It’s likely that until a few days ago, most people in Louisiana had never heard of a company called DXC. But they understand what 2,000 jobs mean and that’s the number of new positions this global digital technology company is pledging to bring to New Orleans over the next five years. By any measure, that’s a big deal.
DXC is actually a huge company. An offshoot of one of Hewlett-Packard’s lines of business that merged with another company, it’s valued at more than $25 billion and employs 170,000 people around the world. The fact that its name is not a household word means little. DXC is one of any number of major companies that supply IT services to a lot of the big corporations you do know. Its decision to put a large stake in Louisiana is a major positive for the entire state.
Of course, like any big economic development deal the state lands, it comes with a price tag. Published reports put that at more than $100 million over a multi-year period. Yes, that’s a lot of money in a cash-strapped state, but there are a couple of points to consider.
One is that to land any major economic development deal you have to pay to play. We can say that it’s bad policy and companies just use one state to leverage another to get a big subsidy, but it’s simply a fact of life. Just look at what Amazon is doing to cities vying to be the home of the company’s second headquarters. Fortunately, Louisiana’s incentives are primarily performance-based, so typically companies have to deliver what they pledged or they don’t get the subsidy.
Another thing to consider is that a big part of Louisiana’s incentive – $25 million – is actually an infusion of investment into our own higher education institutions to bolster them in the areas of science, technology, engineering, and math. This helps DXC with its pipeline of future employees, but it also helps our universities and our state as a whole by producing more homegrown graduates with backgrounds in high-demand fields related to computer science and technology. It’s something we should have been doing anyway, but whatever the mechanism, it helps.
And finally, despite the fact that projects like these are clearly an investment, what we are doing is investing in our future. CABL has long championed the need to diversify our economy so that it includes more high-paying jobs in fields that bolster us from the volatility of the energy sector which is such a large part of our economy. It’s not that we want to play down the importance of those jobs, but the fact that we need to acknowledge that technology and innovation represent growing sectors of the U.S. economy and we need to be in that game, too.
State Rep. Reid Falconer of Mandeville released a statement on the DXC deal which, though not exactly critical, raised some important points. “If we want to attract and retain business, we have to fix three things: our tax structure, our infrastructure, and our justice system. It’s great to take a comprehensive approach, and we can’t sideline one while grasping at another, but until we get those three things accomplished, luring businesses with tax incentives is going to continue to be a stopgap measure that doesn’t solve our quality-of-life or budget woes.” “If we want to attract and retain business,” he says, “we have to fix three things: our tax structure, our infrastructure and our justice system. But until we get those three things accomplished, luring businesses with tax incentives is going to continue being a stopgap measure that doesn’t solve our quality of life or budget issues.”
He’s right about that. States that have stable finances, a solid infrastructure, and a good quality of life have inherent advantages when attracting businesses. You do need incentives to compete in the economic development arena, but you also need to self-invest in your state so that the things people expect of a place are there. Things like good schools, good universities, and good infrastructure translate into good jobs and greater opportunity.
The surprising news to many is that with companies like CenturyLink, IBM, CSRA, EA, GE Capital and others, Louisiana was already making a name for itself as a state with a viable technology sector. The DXC announcement is another exclamation mark on that claim. The key for Louisiana now is not only being successful in getting companies like these to come, but doing the more structural things that will convince them its where they want to stay.