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Burke gives commissioners lesson in economics
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Which is better? A new industry offering more jobs, or one offering higher wages?
Those were questions posed by Industrial Development Board director George Burke during an impromptu economics lesson held for members of the Warren County Commission.
Burke addressed commissioners following their regularly scheduled full court meeting Monday night.
“I want to talk about economic theory. I just want to share some concepts. One of the things that puzzles me the most is how people continue to talk about retail development in Warren County. I see my job with the Industrial Board as creating wealth in Warren County. Wealth is where everything stems from. We at the board are after two things. We are after creating wealth and we are after distributing that wealth throughout the Warren County economy. In my mind, that is what is best for everybody,” said Burke.
Burke said wealth has basically been created two ways. “To create wealth, you’ve got to market something and sell it. Historically, wealth in the South has been created two ways. Traditionally what has happened in Appalachia in particular, but in the South in general, is we have marketed our natural resources and our agricultural supplies. We have done that in exchange for dollars. That was a land-based economy. That was an economy in which the people who controlled the land and the natural resources were wealthy. If you didn’t have natural resources or land, you were basically low-income or poor,” said Burke.
Burke said it’s his understanding that in Warren County in the 1940s and ’50s, most wealthy people owned land and/ or controlled the natural resources in the area. Burke said in the 1950s some communities began to realize manufacturing could change the economy.
“Manufacturing is so much better at distributing the income than an economy based on natural resources or agriculture. Communities, particularly in the South, realized if they were ever going to distribute income and for everyone to have a better way of life, they must have manufacturing,” said Burke.
Manufacturing began to raise income. “Basically, people who had income above the poverty level have disposable income to spend. They are able to buy houses, pay real estate taxes and wealth begins to grow in a community,” said Burke.
Burke said when automotive industries located in Tennessee in the 1980s, our economy began to change.
“I can remember when I first came here in 1985. The first thing I was greeted with was just about every apparel plant in town I believe closed the first month I was here. We began to transition in the economy. It is still based on manufacturing. It is still based on, to a great extent, labor. But, it is also based on capital investments,” said Burke.
Capital investment is the machines and equipment used in manufacturing. “Where capital investment is involved, where capital investment is increased, wages go up,” Burke said.
Burke said discretionary income is what creates and brings in retail businesses.
Burke gave two examples of businesses and explained why, in his opinion, more jobs may not be better than higher wages.
Burke’s examples were:
• Plant A opens with $24 million investment and 1,000 projected jobs. The workers at Plant A will earn $12 per hour. Burke said workers making $12 per hour and working 1,950 hours annually will make approximately $23,500 in one year.
Burke said the poverty wage for a family of four is about $23,500. He said this business is not going to allow workers to have discretionary income and will not do much to create more wealth in Warren County.
Burke said Plant A will pay approximately $87,000 a year in taxes if the taxes were $1, which was used just as an example.
• Plant B opens with a $97 million investment and 250 projected jobs. The workers at Plant B will earn $17.50 per hour. Burke said the workers making $17.50 per hour and working 1,950 hours annually will make approximately $38,000 per year.
Burke said these workers will have approximately $14,000 each in discretionary income, putting $3.5 million back into the economy.
Plant B would pay approximately $400,000 per year in taxes according to the example of taxes based at $1.
Burke said most people who read about these two factories in the paper would be disappointed with Plant B because less jobs are created.
“What I want to get across to you is, Plant B, with 250 employees and this kind of capital investment is far superior to Plant A. The thing on my heart, when I go out and recruit, is the wage they are paying and the capital investment they are making. It is not the number of jobs they will create. This kind of industrial recruiting effort is what will set Warren County apart from other counties. This will make us more like Nashville or Murfreesboro rather than Van Buren County or DeKalb County,” said Burke.