Three Steps Forward and 1,927 Steps Back
By Dave Swenson
In a state still reeling from a great and persistent recession, any good job news is welcomed, but the fact remains Iowa is not producing new jobs yet, and there are concerns that recovery is still a long way off. January’s official jobs report last week found 13,200 fewer jobs in December 2009 than in November, and 40,000 fewer jobs than a year ago.
These are really bad numbers. Folks are hunkering down and preparing for a long and slow slog.
Given that news, it is gratifying to hear jobs are actually being created in Iowa. Just last week the Iowa Department of Economic Development awarded ConAgra $3 million in state aid for a plant expansion.
For that $3 million, ConAgra has promised to reward Council Bluffs, Iowa, with three new jobs. They are getting $1 million in aid per new job. Is it me or does that seem just a bit high? Not only are they creating three jobs, according to the terms of the assistance they must meet an hourly wage minimum threshold of $12.63 an hour, which works out to $25,000 a year and change.
The average metropolitan-wide manufacturing hourly wage in the Omaha-Council Bluffs Metropolitan area last year was $16.70, so Iowa is rewarding the firm for paying three people almost 25 percent less than the prevailing rate.
Oh, ConAgra had $12.6 billion in sales last year and 25,600 employees (plus 3).
But Council Bluff’s job growth giddiness was short-lived. Tyson, another major food producing conglomerate, announced it would idle 480 workers at its meat processing plant in the city. And to really drive the point home, John Morrell up the road 100 miles, announced that it would close its Sioux City operation and idle 1,450 workers.
If you are keeping score, the state is down 1,927 jobs in just one week, yet $3 million poorer nonetheless. Still, incredibly, folks tend to turn to politicians and political rhetoric to boost our economy. There is this pervasive sense that politicians and public money are the keys to prosperity.
As an example, Des Moines Register political columnist Kathie Obradovich last week noted that during his first term from 1983 to 1987 Governor Branstad was relatively successful in that the state added 131,000 jobs during his first term, about 87 percent of this campaign goal for job creation she calculated. To her mind, the Governor was quite good at creating jobs and a goal-setter like him might just be what the state needs to lead us into the future.
There are two things to take away from that conclusion. First, the columnist is unmindful of business cycles – in 1982 and 1983 Iowa’s economy was a complete basket case due to the national recession and the added stress of the farm crisis. As sure as day follows night, there were going to be more jobs in the state in 1987 than in 1983. That Branstad goal was the equivalent of predicting in January it will be warmer in July.
Second, unless Governor Branstad actually hired someone, he didn’t create any of those jobs. The economy did, and all former and sitting governors can possibly ever be are minor bit players in a very large economic stage. They are big and visible boosters, and they sling the public’s money wildly at times, but the economy creates jobs during periods of recovery, not them or their petty functionaries. They just like to take credit for them.
This is somewhat analogous to calling a winning ball team “my team.” You don’t score the points, you don’t do the training, you don’t play the game, but when the team wins it’s your win.
If you ask our political leaders if they do in fact create jobs, they will give you a play by play account of their winning seasons. They will rattle off plant openings, expansions, and plants that were saved from impending doom as a result of their efforts. They will talk about green jobs, wind energy, biofuels, small businesses, entrepreneurs, capital investment levels, and start-ups. They will tell you that they are instrumental in job creation and that state programs are essential to assuring the state’s future. They will tell you that things would have been so much worse had they not been at the switch.
It’s all talk. We’re down 13,200 from last month, 40,000 thousand for the year, and Council Bluffs and Sioux City just got hammered. There is nothing a politician or a state agency can do about that.
Except give a giant corporation $3 million to create three jobs, and have the audacity to call it economic development.
Dave Swenson is a long-time analyst of Iowa political, social, and economic issues. He is a staff research economist at Iowa State University and an extension-to-communities economics educator. He also teaches community and regional planners (those nefarious agents of totalitarian control) how to do economic things in their profession.