Create jobs, don't poach them, Illinois commerce chief says at 1871

By Cheryl V. Jackson

Little is gained in terms of employment from luring companies from other states, and more emphasis should be put on nurturing and developing entrepreneurs, the state’s top commerce official said.

“It’s that kind of activity, rather than trying to lure jobs from other states, that will drive economic development,” Adam Pollet, director of the Illinois Department of Commerce and Economic Opportunity, said during a program at 1871 showcasing international entrepreneurs.

“You can go back 10 years; the net change in employment due to relocation is less than one-10th of a percentage point,” he said Thursday. “We can get caught up in a lot of ‘How do we compete with other states?’ for a zero-sum gain.’’

The comment wasn’t a denouncement of the Economic Development for a Growing Economy (EDGE) lure/retention tool that allows businesses to claim credits against corporate income tax liability in exchange for jobs and investments in the state, said commerce department spokesman David Roeder.

“It is our primary tool not only for bringing companies in from outside of Illinois, but also to keep our companies here and to keep them growing," Roeder said. "States are doing everything they can to raid the jobs of other states. Illinois is a big target. So it has been a good way for us to counteract that."

To qualify for EDGE incentives, a company has to show it has viable options in another state.

The state is using the incentive program to keep 21-year-old All World Machinery Supply Inc. in Illinois, although it is moving from Harvard to Roscoe. It will retain 45 existing jobs and create another 15 jobs by fall 2015, he said. The company had explored moving to Wisconsin.

From 1999 to 2012, the state has pledged more than $800 million in tax incentives to about 300 companies. Nearly half of those pledges were made in 2011 and 2012. The large increase is partly because of the rise in the personal income tax rate, a factor in determining the value of the incentive.

Most of those deals are negotiated behind the scenes between the state and companies. As the economy improves in the wake of the recession, Illinois has used its EDGE program as a defensive weapon to keep companies from moving to other job-hungry states also offering incentives.

Lawmakers have criticized the department for approving deals that allow companies to claim incentives without creating a single job. Some deals also allow companies to lay off workers, a practice called "normal attrition."

There is no correlation between state tax policy and job growth, said Ralph Martire, executive director of the Center for Tax & Budget Accountability, a state policy research group.

“The vast majority of net new job growth comes from new business, and new business comes from people already in the state,” he said. “Relocation is not where job growth comes from. It’s a bit of a loser game. If Illinois gets 500 jobs from Wisconsin, you can bet that three months later, Wisconsin is going to take 300 jobs from Illinois.”

Martire said investment in K-12 education and infrastructure is the only way to drive economic growth.

According to an Illinois Innovation Index report issued last year, the state had a net gain in employment in 2012 through relocation but lost slightly more companies than it attracted. Companies that relocated to Illinois were larger on average than those that left, resulting in a net increase of more than 1,400 jobs in Illinois — relatively small compared with the state’s employment base of nearly six million, the report said.

A total 275 businesses with a combined 7,957 employees moved to Illinois in 2012, while 283 companies with a total of 6,542 employees left the state.

That same year, entrepreneurs created 22,351 new businesses in metropolitan Chicago; but the share of new enterprises, 0.048 percent of the 470,096 businesses overall, was slightly below other metro areas, the report said.

(The Houston area had 22,521 business starts out of 352,764 businesses – 0.064 percent; the Dallas area had 19,521 business starts out of 316,981 businesses – 0.062; the New York area had 29,125 starts out of 526,104 businesses – 0.055; and the Los Angeles area had 35,984 starts out of 578,008 businesses – 0.062.)

Pollet said the state’s economic development plan includes marketing and promotion, and addressing access to capital, workforce training and development; investment in infrastructure; and technical assistance. He added there needs to be an effort at keeping immigrant science and technology students here after their graduations.

“We know that 25 percent of the graduates in STEM from our universities are on temporary visas. What are we doing to make sure these people stay here?” he said. “We have to let them know there are opportunities here.”