Beating a (poorly paid) Dead Horse

We spend huge amounts of money here in CenLa every year in attempts to spawn economic development. We have certainly have had some luck with a few new businesses opening and hopefully more coming to town than leaving. Unfortunately, however, we’ve seen the ugly face of traditional economic development efforts.

Local efforts to attract business investment have come in the form of the subsidization of construction and start-up costs and exclusion from taxation for a decade or two. It has worked (somewhat) to attract companies to the area. The most touted local example of this is the opening of Union Tank Car’s facility at England Air Park. UTLX is a great example of that ugly face. They received millions and millions of state and local funding to assist in building their facility.

The logic behind justifying these tax breaks is that the greater good of jobs created by the new business outweighs the added burden to the local worker’s tax that he will have to pay to cover services provided to that business. There are, of course, problems with this line of thinking. For one thing, these agreements rarely carry any requirements that the jobs created actually be good-paying jobs. In the case of UTLX, there was an added caveat that required UTLX to employ a certain number of workers. Unfortunately, the missing part of that puzzle is the refusal of our local and state leaders to actually enforce the agreement. Union Tank Car has failed to ever employ the numbers the agreed to. They also then, in two separate occasions, have fired large numbers of workers in an effort to save money. This should have NEVER been allowed to happen.

UTLX entered into a contractual agreement with the citizens of Central Louisiana via our various local and state governments. They have broken that contract. Yet, they have not been forced to return the money they received. Basically they got to keep their hundreds of millions of dollars and you the taxpayer are stuck with the bill. Too bad for you…

There is a reason I am focusing on this particular company. It speaks to accountability. We demand accountability of our local officials, we even are beginning to demand accountability of our corporate leaders. But, we allow our system of Economic Development to roll forward year after year with zero accountability. This makes Louisiana a great place to do business. You can promise the people here the moon, soak them for millions of dollars, then when you choose not to fulfill your end of the bargain you get off scott-free.

This is one leg of the dead horse I’m beating today.

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Another is our local government’s refusal to enact fair wage legislation. The terms minimum wage, local wage, living wage, and livable wage have been thrown around for years. Nationally the living wage movement got quite a bit of attention about 10 years ago when local governments first began requiring employers to pay above the federal minimum wage. Naysayers predicted economic doom and swore it would lead to unemployment and price gouging of consumers. Of course none of that happened.

In fact, local minimum wages, living wages, and wage equity laws have been shown to have a net positive impact, especially in lower wage areas. Guess what, our entire region is a lower wage area.

I have worked for several companies over the years that operate in Alexandria and nationwide. Every one of those companies paid workers in CenLa less than they paid them in Baton Rouge, or New Orleans, or Iowa, or just about anywhere else because they could get away with it. I once worked as a manager of an Alexandria chain retailer. This store paid most of their workers minimum wage of within $1.50 of minimum wage in Alexandria. There was a corporate guideline that provided the manager with a range within which he could pay people. That same retailer paid workers in Baton Rouge between $2-4.00 more. They paid workers in New Orleans more than that, and workers other parts of the country generally made $10-15 per hour. Funny thing though, the prices on their merchandise were exactly the same in Alexandria as they were in Baton Rouge, New Orleans, or New York City. I know for a fact, this is the norm for most national chains operating in our community.

Another side of economic development that doesn’t get mentioned much is our local wage demographic. Generally businesses won’t publicly tell us why they choose not to locate in our communities. In the case of CenLa it’s because the majority of them think we are a bunch of uneducated, impoverished, bumpkins. It’s why we don’t have a Borders or Barnes & Noble. It’s why we don’t have a Best Buy. The biggest key in that puzzle, or at least the one in which they have a point is money. Our average incomes in Central Louisiana are among the lowest in the nation. This makes our region a bad investment for any but the lowest rung of retailers and restaurants.

For Alexandria to grow and offer the services to its residents that you find in every other metro area in the state, our wages must drastically increase.

