The Gateway Lesson We Need to Learn

By • on June 25, 2010

Lost in the latest political attacks against Rick Snyder – did he send Gateway factory jobs to China or not? – is a more fundamental matter that none of the candidates for governor seem willing to admit, and may not understand.

The lesson from the Gateway job contraction is that even in South Dakota, the state with the lowest state and local tax collections per capita in the nation, the Gateway factory couldn’t survive. Ditto Tennessee. When Americans, no matter how “skilled” they may be in factory work, have to compete against $4 an hour labor overseas, they lose the competition. End of story.

This means any state seeking to compete for factory jobs as the basis of its economy is doomed to failure. Sure, some factories may survive and hire. But they will pay less and less – GM is trying to drive down the $13 an hour pay for new workers at its battery factories – and every year, productivity gains will almost guarantee there are fewer of the jobs at almost any plant.

Yet, that’s exactly the strategy every one of the gubernatorial candidates is following. All are saying we need to cut taxes and reduce state services to attract more jobs – factory jobs, primarily. But it has been proven time and time again, cuts in services like mass transit, higher education, police protection, museums and the like, drive away young talent needed to attract knowledge industry jobs.

Right next door to South Dakota is Minnesota. Minnesota has attracted a lot of college grads (highest percentage in the Midwest) and thus has the lowest unemployment and the highest per capita income in the Midwest — and relatively high tax burden. South Dakota has relatively few college grads, and much lower per cap income.

If Michigan follows the low-tax, low-service strategy, it will get low-tax, low-service results…a few low-paying factory jobs may come, but they will be at the expense of public policies that attract young talent, and our economy will never return to prosperity.

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