Income Disparity And Rational Market Considerations

            Analysis was greatly surprised today to learn that what it had suggested in the October 24, 2013 post (Income Disparity Part Two Or What Is Wrong With This Picture?) is already in progress within another central Ohio community (in a different form but the same perspective). Analysis has repeatedly critiqued the current Licking County/Newark model of subsidizing corporate enterprise in hopes of revitalizing jobs, urban development, etc. Various posts have revealed that this approach primarily reinforces the income disparity growing yearly in the US. It was suggested that instead of the current dysfunctional model of corporate welfare used to attract business tenants to the greenfield industrial “campuses” around central Ohio, the city of Newark should pursue a model that rewards residential inhabitants to revitalize downtown Newark. Such a program (of sorts) already exists. It is entitled the My Home Program. “The City of Whitehall, Apprisen and Huntington Bank have partnered together to offer a special mortgage financing offer exclusively for City of Whitehall borrowers participating in the My Home Program. Borrowers must meet qualification requirements.  Buyers can receive 4% of loan amount (up to $5,000) in down payment assistance.” (from the City of Whitehall official website). It has already been successfully implemented for over 30 residential homebuyers. Apprisen is a central Ohio non-profit consumer credit counseling service and Huntington Bank is, well, one of the largest and oldest banks in Franklin County (akin to Licking County’s Park National Bank). Here is a program that is directed toward encouraging residential ownership that is now working. The city of Newark, with its 43% non-owner occupant residential housing should take note. Perhaps this may be of interest to the newly elected city council. Pass it on.


            On a separate note, here is more insight on the corporate subsidy for “jobs creators” and their ability to continue the downward spiral of income disparity in the US. The Boeing Company, flush with future orders on its commercial aircraft (in addition to its defense contracts) is looking to honor these with an expansion of manufacturing capacity. Its latest contract offer with the machinists union having been rejected, and the company no longer desiring to negotiate, has resulted in its letting out bids for communities across the US for sites to build its new 777X aircraft. Places like North Charleston South Carolina are only too eager to spend public money to purchase and develop “greenfield” facilities (clear open land developed with new custom buildings). The public expenditure would eventually be paid off through the taxes on the folks who would be working the jobs involved with this production. In addition to this gifted facility, Boeing would also get tax breaks, etc. In a November 25, 2013 article entitled Boeing Picks 15 Potential Sites Nationwide To Build 777X, The Seattle Times’ Dominic Gates writes, “Aviation analyst Richard Aboulafia of the Teal Group expressed skepticism Saturday that Boeing would choose a greenfield site — a completely new location with no experience in airplane manufacturing. “That’s just really a bad idea,” said Aboulafia. “You are adding multiple layers of risk both in terms of workforce and infrastructure.” Boeing did that on the 787 Dreamliner program when it chose South Carolina to build big fuselage sections. That caused such delays and quality problems in the jet program’s early years that the chief executives of both Emirates and Qatar Airways, whose orders launched the 777X in Dubai last week, declared in interviews there that they have told Boeing not to repeat that experience.” Later Gates reports, “He [Boeing spokesperson Doug Alder] said the company still has “no plans to re-engage in contract talks with the Machinists union.” The 31,000 members of the International Association of Machinists (IAM) union on Nov. 13 rejected by a 2-to-1 margin a Boeing contract offer that would have secured the 777X work for Washington state. The proposed contract would have frozen employee pensions and introduced a new wage structure that drastically slowed wage growth for new hires, who would take 16 to 20 years to reach the top of the pay scale instead of the current six years.” Other sources (radio, online analysts, etc.) report that it is a known fact that the current Boeing corporate leadership despises unions and favors a place like South Carolina, a “right to work” state. Gates concludes his article, “With the state-versus-state competition now truly under way for the 777X work, industry analyst Aboulafia said that, “From the standpoint of economics, none of this makes sense.” Although Boeing is at loggerheads with the union over reining in long-term labor costs, those costs are such a small proportion of the overall cost of building airplanes that, “You could meet the union halfway and it wouldn’t have any material impact on the competitiveness of your pricing.” “The only thing that makes sense is that (Boeing executives) are just angry, doing this in a spirit of distaste and antipathy” toward the union, he said. “Maybe the union has brought that on themselves,” Aboulafia added. “I don’t know. But it’s nothing to do with rational market considerations.””


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