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So this brings me to my whole point. We need local wage regulations. Ideally they would be done at the regional level with the Rapides, Grant, Natchitoches, Vernon & Avoyelles police juries enacting identical wage legislation. At the least the city councils of Alexandria, Pineville, Woodworth, Boyce, and Ball owe it to their workers to provide them with protection from predatory employers.

We need at the minimum:

A local minim wage: 50% above Federal Minimum wage would be an acceptable start and would still have us considerably below the national average of wages. The Republican theory against minimum wage is that no one really works for minimum wage anyway, so there shouldn’t be any opposition to this, right?
A Living Wage requirement for government workers, employees of government contractors, and employees of any company receiving public economic development funding (including tax breaks). The living wage should be set as a minimum of what it takes for a single person to live in CenLa. That means rent in an apartment, a car payment, insurance, food, utilities, etc. About 5 years ago the number was $14.50 per hour.
A Wage Equity law that requires businesses to pay local workers at a level at least the company-wide average for that particular combination of job and years experience. In other words, a Retail Clerk in Alexandria with 2 years experience should make no less than the average of all retail clerks in that company with two years experience nation-wide. This would require employers to pay their Alexandria workers the same as they pay their workers in the rest of the country.

The effects of such regulation are that the economy can grow because workers have more money. More money means more being spent locally which means these businesses make more in the process as well. More sales mean more tax dollars. Higer pay means fewer people in poverty. Fewer people in poverty means less crime…

Our State government will not do this for us. Especially not with Jindal in office. Our local leaders must take the reigns on this and move our community forward. This is a test — are these local leaders really out to protect and support the voters and workers or are they just out for a free ride.

Responses

Drew Ward

June 19, 2009

For some additional reading: http://www.epi.org/publications/entry/bp170/

Also some numbers on Alexandria:

That living wage of $14.50 per hour would equal $30,160 per year. The average wage for a full-time worker in Alexandria is currently $29,456 for a man and only $20,154 for a woman. And that is for people with full-time jobs.

The average per capita income is $16,242 which would be $7.80 per hour. Of course that number is not what most workers make especially as household incomes for Alexandria (two or more people generally) show that 21% are less than $10,000 per year, another 10% fall between 10,001 – 14,999, and an additional 17% don’t break 25k.

Again these aren’t people, they’re entire households!

If you took a family formula of a husband with a full-time job and a wife with a part-time job with both making the federal minimum wage of $7.25 (as of July) they would have a household income of $22,620. That is still below the national average, and more importantly it means that roughly 50% of our local population isn’t even making that much!!!

A good list of the numbers (bottom of the page) http://www.simplyhired.com/a/local-jobs/city/l-Alexandria,+LA

This is a ridiculous situation that must be the basis for any real economic development in our region.

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Ace Midnight

June 19, 2009

Drew,

Wow, it must have felt good to get that off of your chest. To address two points, and roughly in order:

I agree that all of the corporate welfare, well-intentioned though it may be, needs a “reboot”. We were in competition with several other communities (and I think that Alexandria and Monroe were the two finalists, or two of the finalists), and, obviously we had to pony up the best deal to get the facility. It is easy, with the benefit of hindsight, to say that we shouldn’t have been so generous/desparate. However, at the time, it was one of the most positive economic stories for Alexandria in recent memory.

Your other point is very valid – Union Tank Car didn’t live up to it’s end, so there should be stipulated damages. I like to think of myself as a smart guy – the risk period is in that 5 year window after the facility starts operating. I would like to see the company who is getting the benefit of all this largesse put up, at least a deposit, if not the entire balance of the stipulated damages under the contract, should the company be found (and it can be done inexpensively, and contractually by a private arbitrator or mediator) to have breached the agreement. This money can be placed in escrow or otherwise held in trust by a disinterested third party, and can be in some form of an interest bearing account or other instrument that pays interest to the company. Maybe provisions like this will make it impossible to win competitions, but the Union Tank Car example is one of a Pyrric victory, at best.

