jobs without wasting taxpayer money? Business Oregon is trying to do exactly that with its new BOOST program. The program approved its first two grants this week, and if you measure such things by jobs promised per dollar invested, this initiative would seem to have potential.

The companies that won the first two grants are Miles Fiberglass, a Happy Valley-based manufacturer of fiberglass components, and J. Lieb Foods, a Forest Grove maker of high-end processed foods and drinks. Miles Fiberglass received $50,000 to add 20 jobs to its current staff of 75. Lieb Foods got $25,000 to boost headcount from 60 to 70.

That comes out to $2,500 per job, which may strike even the most skeptical critic of government spending as an OK deal, given the sputtering state of our economic recovery and the rising costs of hiring new people, especially paying for health insurance.

Is it a good deal?

It’s certainly a better jobs-per-dollar ratio than the typical big-money taxpayer-subsidized project. The most egregious example in recent memory was the Cascade Grain debacle, which cost taxpayers $70 million in loans, grants and tax breaks while promising just 60 jobs and delivering none after the ethanol market collapsed and the company went bankrupt.

Even big-money success stories, such as SolarWorld and Genentech in Hillsboro, cannot compete with a ratio of $2,500 per job.  Solarworld is up to 1,000 jobs in Oregon, with the largest solar manufacturing facility in the nation. But the Business Energy Tax Credit (BETC) alone for the Oregon plan was worth $20 million. That comes to $20,000 in public funds (in the form of lost revenues) per job created. Other BETC incentives have produced far less in the way of jobs.

Admittedly, that is not an apples-to-apples comparison or even close. Multi-pronged incentives packages for attracting large, out-of-state companies are riskier and far more complex than putting a few thousand into local mom and pop operations. They often involve major property transactions and huge construction projects, which can boost the economy in different ways. They can also pay tremendous dividends over time (think Intel).

But given the scarcity of public funds and the daunting challenge of boosting employment in Oregon’s private sector, wouldn’t it make sense to invest frequently but moderately in companies that have proven themselves and are on the verge of expanding?

Helping companies such as Miles Fiberglass and Lieb Foods over the hump strikes me as a smart way to earn a better jobs return on state investments. What do you think?

I like the fact that the BOOST loans and grants target traded-sector businesses, since they bring fresh money into the region. My only qualm with the program is that it is limited to manufacturing, processing and distribution companies. It would seem to make sense to include technology businesses as well, given the vast potential in that sector.

Ben Jacklet is managing editor of Oregon Business.

 
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