In wake of Foxconn deal, Wisconsin and Illinois vie for jobs

CHICAGO (Reuters) - The pledge by Taiwan's Foxconn to build a $10 billion factory in southern Wisconsin has ignited cross-border competition with Illinois over which state’s residents will get the jobs created by the project.

Backers of Wisconsin’s $3 billion incentives package, which is quickly moving through the state legislature, estimate Foxconn’s plant and related investments could create more than 23,000 factory, construction and ancillary jobs.

But one estimate says 50 percent of the jobs may go to residents from other states. Within a 20-minute drive of likely Foxconn sites, Illinois stands to gain those jobs, prompting Wisconsin lawmakers to push to hold on to them.

U.S. Senator Ron Johnson, a Wisconsin Republican, has even proposed that other states like Illinois should contribute to the Foxconn incentives package if its residents are projected to make up a significant part of the Foxconn workforce.

Illinois aims to capture whatever jobs it can from Foxconn’s plan to build a 20 million-square-foot plant to manufacture liquid crystal displays. State officials had worked to attract Foxconn to the state since February, but the company disclosed this week that it plans to build an assembly plant, a molding plant, and a packaging plant in Wisconsin.

Foxconn, known formally as Hon Hai Precision Industry Co Ltd (2317.TW), is a major supplier to Apple Inc (AAPL.O) for its iPhones. Wisconsin Governor Scott Walker and U.S. House Speaker Paul Ryan, a Wisconsin Republican, announced the plan with President Donald Trump and Foxconn Chief Executive Terry Gou in a White House news conference last month. In attracting the company, Wisconsin beat out Illinois and five other states.

HIGH-STAKES ISSUE

In Illinois’ Lake County, which borders Wisconsin, economic development officials have contacted Foxconn to promote manufacturing companies that can supply the plant, said Aaron Lawlor, chairman of the county board. “We’re going to be aggressive about providing opportunities for our workers,” Lawlor said.

Job retention from Foxconn is a high-stakes issue in Wisconsin. Lawmakers have criticized Walker for the size of the incentive package, one of the largest on record, and economic analysts say any jobs lost to Illinois will delay the state’s payback from the tax incentives.

“If we’re going to use taxpayer dollars to create these jobs, then we shouldn’t be subsidizing Illinois workers,” Wisconsin Representative Katrina Shankland, a Democrat, said in a phone interview. “Governor Walker should have spent more time negotiating this.”

Walker’s administration stands by the prediction that 90 percent of Foxconn jobs would go to Wisconsin residents. A consultant hired by Wisconsin’s economic development agency initially estimated out-of-state residents would grab 40 to 50 percent of jobs, but recalculated the number after that estimate drew criticism. It now estimates that 15 percent of Foxconn jobs and 30 percent of ancillary positions will be held by out-of-state residents.

The agency’s spokesman, Mark Maley, attributed the shift to a change in the scope of the Foxconn project after the first analysis.

Walker’s spokesman, Tom Evenson, said Wisconsin would recover at least some lost tax revenue because an agreement between Illinois and Wisconsin requires the states to compensate one another for lost income tax revenue from workers who cross state lines.

An amendment to the $3 billion tax incentive package, now before the state legislature, would urge Foxconn to prioritize hiring Wisconsin workers, but sets no binding quota. An earlier proposal to set a minimum for Wisconsin hires was voted down after Republicans raised concerns that the restrictions violated constitutional protections to interstate commerce.

COMMUTER IMBALANCE

If Illinois residents do win a large proportion of Foxconn-related jobs, they will alter a years-long trend of workers commuting in the opposite direction. In 2015, more than 56,000 Wisconsin residents reported working in Illinois, double the 28,000 Illinoisans who worked in Wisconsin, according to the Wisconsin Department of Revenue. That two-to-one ratio has endured consistently between 2005 and 2015, agency records show.

The presence of major employers, and typically higher wages, in northern Illinois - in conjunction with a loss of some major manufacturers in Wisconsin’s southeast over the past decade - explains the commuter imbalance, said Robert Bruno, a professor of labor and employment relations at the University of Illinois.

Dave Tuggle, a 57-year-old resident of Waukegan, Illinois, and a former information technology manager, is keeping an eye on the Foxconn deal. “If they offered me a job, I would certainly go there, because Illinois sure isn’t getting any more new jobs,” he said.

Wisconsin’s inability, so far, to protect the possible Foxconn jobs with a state border wall of sorts marks a notable milestone in a long, nose-thumbing relationship between the two neighboring Midwestern states. Wisconsin had enough cash on hand to dole out around $250 million a year initially to land Foxconn, but financially destitute Illinois — which has more than $14 billion in unpaid bills and went two years without passing a budget – stands to gain, too.

“We get all the benefits without any of the burden,” cracked Jack Franks, county board chairman for McHenry County, which abuts the Wisconsin border near the likely sites.