45 percent of New Mexico employees work at companies with 500 or more workers. With such a large percentage working for smaller employers, economic development resources should be focused on those smaller companies.
Small Business Gets Shafted by Economic Development Programs
BY RENE THOMPSON
State spending to help create jobs in the private sector is heavily biased against small businesses in three states, including New Mexico, according to a study by a Washington D.C.-based think tank.
In New Mexico, 70 percent of all economic development spending was focused on big businesses, according to the study by Good Jobs First. Merely 18 percent benefited small businesses, while the rest was undetermined. Ninety-three percent of New Mexico’s high-wage jobs tax credits go to large companies, the report said.
But local economic development expert Mark Lautman said the study is off base because going after large companies produces the biggest results. Targeting small businesses with scarce economic development dollars is inefficient, he said.
“If you are a governor faced with investing a finite amount of the public’s resources to grow the economy, you will want to get the most bang for your buck,” Lautman said.
Lautman said that focusing on small businesses means an economic development program would have to market, sell and complete exponentially more transactions every year. “Unless you are awash in e-base deals and have an unlimited budget, any rationale chief executive will find themselves going for the big ones first,” he said.
The study said that 45 percent of New Mexico employees work at companies with 500 or more workers. With such a large percentage working for smaller employers, economic development resources should be focused on those smaller companies, the study said.
Lautman disagreed. “These guys have always been focused on amplifying their politically sponsored populist angle that economic development programs and incentives are corporate welfare being used at the expense of the little guy and not an economic development per se,” he said.
The report recommended that New Mexico publish its own annual reports on how much spending actually goes to small companies. It also said that if economic development officials start focusing on smaller employers, it could help to create jobs and cushion the blows from job losses when established companies go under.
Lautman said that if the state started throwing lots of economic development money at small businesses, it would encourage the unprepared, under-financed, and business naive to quit their 9-to-5 jobs and start their own business without knowing the consequences, and that the state would lose money on poor investments.
“There is no telling how many of us have been duped into going into business for ourselves with a meager midlife savings, and lost it all on the romantic idea of being an entrepreneur when we can’t even spell it,” Lautman said.