Enterprise Zones Have No Net Effect on Employment in California

June 24, 2009

This month, the

Public Policy Institute of California

released a


that describes the economic impacts of the state’s Enterprise Zone program.  Its findings:  “…the program, on average, has no effect on job or business creation.”  That’s a tough break for the

California Association for Local Economic Development

, whose members proposed expanding the $500 million program to help stimulate the state’s economy.  The study’s conclusions shouldn’t be a surprise, though.  Other studies around the country have found that Enterprise Zone (EZ) programs are poorly managed and often

stray from their original intent

to incent job and business creation in disadvantaged urban areas.  In the Chicago area, EZ tax credits have actually

contributed to greater metropolitan inequality

.  New York is in the process of attempting to

rein in Empire Zone companies

that for years have failed to meet basic program requirements.  A forthcoming Good Jobs First study shows that many companies in two of Ohio’s largest metropolitan areas simply move from zone to zone to reap the benefits of EZ subsidies.

At a time when state and local budgets are stretched to the breaking point, results-oriented economic development should be a priority.  States and cities can make every dollar count by investing in schools, fixing infrastructure, and creating quality workforces.  More tax giveaways won’t generate consumer demand for goods and services – they’ll only further damage budgets.