The Good, Bad, and Unknowns of Foxconn

I have resisted writing about Foxconn for a few reasons. For one, this economic development issue has gotten partisan in a hurry, and I try to stay out of partisan battles to avoid the risk of become a less boring writer and person. In addition, many have already done a nice job writing about the issue. The Wisconsin Policy Research Institute (WPRI) published a symposium highlighting different opinions on the subject. My own state representative, Gordon Hintz, wrote about it in last weekend’s Milwaukee Journal Sentinel. Or if you prefer dry analysis, check out the Legislative Fiscal Bureau memo on the subject. Of particular note is the break-even analysis on page 20. Despite this excellent work, I could not resist, so here is my take.

Jobs are good, and modern jobs are better. I hope Michael Lovell is right and Foxconn represents a “transformational moment” for Milwaukee and Wisconsin. Others, including the Governor, the President, and MMAC president Tim Sheehy have cited the potential for Foxconn to bring jobs and opportunities far beyond the factory itself. That is all good stuff. If the most optimistic projections are correct it is hard to oppose the benefit package used to lure the company.

We gave a lot to lure Foxconn. Break even in 2032-33! Not only is that a very long time to be made whole, it is a long time where something can go wrong and undermine the most optimistic economic impact projections. New technologies, automation, economic strife, international conflict, political scandals, and who knows what else could change the Foxconn calculus. I hope it does not, but it is a long time to assume things will go swimmingly.

What kind of jobs? The mean salary projections are decent. The technology looks amazing. But is the future of the Wisconsin and world economy factory jobs paying $55,000 a year? Are these jobs that can transform a region? Perhaps I come off as an elitist, and perhaps they can. But I am reminded of criticism I received when I was the research director at WPRI. We published a positive piece on the value of manufacturing to Wisconsin’s economic future, and a prominent business leader basically told us we were dead wrong in our analysis, calling us victims of our state’s tendency to underestimate Wisconsin’s needs and potential. That criticism still gnaws at me, not because it was unfair, but because I worry it was on point.

Lazy short-term thinking. We need jobs, so lets bring a company that has jobs to the state. Problem solved! I call this the housing project principle. People needed housing, so cities built housing projects to solve the immediate problem. Long-term the issues leading to the need for housing were not addressed, and the solution itself often created even more problems. I think the principle applies here.

What leads to innovation and the creation of jobs long-term? I argue it is investment in K-12 education and higher-ed. Though I am biased, I think there is tremendous need for increased investment in the regional comprehensive universities that educate so many of Wisconsin’s future residents, i.e. students from in-state who intend to remain in the state. We also need strong municipalities where a high quality of life is emphasized and enabled through appropriate levels of state support of local government. And yes, we need competitive tax policies.

In other words a comprehensive strategy can make economic development steady and stable. A strategy focused on luring companies will be both expensive and incomplete.   This is not to say Foxconn is a bad development. It isn’t. But any positives it brings will be minimized if the state refuses to invest in institutions that can make Wisconsin more educated, more innovative, and more desirable for people and companies.

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