State governments could be wasting billions on investment attraction

State governments that spend hundreds of millions to persuade employers to come to their state could be over-stating the long-term benefits of job creation, according to two labour law experts.

State governments that spend hundreds of millions to persuade employers to come to their state could be over-stating the long-term benefits of job creation, according to two labour law experts.

John Howe and Ingrid Landau from Melbourne Law School’s Centre for Employment and Labour Relations Law say there is a worrying lack of transparency around the size and nature of incentives provided to employers. This makes it difficult to tell whether taxpayers are getting value for money from investment attraction, which usually takes the form of payroll tax breaks or cash grants.

Howe says governments often spruik the jobs created as a result of investment attraction, but often these jobs are in low-skilled, high-turnover areas such as call centres. He argues that this provides little long-term benefit to the state.

“There doesn’t seem to be anything in the contractual arrangements to guarantee that those jobs are sustainable in any way,” Howe says.

“If governments are shelling out billions of dollars, you’d hope it was to create more sustainable, secure jobs rather than jobs in unskilled areas where there’s likely to be high turnover and the jobs are less secure.”

Earlier this week, the Victorian Government announced it would spend $5 million to assist IBM with the creation of 300 jobs in the regional town of Ballarat. The jobs are in areas such as business processing, security, call centres and technical support.

Howe says it is difficult to say whether the state is getting good value for money without knowing the exact nature of the contract between the government and the enterprises, but there could be some concern about the nature of the jobs involved.

“Some people will argue that call centre jobs are not the sort of jobs that government should be supporting because they are so footloose.”

Howe’s research also highlighted that state governments may not be utilising their own resources when assessing an investment attraction deal. While the states perform extensive due diligence, Howe found there was limited consultation with government departments to, for example, check a company’s occupational health and safety or industrial relations record.

“They just don’t talk to their own people,” Howe says.

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