Saving Jobs Costs Less than Losing Jobs

The cost to taxpayers to save, lose jobs

To save a job — $750 To lose a job — $25,000

Wednesday, November 17, 2010
By Len Boselovic, Pittsburgh Post-Gazette
Pam Panchak/Post-Gazette
Tom Croft, executive director of the Steel Valley Authority, says state funding to help save manufacturing jobs works out to a cost of $750 per job saved vs. the $25,000 he conservatively estimates a jobless person costs taxpayers in employment taxes, lost taxes and other costs.

Here is Tom Croft’s economic proposition in a nutshell: It costs the government considerably more to lose a job than it costs to save a job.

Mr. Croft, 59, is the executive director of the Steel Valley Authority, an organization founded in the 1980s to resuscitate the region’s crumbling manufacturing industry. After several high-profile rescue attempts, including the failed effort to resurrect LTV’s South Side Works, Mr. Croft started focusing on small and midsize companies where jobs were in jeopardy.

Since 1993, when the authority first received state funding for its job loss prevention efforts, it has helped save 15,800 jobs, Mr. Croft said. That includes nearly 1,100 jobs preserved in 2009, when the efforts were financed by $800,000 in state Department of Labor and Industry funds.

That works out to a cost of $750 per job saved vs. the $25,000 Mr. Croft conservatively estimates a jobless person costs taxpayers in employment taxes, lost taxes and other costs. Tack on the indirect costs like reduced business and consumer spending, and taxpayer savings from preventing layoffs are even bigger, he added.

“The commonwealth is getting a bargain in terms of cost efficiency and cost effectiveness,” said Mr. Croft, with the authority since 1988.

From its initial operations in Western Pennsylvania, the authority is expanding to all 67 Pennsylvania counties. In addition to its Regent Square headquarters, the nine-employee operation has offices in Harrisburg and Wilkes-Barre, and will open one soon in Philadelphia.

Its Strategic Early Warning Network is based on keeping in touch with local economic development agencies, chambers of commerce, bankers, union leaders, elected officials and others who can pick up the scent of potential layoffs before they occur. It also uses Dun & Bradstreet data to ID companies that are defaulting on their debt or exhibiting other signs of being in trouble.

Mr. Croft said the earlier that ailing companies are identified, the more the authority can do to save jobs by helping management reduce costs and increase efficiency, identify new market opportunities or promote labor-management cooperation. In most cases, the services are provided at no cost.

“Our strength is financial restructuring,” he said.

Economic development officials in Ohio, New York and other states have enlisted the authority to help with their job-saving initiatives, too.

And next month, a U.S. Department of Labor jobs conference in Arlington, Va., coordinated by Mr. Croft will assemble federal and state agencies, business leaders and labor union officials. They will try to see how successful public-private partnerships at the state level can be put on a national scale.

An Augusta, Ga., native and stepson of a former head pro at the male-only Augusta National Golf Club, Mr. Croft intended to become an architect. But he changed his mind.

After working with lumber workers in the Pacific Northwest displaced by the recession of the early 1980s, he moved on to the Seattle Worker Center and assisted workers from the region’s troubled shipbuilding industry. Mr. Croft said that’s where he developed the concept of trying to identify jobs that are in jeopardy while there is still time to prevent layoffs. “There should be a program in every state that helps companies that are in trouble. And there’s not,” Mr. Croft said.

Success comes in small numbers. Compare the authority’s statement that it saved an average of 820 jobs annually since 2005 with the 570,000 Pennsylvanians who are now unemployed, according to the state Department of Labor & Industry.

Success can also be fleeting. Often a business is too far gone to do much good, Mr. Croft said. Jobs may be saved for a year or two as new problems besiege it.

But even when the reprieve is temporary, at least it gives workers time to earn a living while making plans, he said. And in small rural companies, saving jobs at one of the region’s biggest employers provides vital life support to the local economy.

“We found them to be very useful, very helpful,” said Cindy Zimmerman, of Woodcraft Industries. The State College furniture maker sought the authority’s help when its Buffalo banker pulled the company’s line of credit. She credits the authority with helping Woodcraft find new financing.

“There would have been 150 jobs lost if that didn’t happen. We would have had to close the doors. We had no other place to go,” Ms. Zimmerman said.

When Miller Welding & Machine was considering diversifying into the solar energy industry, it couldn’t afford to pay an outside consultant. So it brought in Mr. Croft’s group.

“They did help us kind of stabilize in our thinking and move forward,” said David Miller, president of the Brookville, Jefferson County, business.

He said it now employs about 270 people, below its peak employment but about twice as many as it did when the authority signed on. Putting more than 100 back to work is important in a small town where there are few other opportunities, he said.

“There’s only a few organizations providing jobs in these rural communities, and when one of them leaves, it’s very difficult to attract another one of them in,” Mr. Miller said.

Len Boselovic: or 412-263-1941.

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