By putting up $378 million in cash incentives to attract Nissan, Mississippi has made itself beholden to a large overseas employer -- perhaps even against the interests of its own citizens.
The United Auto Workers’ push to organize the 5,600 employees at Canton’s sprawling Nissan plant caught the attention of the New York Times this week:
The unionization battle has badly divided workers at the gleaming white Nissan plant here, which stretches four-fifths of a mile along Interstate 55 and produces 450,000 Altimas, Sentras and other vehicles a year. The pro-union forces say many workers are backing the U.A.W., while anti-union workers insist the union has little chance of gaining majority backing. Some anti-union workers wear T-shirts saying, “If you want a union, move to Detroit.”
Both the union and management have their own interests at heart. The UAW is fighting for survival after losing most of its membership due to shifting economic and political tides. Meanwhile, Nissan is busy protecting its bottom line. Mississippi is left standing in the middle — at the mercy of powers thousands of miles beyond its control.
How did we get to this precarious position? In the twelve years since Nissan announced its intentions to build the Canton plant, the State of Mississippi has subsidized the company with $378 million in cash, infrastructure, and workforce training. Having lowered barriers to entry sufficiently to attract the world’s fourth-largest automaker, Mississippi also lowered the barriers to exit if conditions — or the state’s willingness to subsidize — ever changed. A unionized workforce would present a dramatic change for Nissan and Mississippi. After all, Mississippi would never been considered for their plant if it hadn’t been an anti-union “right-to-work” state.
It’s not unreasonable to think that Nissan would begin to phase out production in Canton and look for alternatives with cheaper labor (and bigger incentives).  When workers at Canton’s sister plant in Smyrna, Tennessee, attempted form a union in 2001, Nissan CEO Carlos Ghosn issued a not-so-subtle threat: ”It is without reservation to say that bringing a union into Smyrna could result in making Smyrna not competitive, which is not in your best interest or Nissan’s.” The union was voted down 2-1.
Mississippi is therefore forced into complicity with Nissan management in order to preserve its $378 million investment and remain attractive to prospective industry in the future. That won’t be seen as such a bad thing by our Republican leadership, all of whom are ideologically opposed to organized labor.
Still, it’s an awkward spot for the leaders of the poorest state in the country to actively argue for its citizens to be paid less than people doing the same job in other states, especially when our position is largely dictated by the management of a multinational corporation. It’s not just Nissan — it will continue to happen with every business we lure the to state with lavish incentive packages and the promise of cheap labor.
The Nissan deal
In 2001, then-Governor Ronnie Musgrove signed legislation authorizing $295 million in incentives for Nissan to build a 4,000-worker plant off of I-55 in Canton. At the time, the incentive package was the largest in history. (It has since been surpassed by Mississippi’s $296 million deal with Toyota in 2007).
• $80 million for training
• $68 million for preparation of the site, which was to be leased to Nissan
(initially at $10,000 per month, increasing to $100,000 once production began)
• $59 million in road improvements
• $33 million for water and sewer infrastructure
• $17 million for the construction of a “vehicle preparation” building
• $25 million for a university-level automotive engineering center
• $5 million for a marketing plan to promote both the company and the state
• $8 million for miscellaneous expenditures
In 2002, the Legislature approved another $68 million in subsidies, raising the state’s investment to $363 million. Add $15 million to finance a 2012 expansion, and you get $378 million — the total amount the state says it has put into Nissan since its inception.
But according to estimates from Good Jobs First (a report paid for by the UAW, for what it’s worth), that accounting neglects the value of the tax breaks and local subsidies Nissan has also received. The company holds exemptions from most property, sales, and withholding taxes, and Nissan will collect an annual state tax credit worth $5,000 per worker until 2023.
Adding both cash and tax breaks, Mississippi has subsidized Nissan’s operations to the tune of $1.3 billion over the last ten years. In return, Nissan has brought $2 billion in private capital to the state and created 5,600 jobs — plus many more from suppliers that have set up near the plant.
Mississippi’s leaders knew exactly what they were buying, and Nissan has delivered as promised. In fact, the relationship between state leaders and Nissan management has gone so smoothly that State Auditor Stacey Pickering wrote an op-ed defending Nissan against the critical Good Jobs First report, even though his office was never mentioned.
