Corporate welfare and Arkansas’ quality workforce shortage

by Jacob Bundrick ([email protected]) 187 views 

Editor’s note: Jacob Bundrick is a research associate with the Arkansas Center for Research in Economics (ACRE) at the University of Central Arkansas.

Opinions, commentary and other essays posted in this space are wholly the view of the author(s). They may not represent the opinion of the owners of Talk Business & Politics.

A region’s workforce is vital for economic growth. Yet, with such a consensus being drawn around the importance of the workforce, it is incredible to find that Arkansas has a shortage of qualified, skilled job applicants.

Why does the state find itself in this position? One reason is that the state’s economic development efforts often focus on providing corporate welfare rather than equipping residents with the necessary job skills.

Economic development efforts, like any other use of resources, have opportunity costs. Tax breaks and subsidies seem like “free lunches” to the firms that receive them, but those tax breaks and subsidies represent money that could have gone towards other programs. This money could have been left in tax payers’ pockets, spent on K-12 teachers, or used for a variety of other measures.

The recent call to action for adult learners from ArcBest Corp. president and CEO Judy McReynolds only highlights the state’s shortage of formally educated labor as an opportunity cost of cronyism. Arkansas spent money on subsidies when it could have spent money on increased education. As a result, McReynolds notes that the shortage of educated labor is a “challenge” to not only her firm, but the Arkansas business community as a whole.

In an effort to address this matter, the state government has issued a plan called Closing the Gap 2020, which will focus on raising the post-secondary education attainment rate in Arkansas. Based on job projections, the government has determined that Arkansas has a shortage of approximately 63,582 bachelor’s degree holders and 73,535 associate’s degree holders. However, one cannot help but wonder how many degrees could have been attained if the state used tax payer resources to address the affordability of education rather than handing out favors through the good old boy network.

As an illustration, consider the opportunity cost of the Governor’s Quick Action Closing Fund (QACF). The state uses this fund to provide subsidies to firms such as Nordex in Jonesboro and Hewlett-Packard in Conway. Proponents of the QACF argue that the fund is a vital tool for recruiting business to the state, and, therefore, a valid use of tax payer dollars. But a close look at QACF accounting reveals that seven of the 10 largest beneficiaries have failed to live up to job creation promises.

Imagine, instead, that the state used the $156,252,000 allocated to the Quick Action Closing Fund to pay for bachelor’s degrees. Based on the University of Arkansas’ 2015-2016 cost for tuition and fees, the QACF could have paid for 4,583 bachelor’s degrees. By the same token, the QACF could have paid for 3,961 at the University of Central Arkansas, 4,852 at Arkansas State University, and 6,056 at Arkansas Tech University. This one incentive program alone could have paid for 6.2% to 9.5% of the state’s education gap in bachelor’s degree holders.

How many more high-paying jobs could Arkansans fill if they had the appropriate educational credentials? How many more firms would be attracted to the state if Arkansas’ educational attainment rate was raised? What would the state’s per capita income rise to if Arkansans were more educated? How fast would Arkansas’ economy grow if we focused on providing a better education?

Arkansas’ state government is more than willing to hand out tax breaks and subsidies. But what have we missed out on by spending our resources on financial incentives for only a select few firms? Are subsidies and tax breaks for firms who often fail to provide promised jobs the best use of tax payer money?

It is difficult to say “yes” when both Arkansas’ business and government leaders are concerned with the lack of formally educated labor in the state.