19 November 2008

Paying for work

The provincial government's business department is tossing $325,000 at an international, private sector information technology company so the company can create 10 new jobs over the next five years.

$325 K

10 jobs

Five years.

Do the math.

That's 32,500 per job, or $6,500 for each position for each of the five years.

That's pretty much on par with the current administration's plan to develop new jobs in the province by subsidizing with public sector cash.

Within the past two weeks, the provincial government did the same thing with more public cash for a private sector manufacturing business and its facility on the Burin Peninsula:  $500 K for an extra 30 jobs and that's on top of the subsidies to get the workforce to its current level.

This use of public cash  - including low cost power - for the private sector mirrors what was done here in the 1950s and 1960s in the disastrous Smallwood industrial development program. 

It's an idea that was rejected in the 1992 Strategic Economic Plan.  There's good reason for it. Subsidizing private sector businesses like this doesn't have the greatest record of success, at least when it comes to creating sustainable, competitive industries.

No small irony that the money for a software company  - singled out by the auditor general - comes days after another software developer that relied heavily on public sector cash closed its doors.

Another recipient of provincial cash imploded just months after getting the cheque.

Major national cable and telecom companies aren't likely to fold, but they sure loved getting a massive cash injection from the provincial government to subsidize their expansion projects.  The total cost of that one hasn't been calculated yet.