About 10 days ago, I posted a brief piece, “Questions about the Volkwagen USA Deal,” that questioned the wisdom of using $6 million in state subsidies to bring 400 high-paying Volkswagen USA headquarters jobs to Fairfax County. That question was the perfect segue into the second installment of my “Economy 4.0” series, which asks the core question, what exactly are we trying to achieve with economic development — job creation for the sake of job creation, or better places to live? As I expanded my arguments, what started as an introduction to an essay about the metrics of prosperity became a detailed case study. So I hived it off into a story of its own.
Here’s my argument in a nutshell: In a regional economy like Northern Virginia characterized by chronic labor shortages, the only way that VW can fill 400 new jobs is to bring 400 wage/salary earners into the region. While corporate VW will pay taxes and its employees will pay taxes, they also will require public services and infrastructure. Northern Virginia’s infrastructure, especially schools and roads, is already overloaded. Someone will have to pay a lot of money in up-front capital costs to accommodate the newcomers. Therefore, the creation of those 400 jobs is a mixed blessing.
Some might argue, well, those are very high-paying jobs. Surely those people will pay their own way. There’s no denying that the VW jobs are the kind of jobs that economic developers salivate over. At $125,000 per year on average, VW headquarters employees will earn twice the regional average and three times the state average. But we must consider two things. First, through the multiplier effect, those jobs generate another 100, 200 or maybe more retail- and service-sector jobs in the economy. That means even more people will move into the region — teachers, policemen, hair dressers, Seven 11 clerks, etc., who certainly will not be earning $125,000 a year.
Secondly, it is theoretically possible that governance structures and human settlement patterns in Northern Virginia are so dysfunctional that even jobs paying $125,000 on average do not pay for themselves! According to Virginia Employment Commission data, Fairfax County is projected to increase the number of jobs by roughly 250,000, or 21.9 percent, between 2004 and 2014, but population growth in the county has slowed to the 6.0 to 6.5 percent range. In other words, three out of every four new employees will work in Fairfax County but live somewhere else.
That’s the jobs/housing imbalance that Ed Risse is always warning us about. The result is more people crowding onto more increasingly overloaded roads and driving ever longer distances. How much will it cost to upgrade the transportation network to handle those additional employees, and how long will it take to recoup that cost in tax revenues? The fact is, we don’t know. No one is asking the question, so we clearly don’t have the answers. Absent hard data to the contrary, we have to consider the possibility that the Commonwealth of Virginia spent $6 million to subsidize Northern Virginia in an entirely self-destructive enterprise of digging itself into a deeper hole.
