In an attempt to create new jobs, the government has decided to offer an advantage to giant tech companies like Amazon by offering tax breaks. While this may sound like a great initiative by the government, it might not be the best idea for the economy. Amazon is not the only tech giant enjoying the tax breaks because Tesla and Foxconn received $1.25 billion and $3 billion breaks respectively for building a battery factory and display factory.
Concern raised by Good Jobs First
Good Jobs First is a watchdog group that claimed these tax breaks as unjustifiable because these simply takes away development opportunities from small-scale businesses that might create more jobs than these giants.
A major reason behind this claim was increased reliance on automation by tech giants which means that very few employees would be needed to operate the data center by Apple and factories by Tesla and Foxconn.
Are government expected figures accurate?
While the government might think that supporting tech giants could be the future of creating jobs, the example of Apple’s data center in Iowa suggests the opposite. From an expectation of creating 550 jobs, it is likely to generate only 50 full-time jobs which would not affect the economy in a great way.
Another significant failure was in 2008 when a tax subsidy deal worth $2 million between Nortel Networks and Massachusetts was expected to create 800 jobs in addition to the current 2200 jobs that were in place. To the government’s surprise, only 145 jobs were left in 2010 which was a disaster.
The cost per job due to these tax breaks gets significant and so the government needs to be able to justify that before offering any tax subsidies to these giants. So the government either needs to keep a check on these companies to ensure that a decent number of jobs are created in the economy as a result or consider supporting small-scale firms that do not totally rely on automation and needs manual labor.