As far as the so-called “minimum wage”, I think that, above a certain point, a federally mandated minimum wage starts to hurt small businesses and teenage job seekers. I used to be completely against the concept of a minimum wage, but I have reconsidered over the years. As much as I hate complex regulations, I wish there was an option to allow smaller companies to get waivers on minimum wage regulations (perhaps those small enough to be exempt from OSHA regulations?) and also, for employees who are very young, or completely unskilled to be paid a “sub” minimum wage for a specified period or during a training period.

These two exemptions would create loopholes that could and would be exploited, however, they would go a long way to soothing the negative impacts of a higher federal minimum wage.

In a job-starved place like Alexandria, some sort of ambitious premium local “minimum wage” of 50% over federal minimum wage would just be a straight up job killer of epic, nay, Biblical proportions, in my humble opinion.

Your proposition to enforce a “company wide” average pay scheme, while noble in intent, is far too much government involvement in internal company affairs for my tastes. It would also guarantee no new facilities, branches or other locations in the area, unless you gave them a 5-year waiver on that requirement to get up and operating (so we’re back in the corporate welfare business again).

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Drew Ward

June 19, 2009

Ace I don’t quite understand your logic. You readily admit things are broken yet you never want to see them changed.

Mandating fair wages would not result in a loss of jobs or opportunities. Studies of communities with such regulations have proven so. Neither do they result in higher prices for the consumer. These claims are simply scare tactics used by the business lobby and it’s scary that you’ve bought into them.

There is also no way higher minimum wages would hurt teenage job prospects. In places where the going rate for burger flippers is $10/hr McDonald’s and Burger King don’t hire any fewer burger flippers; they just pay them more. And (gasp) those McDonand’s and Burger Kings are still very profitable.

As for exemptions, there shouldn’t be any. Like you said loopholes would be exploited. As for as small businesses, how would you define that? Under many definitions just about every business in Cenla could be deemed a small business. If they want workers they should be willing to pay them properly.

And a sub minimum wage should also never be allowed because minimum wage should be just that — the MINIMUM. Once an employee is trained and productive or has proven himself an asset to the company he should rightly be paid more than minimum wage. This idea we have locally that it’s alright for people to work their entire lives at minimum wage just because the law says it’s OK is asinine.

When I was in High School I worked for McDonald’s for a summer. I will never forget wanting to laugh when I was told that every 6 months you were eligible for a raise if you worked hard and had a perfect record. That raise? 25 cents. Wow I thought, after 4 years with this company I could make a whole dollar more! If performance and improvement are expected of employees, companies must be willing to pay for it.

Finally, you say that requiring companies to pay workers the same here as elsewhere would be too much government regulation. Exactly when and where do you propose the government regulate then? Government should keep its nose out of things that work, but when companies are abusing the system and robbing workers of their rightful wages through the equivalent of wage price fixing, I can think of no better time for government to step in and regulate.

Alexandria workers should not make less money for the same work just because they live in Alexandria. period.

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1. Ace Midnight
  
  June 19, 2009
  
  I hear your frustration, man. I am sympathetic to those who are at minimum wage, or just above it. But I ask you, assuming a competitive marketplace, where do the higher wages come from? If they have to increase prices to cover them, those costs are passed on to the consumer of the product or service (as are all forms of taxation). If the company paying the higher wages (and/or higher rates of benefits packages) can’t raise prices because of competition in the marketplace, and the company ceases to be profitable, it will go out of business. At the very least, profits will be reduced and the owners/stockholders’ income and asset values will go down.
  
  The answer is – work at minimum wage just long enough to finish school, or otherwise get qualified for a higher paying job. That’s what most people do. I don’t have a problem with adjusting minimum wage, periodically, to keep up with inflation, but the idea that we’re suddenly going to increase the labor costs, in the interest of “fairness”, of Wal-Mart and McDonald’s (and many, many others) by 50% and that money will just fall out of the sky is fantasy. The result will be, lost jobs (possibly long-term), increased prices, damaged companies, or a combination of all three. It’s simple mathematics.
  