Where does it end?
Perspectives can vary about Nissan’s relentless pursuit of public money to pad the bottom line — and Mississippi’s willingness to grant it. Corporate management certainly see themselves as shrewd enterprisers partnering with the public sector; others might call them ruthless misers exploiting a poor state. There’s merit to both views.
For example, in 2012, Nissan received a $200,000 grant from the Mississippi Development Authority under the auspices of the Job Protection Program, a fund designed to make “grants and loans to at-risk industries to be used for job retention and to improve productivity and competitiveness.” That year, Nissan turned a worldwide profit of $3.4 billion.
In 2012 MDA also subsidized profitable multinationals GE, Siemens, Raytheon, Lockheed Martin, and DuPont. With Nissan, those six companies’ collective annual revenue is four times as large as the entire Mississippi economy. Mississippi is hardly alone in its generosity: a study by the New York Times found that states and cities spend over $80 billion each year on economic development incentives.
Many of the recipient corporations obviously don’t need public money to hire more workers or build new facilities. They ask for it because they know states will pay it. If they won’t, then those jobs will simply move somewhere that will. With corporations holding all the leverage, state economic marketing has turned into a beggar-thy-neighbor bidding war, and prices keep going higher and higher.
The MDA puts it in more serene terms:
“When planning to locate a new enterprise, it is common practice for business prospects to work with multiple states. Each state has its own extensive incentive programs to entice investment to its respective state. Thus, competitive incentives are a necessary component of Mississippi’s economic development and growth strategies and are critical to maintaining the state’s position as a strong contender for high-quality job creation.”
They go on to mention low labor costs as a key ingredient in the business recruitment cocktail. A union would change that — that’s the whole point.
Nissan says that its average production wage is $24.47 an hour, while maintenance pays $28.49 . With benefits, that comes out to roughly $45 an hour — at least $10 less than what workers at unionized GM make. (In case you wondered, Nissan’s annual revenue breaks down to $664,523 per employee).
An hourly wage of $24 plus benefits is still more than most comparable industries in Mississippi pay. For many Mississippians, Nissan is a plum job. It offers solid compensation and job security.
But only about 3,500 of Nissan’s 5,600 employees receive those perks. The remaining 2,000 or so are temporary workers, hired through temp agencies and paid Mississippi’s going rate of $12 an hour. Because of the structure of the state tax incentives, Nissan will likely rely more heavily on temporary employees in the future. Case in point: Nissan recently announced that a new expansion funded by $100 million in public bonds should add 1,000 jobs. All of them will be filled by temporary workers.
The real question: Is it worth it?
Constructing a cost-benefit analysis of these sorts of economic counterfactuals is extremely difficult. However, we can say with certainty that the incentives for political leaders to grant business subsidies do not necessarily align with the state’s long-term economic interests. After all, one job created today benefits a politician more than 100 jobs created in 20 years ever will.
A job recruited from a big out-of-state company will also get more attention than one created by a small firm locally. News of multinationals setting up shop in Mississippi generates splash headlines across the state and prime bragging material for politicians. Governors Musgrove and Barbour attended the ribbon-cuttings of Nissan and Toyota, respectively. Governor Bryant made the announcement about Nissan’s latest expansion in person.
But hooking a few big fish doesn’t always mean you’ll catch your limit. Neil White showed in his earlier analysis of the Mississippi labor market on this site that despite landing a number of big employers, the state’s economy has the same total number of jobs as it did in 1998. Recent data from the Census Bureau shows that those jobs are paying less, too. Median income in Mississippi has dropped over $3,000 since 2008.
None of this disputes that Nissan has been good for Mississippi’s economy. It has. But that doesn’t resolve the question of opportunity cost: Would Mississippi be better off if we’d used the money for something else? Instead of bidding for large corporations, what it we had invested in, say, Pre-K education? Or reduced tuition at our universities? Or supported local businesses and entrepreneurs?
Given our state’s limited resources, these are questions Mississippians should ask ourselves, and our leaders, more often.
1. The National Labor Relations Act specifically prohibits this, though its provisions have certainly been circumvented before. At the very least, unionization would scare off future business prospects who prefer low wages and relatively lax labor standards.