The Los Angeles County Economic Development Corp. announced Thursday the methodology used to determine the effectiveness of California’s enterprise zones is flawed.
The Public Policy Institute of California claimed there is no employment impact in enterprise zones, but Christine Cooper, Ph.D., senior economist for LACEDC said eliminating tax credits would result in a raise in the state-unemployment rate by as much as 3.4 percent.
The state’s poverty rate would increase by as much as 8.6 percent, and average wage and salary income would fall by $3,100, reducing personal income and sales-tax revenues collected by the state, Cooper said. While the state would initially save nearly $5,100 per year for each tax credit, it would lose an average of $20,000 per year to unemployment insurance payments for those workers who would lose their jobs.
The PPIC study differs from others in that it uses a privately developed database of businesses that self-report employment levels. LACEDC officials said the problem is that the method for reporting employment is grouped into sets of numbers so that if an employer with two employees selects the “1-5 employees” and later has five employees, it would still check the same category showing no increase in employment. The intervals for larger companies range in hundreds of jobs masking the true results for an even greater new-employee count.
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