  Reply
  1. Drew Ward
    
    June 19, 2009
    
    Ace Studies show (and anyone who has shopped at a Wal-Mart or McDonald’s in a higher wage city has seen) that when lower-end wages are higher the cost is NOT passed on to the consumer.
    
    http://www.epi.org/publications/entry/bp170/
    
    That document above discusses this.
    
    Also, (and I’m glad your education has been possible and has paid off for you) many people — no MOST people cannot go to school, much less finish school and then get a better job.
    
    If you look at Alexandria’s demographics you see the following:
    
    Education
    Less than 9th grade 10%
    9th to 12th grade, no diploma 18%
    High school graduate 29%
    Some college, no degree 20%
    Associate’s degree 3%
    Bachelor’s degree 12%
    Graduate degree 8%
    
    Now, if minimum wage jobs were a temporary status while they finish school then why do only 23% of our citizens have a college degree?
    
    The fact that 20% have some college shows that they have tried but most likely economics of the situation have not allowed them to finish their degrees.
    
    Add to that, there is nothing in our legal structure that requires an employer to pay more because you have more education. Kentucky has this and it has worked wonders there to increase wages and productivity, and also to encourage its citizens to attain higher levels of education.
    
    Sadly in CenLa companies think it’s perfectly OK to require applicants to have a bachelor’s degree and to then pay them $25k a year.
    
    Your simple math is not simple, it’s simplified to leave out 90% of the equation. Companies actually make more money when workers are paid more because there is more money to spend in the community and thus more opportunities to sell their goods.
    
    If your logic were correct New York, Houston, Los Angeles, for that matter Europe would not exist because paying workers living wages would have long ago destroyed the economy.
    
    Reply
Drew Ward

June 19, 2009

One final thing — I never implied that we shouldn’t give money for economic development or that we should not have provided the support to Union Tank Car that we did. However that money should be truly contingent on meeting the terms of the agreements.

In UTLX’s case we should charge them for every worker they did not hire, and we should have billed them for each of the workers they laid off (and maybe given it to those workers). Had we made it less economically viable for them to screw their workers, those people would still have jobs and Union Tank Car would certainly have 800 workers (or whatever the original number was supposed to be).

And if in a case like theirs, a company like UTLX says they’ll close the doors and pull out, fine. We build the factory, we simply take control of it to recoup our investment and then turn the whole thing over to employee ownership.

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Lamar White, Jr

June 21, 2009

Drew, you know I have mad respect for you and your perspective. But I have to disagree with many of your assumptions: With respect to UTLX, hindsight is 20/20, and clawbacks should have been an essential component of any agreement. But, despite their inability to meet benchmarks and the bad timing of the national recession, ULTX pays well, particularly for this market. That said, I think we should be more focused on incentivizing the diversification of our workforce; instead of allowing ourselves to continue to be reliant on manufacturing and agri-business, we should aim to compete for knowledge-based jobs (which makes LSUA all that more important).

Also, we do NOT spend massive amounts of money in Central Louisiana on so-called corporate welfare.

I thoroughly empathize with your argument for living wage legislation, but this has to begin on a federal level, not locally. We would be shooting ourselves in the foot and undermining our competitiveness if our local government attempted to interject itself in these issues.

This is a national problem, not something to be criticized provincially or solved merely on the local level.

Yes, our per capita household income is abysmal, but we can’t legislate a quick fix; increasing income requires micro-economic changes that depend on federal changes.

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Rhonda Reap-Curiel

June 23, 2009

UTLX has received notice of clawbacks. They also pay for fire protection from the City through a contract. Perhaps one should seek information before assuming knowledge he does not possess.

Lamar is correct in that Central LA is not known for handing out dollars under the corporate welfare plan.

