It has become evident that Governor Scott Walker has miserably failed in his promise to bring 250,000 jobs to Wisconsin and thus desperation has set in – as a failed Governor and the Wisconsin GOP mindlessly grasp at anything to show forward progress – and thus the Foxconn deal was hastily put together and numbers thrown about – but as of this moment – the basket of eggs that Scott Walker is counting on is not only empty – it is in negative territory.
The raw numbers being thrown around are $3 billion in tax credits, for 13,000 jobs, over 10 years. So let’s do the math – and see what the taxpayer subsidy for Foxconn CEO Terry Gou will be:
$3 Billion Dollars divided by 13,000 jobs = a taxpayer subsidy of $230,769 per job.
$230,769 per job divided by 10 years = $23,077 taxpayer subsidy per year, per job.
With a projected annual pay of $30,000 – required by law to be eligible for the tax credits, this means that Terry Gou’s cost per employee is $30,000 minus the Wisconsin taxpayer subsidy of $23,077 = $6,923 per employee.
With a required 2,080 hours to be considered a full time employee – $6,923 divided by 2,080 hours = Foxconn’s CEO Terry Gou cost of labor at $3.33 per hour.
The numbers used in the above were obtained from the draft agreement between WEDC and Foxconn – available by clicking on Foxconn Deal
MarketWatch does an even better analysis of the numbers and why Foxconn Terry Gou has outfoxxed mathematically illiterate and reactionary Wisconsin Politicians:
Subsidies equal $66,600 a year for each of the 3,000 initial workers
Foxconn’s announcement of plans for a $10 billion factory in southwestern Wisconsin is big news for those of us who care deeply about the manufacturing economy in the Midwest.
Still, the numbers on this economic development deal, touted as the largest in state history, don’t seem to add up on many counts. In fact, by one measure, the subsidy from Wisconsin taxpayers could more than cover the salaries Foxconn will pay its workers.
Here are three reasons that Wisconsin taxpayers should question this deal.
1. Worldwide, Foxconn 2354, -0.90% sold about $136 billion in goods last year while employing 1.3 million workers. That translates into labor productivity of about $105,000 per worker. That is pretty good given that most of the Foxconn factories are in developing counties.
But by American standards that is lousy. By comparison, on a per-worker basis, Wal-Mart Stores WMT, +0.69% sells about twice that value of goods each year. Moreover, Wisconsin-based Harley-Davidson HOG, -0.10% reported sales of $970,309 per worker in the most recent report.
That begs the question of just how will Foxconn, which has a profit rate at nearly double Wal-Mart’s, going to remain profitable paying workers close to three times the typical wage for a Wal-Mart worker, but who produce only half as much?
That is where the economic development math becomes worrisome.
2. Foxconn claims it is going to create 3,000 jobs, paying on average a little over $53,000 a year. That is about 50 cents an hour higher than the average wage in Wisconsin. However, that figure almost certainly includes all forms of compensation, including health-care plans. So in reality, these workers, who will make liquid-crystal-display screens for TVs and other products, likely will be paid less than the state average, in a state that boasts a 3.2% unemployment rate.
From the outset, then, there must be concerns about how this plant can find and keep its workers, without even considering the dubious claim that it can grow to 13,000 workers in just a few years.
But that isn’t even the biggest problem.
Foxconn bears no meaningful risk in this deal.
3. The state of Wisconsin, which has had a series of high-profile budget battles over the past few years, is promising a $3 billion incentive package for the plant. That is three billion dollars, paid to Foxconn over a 15-year period.
To put that into perspective, Wisconsin is promising to pay Foxconn the equivalent of $66,600 per employee, based on having 3,000 workers in the plant, for each of the next 15 years, while Foxconn is promising pay of less than $54,000 a year. By comparison, the much-touted deal last November to save 800 jobs at a Carrier factory in Indianapolis is costing Indiana $7 million over 10 years — or $875 a year.
There are many questions about this deal, but one thing is certain. This incentive package surely offsets any labor-cost issues they might face, since Wisconsin taxpayers are essentially paying their wages.
The Foxconn Deal is just another cover for a mathematically illiterate and reactionary Governor Scott Walker to continue his coverup of nearly 8 years of failure, and another bad deal for beleaguered Wisconsin Taxpayers.
See the ever growing list of Scott Walker failures at: The Scott Walker Failure Files