Business Insider

Workforce development aid is just corporate welfare

Peter Crabb: The Economy
Peter Crabb: The Economy

Workforce development is a hot topic among policymakers at both the national and state levels. The question is: Whose job is it to “develop” or train the workforce?

Workforce development programs are just another form of corporate welfare.

Candidates and leaders in both political parties are calling for more spending on worker training or educational subsidies for technical and vocational programs. Such proposals are championed in the name of economic growth. It is more likely that these programs just grow the bottom line of some businesses at the expense of others.

Corporate welfare is best thought of as any government support or subsidy of private business, such as a tax incentive. Numerous industries and business groups receive some form of assistance from either federal or state government programs. For many corporations, it is perfectly sensible to spend a portion of the annual operating budget on lobbyists and campaign contributions just to keep these preferences going.

Economic theory and evidence show this is tremendous waste for society.

The branch of economic study known as welfare economics shows how tax incentives, subsidies or other industry preferences result in an overall loss to the economy. In competitive markets without such preferences, sellers remain competitive by producing at a cost at or below the going price. Those firms that can’t will not be in the market.

In this manner, the free market allocates the going demand for any good or service only to those businesses that can produce it well — efficiently and at a reasonable price.

Corporate welfare messes this all up.

Tax incentives, subsidies or preferential treatment keep inefficient firms afloat, and increase the return to capital in industries where it is not needed. Businesses calling on government to spend tax dollars to train workers are simply asking the government for a subsidy. Further, if the government directs workforce-development funds to certain types of training, it will be giving preferential treatment to some industries over others.

Those corporations that want better workers simply need to pay better wages or train their employees themselves.

Don’t be fooled by the idea of workforce development. End all corporate welfare.

Peter Crabb is professor of finance and economics at Northwest Nazarene University in Nampa. prcrabb@nnu.edu.

  Comments