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Lamar White, Jr

June 23, 2009

To be clear, I don’t think it is productive to pile on UTLX. They are not the only company in the nation having to cut back because of the recession.

But I think Drew’s post reflects a widely-held perception that we have not done enough to ensure they meet the deliverables spelled out in the agreement.

The real question, however, is can we afford to kick a company when it is down? UTLX is not a retail or light industrial employer; they provide good, middle-class jobs with benefits, something, unfortunately, that we don’t have enough of around here.

Rail freight, in particular, is directly tied to the production of the overall economy, and right now, nationally, rail freight is in a slump. When manufacturing production is down, rail freight is down.

Ironically, commuter rail ridership is up because of fuel prices (which are expected to go back up to $3 and $4 a gallon this summer).

Thanks for your comment, Rhonda. I seem to remember the notice of clawbacks making the news a few months ago.

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Rhonda Reap-Curiel

June 23, 2009

Guys – there is failure on all accounts to actually meet what the CEA states. For instance, did either of you know the State actually missed the first payment on bonds issued for the project? Did either of you know the State failed miserably to provide for proper funding in the initial ramp up for training and assessment of employees? I will be the first to say they company is not meeting its hiring goals. How can they when DOW closed 5 plants alone at the end of the year? DOW happens to be one of their main customers.

As already stated rail freight is down. It doesn’t take a rocket scientist to figure this one out. A simple drive down I-49 past the UP switch yard to see a barren yard is an obvious indication.

Our per capita income has been steadily rising over the past 10 years. Additionally we have gone from 7% manufacturing base to 13% manufacturing base as a result of expansions and the recruitment of new industry to the area. This 6% increase has helped to raise the per capita income level. Our primary employment base remains government and service based industries. Fortunately the government tends to pay well and have good benefits. Unfortunately most service related industries do not. The exception here is healthcare.

Central Louisiana lost a knowledge based industry when McKesson was purchased by Parata. The combination of manufacturing and software development that was taking place at that facility was a huge loss for us. As a result we have been able to make changes to State incentive programs to assist in keeping companies when they are purchased by out of state firms.

There is no easy solution for solving the livable wage issue. The simple fact has already been stated. Companies in Central Louisiana want employees to be educated but still want them to be paid at high school degreed levels. These same college educated persons can make more money in almost any other area of the State. The exception being the Northeast (Monroe) region.

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Drew Ward

June 24, 2009

Again, I’m not saying we should not have been of assistance to UTLX (nor any other company). Rhonda I’m glad to hear that moves have been made to recoup the public investment. I only hope they are of a scale that is relative to the company’s lack of commitment to hiring the number of workers agreed upon.

I understand the economy is lagging and certainly that must be taken into consideration. However when companies enter into a contract with the taxpayers they must be willing to fully uphold their end of the bargain no matter what the economy does or face the consequences.

I would only ask this of the executives who decided to cut those hundreds of jobs last year (days before the workers were vested into the pension system): had the total money given to UTLX been divided by the total number of jobs they agreed to create, the for every worker laid off or not hired that money taken back from them, would it have still been so profitable to fire those hardworking people?

I doubt it.

Certainly the state should be held equally accountable and should be holding up their end of the bargain. I am glad “clawbacks” are occurring. But again, if that company only managed to hire 25% of the workers they promised, they should only be allowed to keep 25% of the money — nothing more.

I am all for spending public money to spur investment and economic growth. In fact I am probably more for it than most people because I recognize that when the market doesn’t support a community the way we need government does need to step in to facilitate that support and leverage the power of the whole community to help that community. However, I believe that the minute a single taxpayer dollar is spent on private industry that a much higher level of scrutiny and fiscal responsibility must go into place. Tax dollars are valuable and come directly form the pockets of our workers and property owners. They must be spent as wisely and efficiently as possible, and there must be absolute accountability so that if any party fails to meet their side of an agreement those funds are returned.

