Musicmystery
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The numbers on this economic development deal, touted as the largest in state history, don’t seem to add up on many counts. In fact, by one measure, the subsidy from Wisconsin taxpayers could more than cover the salaries Foxconn will pay its workers.
Here are three reasons that Wisconsin taxpayers should question this deal.
1. Worldwide, Foxconn 2354, -0.65% sold about $136 million in goods last year while employing 1.3 million workers. That translates into labor productivity of about $105,000 per worker. That is pretty good given that most of the Foxconn factories are in developing counties.
But by American standards that is lousy. By comparison, on a per-worker basis, Wal-Mart Stores WMT, +0.04% sells about twice that value of goods each year. Moreover, Wisconsin-based Harley-Davidson HOG, -2.79% reported sales of $970,309 per worker in the most recent report.
That begs the question of just how will Foxconn, which has a profit rate at nearly double Wal-Mart’s, going to remain profitable paying workers close to three times the typical wage for a Wal-Mart worker, but who produce only half as much?
That is where the economic development math becomes worrisome.
2. Foxconn claims it is going to create 3,000 jobs, paying on average a little over $53,000 a year. That is about 50 cents an hour higher than the average wage in Wisconsin. However, that figure almost certainly includes all forms of compensation, including health-care plans. So in reality, these workers, who will make liquid-crystal-display screens for TVs and other products, likely will be paid less than the state average, in a state that boasts a 3.2% unemployment rate.
From the outset, then, there must be concerns about how this plant can find and keep its workers, without even considering the dubious claim that it can grow to 13,000 workers in just a few years.
But that isn’t even the biggest problem.
3. The state of Wisconsin, which has had a series of high-profile budget battles over the past few years, is promising a $3 billion incentive package for the plant. That is three billion dollars, paid to Foxconn over a 15-year period.
To put that into perspective, Wisconsin is promising to pay Foxconn the equivalent of $66,600 per employee, based on having 3,000 workers in the plant, for each of the next 15 years, while Foxconn is promising pay of less than $54,000 a year. By comparison, the much-touted deal last November to save 800 jobs at a Carrier factory in Indianapolis is costing Indiana $7 million over 10 years — or $875 a year.
There are many questions about this deal, but one thing is certain. This incentive package surely offsets any labor-cost issues they might face, since Wisconsin taxpayers are essentially paying their wages.
In a market economy, companies taking risk and hiring workers is a necessary ingredient to prosperity. That is not what is happening here. Foxconn bears no meaningful risk in this deal. All the risk and all the labor costs for the next decade and a half are borne by the beleaguered taxpayers of Wisconsin. This isn’t free-market economics, or making America great again. This isn’t even cost-effective socialism.
Voters might wish to ask just why each Wisconsin household is stuck with a nearly $1,200 bill to subsidize a company that is half as productive as Wal-Mart, and one-tenth as productive as Harley-Davidson.
This isn’t simply a bad deal. It is an over-the-top bad deal for Wisconsin.
Michael J. Hicks is the George and Frances Ball distinguished professor of economics and the director of the Center for Business and Economic Research at Ball State University in Muncie, Ind.
http://www.marketwatch.com/story/this-1-number-sums-up-why-that-foxconn-deal-is-over-the-top-bad-for-wisconsin-2017-07-28
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RE: Foxconn - 
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