WalMart (AP)
Last week, Fresh Direct announced plans to move its operations from Long Island City to a new plant in the South Bronx, thanks in part to tax incentives and other benefits offered by City Hall. That means jobs for New Yorkers — but the city needs many more jobs, and it can’t afford subsidies for them all.
Maybe it’s time to rethink some of the campaigns to keep businesses out of New York?
To get back to the good news, Fresh Direct, which lets customers order groceries online and then delivers them by truck, will invest $112 million in a new 500,000-square-foot food-preparation, -packaging and -distribution center in the Harlem River Yard. The new facilities will allow the company to expand its business southward toward Philadelphia and north to New England. And they will enable Fresh Direct to increase its employment in New York City from 2,000 to 3,000.
Yet the decision to stay and grow in New York came with a price tag. To persuade Fresh Direct not to move its operations to New Jersey, the city and state provided benefits — including tax incentives, capital grants and low-cost energy — worth tens of millions of dollars.
Even taking these costs into account, it’s a good deal. At stake were 2,000 existing jobs and another 1,000 potential ones — office staff and IT specialists, food- prep and warehouse workers, drivers and deliverymen. With New York still struggling to recover from the recession, the city and the state couldn’t afford to stand idle while all that moved to New Jersey. Over time, letting Fresh Direct go would’ve cost a lot more in lost tax revenues than the taxpayers are spending to keep the company here.
But those costs do point up the inevitable limits of stimulating private-sector job growth with public-sector subsidies. To get its unemployment rate back down to prerecession levels (4.9 percent in 2007), over the next few years New York City will need to increase the number of employed residents by about 170,000.
There is simply no way that financially strapped governments can create that many jobs with subsidies. No, the overwhelming majority of the new jobs needed to get the city back to full employment must be created by private companies willing to invest their capital, grow their business and hire more workers without any financial assistance from the city or the state.
In that context, the continuing campaign by some local elected officials and labor unions to keep Walmart out of the City seems especially counterproductive.
According to news reports, Walmart is prepared to enter the New York market without special tax breaks or other assistance. If it succeeds here, the company could, within a few years, employ as many people here as Fresh Direct does now.
Yes, some critics might say, but most of those would be low-wage jobs. But so are many of the Fresh Direct jobs. Entry-level wages for warehouse and delivery jobs at Fresh Direct range from $8.25 an hour for “pickers and packers” to $11 to $12 an hour for drivers.
And such jobs (at Walmart, Fresh Direct or anywhere else) provide a vital point of entry into the workforce for people with limited skills and for new entrants into the labor market.
Creation of more entry-level jobs is not by itself a solution to the city’s unemployment problem — but it’s an essential part of the solution.
So let’s celebrate New York City’s success in keeping Fresh Direct — but let’s also put out the welcome mat for Walmart.
Hugh O’Neill is president of Appleseed, a New York City-based economic-development consulting firm.