1.8.17

SKEPTICISM ABOUT WISCONN VALLEY.

Jim "The Political Environment" Rowen is not pleased that there is not a passenger train to move techies between the Madison area and Pleasant Prairie.  He's right about that, but the failure of the train is a failure of its advocates to note that extending an existing service from Milwaukee to Madison increases the number of possible trips among intermediate stops.  That let a few Milwaukee radio talkers mischaracterize the extension as a new service for the benefit of lawyers and lobbyists.

But there's something in a longer Milwaukee Journal-Sentinel article that merits further analysis.
If Foxconn landed tomorrow, it would siphon tech talent from existing employers, leaving gaping holes throughout the region in one information technology department after another. Wage inflation would be inevitable, particularly for high-tech positions, as would be a new breed of long-distance commuter drawn from Chicago and Madison, who would spend hours every day on I-94, business leaders concur.
Foxconn will not be landing tomorrow, which will give real estate hustlers opportunities to plat and build new clusters of Executive Boxes and McMansions with Lake Michigan water mains, for the tech wizards who would rather not spend a second shift on the roads.  Not to mention, that some workers might be enticed away from Silicon Valley with the right pay packets and house prices.

That might not necessarily be a bad thing.
As disruptive as it might be, some cheer a rare opportunity to jolt the economic ecosystem.

“I say bring it on,” said Jeff Joerres, who retired in 2015 as chief executive of ManpowerGroup, a multinational Milwaukee-based staffing and recruitment service that matches job candidates with employers.

To dismiss Foxconn because it would cause disarray and inconvenience would relegate the region to status quo, “which is a pretty dangerous place to be,” Joerres said.
On the other hand, to attract such a different sort of business with massive tax inducements brings dangers in train.
Great for Foxconn, almost certainly, but not for most of the people of Wisconsin, Matthew Mitchell, a senior researcher with the Mercatus Center at George Mason University, says.

"With enough subsidies," Mitchell tells Reason, "you could get orange growers to relocate to Wisconsin."
Arguably, the parity formula that supports cheese prices as a function of distance from Eau Claire, Wisconsin, works the same way.  But I digress.  Although I'm no fan of factory-chasing subsidies, here we have an information technology company that seeks to locate somewhere other than Silicon Valley, or Greater Boston, or the Illinois Research and Technology Corridor, and the dominant strategy for a state that wants to get in on the action might be to offer some tax breaks.

It's less encouraging, though, to contemplate these investments as hedges against a future trade war.
The high public cost of each job is evidence the Foxconn project is not suited to area. "The last thing a region wants in order to prosper is a bunch of firms that aren't really suited for the region," Mitchell says.

Cato trade policy expert Dan Ikenson agrees. The Foxconn deal has less to do with creating prosperity in Wisconsin and more to do with President Trump's potential to crack down on trade.

"Foxconn is hedging against a U.S.-China trade war which it feels is increasingly likely," Ikenson says. "If it's stuck in Shenzhen snapping iPhones together and there is a trade war, they could be jeopardy."

Having a manufacturing plant in the United States would allow Foxconn to ship its goods to its American customers without the fear of being hit with tariffs says Ikenson.
We can produce smart 'phones in Wisconsin in a Foxconn factory.  Or we can produce smart 'phones in Wisconsin in a dairy.  The trade war will hurt dairy operators.

2 comments:

David Foster said...

"Foxconn is expected to require troops of high-end systems engineers who can operate robots"

I don't think that's a very accurate description of the likely job mix at this factory. It doesn't generally require "systems engineers" to operate robots, whatever the journalist means by 'operate'. I bet that the skill requirements for the majority of employees at this plant will be:

--able to read and understand written materials
--basic 8th grade math skills
--capable of cause-and-effect thinking
--drug-free
--shows up to work on time

....ie, the attributes expected of any skilled worker circa 1940, having nothing to do with any 'digital age' esoterica.

Stephen Karlson said...

Likely so, and I hear enough about Wisconsin druggies to fear that Foxconn will have the same staffing troubles as Warren Consolidated.