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Rhonda, Lamar and everyone else,

I did not expect this to become a UTLX centered debate. I meant only to point out a situation in which we have had a bad corporate partner and to say that accountability and very open transparency must be central in spending of our economic development dollars. There certainly is a conception that little has been done to recoup money from Union Tankcar. The reason for that is that the entire process by which companies are awarded public funds is very cloaked. I am surprised to hear of the clawbacks because although I read the Town Talk everyday I did not see an article on that (granted expecting the TT to cover local news is a stretch in itself). I commend those agencies who are seeking a return of their funding contribution. I again just hope the amount they take back is in line with the true number of jobs created.

My point is simply that if there were very active dispersal of information about who gets money, how much, under what terms, when and if they have to give it back, and what is being done to enforce agreements, people would feel much better about trusting their elected officials to spend their money. Until then, even when the actions of administrators are of the noblest thread, voters and taxpayers will be suspicious.

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Rhonda, you are absolutely correct that our service industry jobs do not pay well. You are a bit off on your statement about government and medical jobs here though. Although government jobs are among the highest paying in the area, a comparison would show that locally employees of public agencies are generally paid much less than they are in other parts of the state and considerably less than comparable positions pay nationwide. Ask Lamar…he’s not exactly raking it in working for Jacques.

I actually worked as a recruiter for the health care industry while in college and can tell you that our area has the worst reputation in the entire South for health care wages. Doctors and nurses and assistants make much much less than their counterparts outside of CenLa.

I can’t tell you how many times I spoke to doctors and therapists and such, told them about a job,told them about a facility, only to have them laugh me off the phone when they found out it was in Alexandria. HCA (Rapides and many ofthers) and Christus (Cabrini and others) have nearly a total monopoly on health care in our region and have worked together to collectively lower health care wages to improve their profits. I found that on average medical positions paid only about 40% of the national average here and about 50-70% of the state average at local hospitals. This not only lowers our per capita, but makes it difficult to attract and keep qualified medical professionals to serve our population.

It’s yet another example of companies trying to pull one over on the ignorant locals of Central Louisiana. Where as I don’t think we’re all ignorant, obviously someone in Nashville at HCA headquarters does, or at least thinks we’re not worth as much as workers in Tennessee or Alabama.

As also pointed out, much of our workforce is tied to service industry jobs. What I don’t understand is that if everyone recognizes that this is where the majority of local people work, and that these jobs pay considerably less than they should, they why is it such a bad idea to argue for local wage regulation?

Lamar I can understand your (and others’) concern that local minimum wage laws would hurt our ability to compete for jobs and businesses. But, studies of areas that have used such regulations have shown that this does not happen. And beyond that, if there are such bad corporate stewards that they would refuse to locate in CenLA because they can’t pay their workers $7 per hour, do we really want them?

I say no. Screw ’em!

We know our workers are getting taken advantage of. We know (let’s face it, we honestly know) that at the state or national level they don’t have a friend who will resolve this issue. If we don’t regulate wages to a fair level locally where change involves fewer people and is possible, then we are screwing our already screwed workers in a vain attempt to attract more businesses to the area who will also likely screw more of those workers.

I finally would ask this…if our current industrial jobs are so great, the try working them for a month. Most of them pay around $10/hr or less. Many of them require shifts that take place in the middle of the night. They are dirty, hard jobs. And even after a full week you have $400 (before taxes). Assuming they get most of their taxes back, that means those hard working locals with those quality industrial jobs have about $1500 a month to pay their rent, support their family, grab insurance, and somehow along the way contribute to our local economy? nah

Forcibly improving wages and improving local levels of education are more important to local economic development than any publicly funded project, any new housing development, or any new company locating here. If the regular working people of our community don’t have a chance within their means to improve their situation, then economic development is absolutely meaningless to them and will eventually fail to improve the community.

It’s not pretty, and it’s perhaps not politically correct, but it’s reality and our economic development efforts must include a solid grounding in the reality of the real poor workers of Cenla.

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