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Labor's Edge: Views from the California Labor Movement

Enterprise Zone Victims at VWR and Blue Linx Demonstrate Need for Reform

By Sara Flocks, California Labor Federation

The loss of a job is one of the worst things that can happen to a worker. The situation is even worse when an employer closes their doors, leaving hundreds of workers jobless, anxious and wondering how to make ends meet. The loss of a job means can mean that workers lose their homes, their security and their ability to provide for their families.

What’s the one thing that could make job loss even more painful? If you lose your job and then have to PAY for your employer to pack up, leave you behind and open their doors elsewhere. And we're not talking about pocket change; we're talking about $700 million or more every single year for the rest of your life.

Sounds too crazy to be true, right? Well, welcome to the California Enterprise Zone (EZ) Program. The EZ program gives tax breaks to businesses located in any of 40 Enterprise Zones that practically cover the entire state. Employers can claim up to $37,500 in tax breaks for every new person they hire.

On the surface, EZs seem like a well-meaning program to create jobs and help poor areas of the state. The reality is that EZs have turned into real-life Twilight Zones---where workers pay to lose their jobs and companies are rewarded for eliminating jobs.

Workers at VWR International and Blue Linx are living proof of the devastation that EZs can cause. Teamsters Local 853 has represented workers at both VWR and Blue Linx for years, and workers had good union wages and benefits. Both companies are national—VWR was bought out by a private equity fund based in Chicago, and Blue Linx is based out of Atlanta, Georgia with locations nationwide, including their California locations in Brisbane (VWR) and Newark (Blue Linx).

But these companies realized that the EZ program offered them perks that they couldn’t refuse. They could move into an Enterprise Zone and enjoy lavish benefits like a $37,500 hiring credit for each employee hired, sales tax credits for any new equipment bought, and a whole host of local perks.

Workers were actually willing to move to follow their jobs given the good union wages and benefits and their long tenure with the companies. But here's the catch -- in order to get the EZ hiring credit, the companies could not bring along any of their current workers. Not that the companies saw that as an obstacle—by ditching union workers they could not only slash wages to $10 an hour with no benefits, and they could also get generous hiring credits for each new low-wage worker they hire.

At first, workers at Blue Linx were promised that they could move with the company, union and all, to their new facility in Tracy. It would be a longer commute for many of them, but they were willing to drive for hours and sleep in their cars if it meant keeping their union jobs. The shop steward at Blue Linx was told to inform workers that they would be moving with the company.

Then, it all changed. It might have been a tax consultant that clued in the company, or maybe it was a site consultant who told the company about the EZ program. All of the sudden, the company went into radio silence. No communication with workers. No updates on the company move date. Workers found out the company had changed plans not from their employers, but from Google. During an internet search they saw Blue Linx was hiring at their new location at the Port of Stockton, in an Enterprise Zone. Suddenly, workers were not invited to move with their jobs—but they decided to apply online anyway.

Blue Linx closed down their Newark location in February 2013. The Newark workers were not allowed to move with their jobs, and are now they're scrambling to find work after expecting to be able to work in the new facility.

Workers at VWR suffered a similar fate— the company required that workers sign an agreement that they wouldn’t try to follow their jobs to Visalia, where the company moved, in order to get their severance pay.

Workers at VWR lost their jobs in December, just in time for the holidays. Meanwhile, a New York Times story reported that VWR received $5.6 million in tax subsidies from California taxpayers—many in the form of EZ credits.

The money VWR and Blue Linx got when they abandoned their workers for EZs did not come out of thin air. That is money that you and I and the workers at VWR and Blue Linx paid in taxes. Workers paid money to lose their jobs—and they’ll keep paying until we take action to stop this devastating and expensive program.

The best non-partisan research shows that the EZ program has failed at creating jobs or economic activity in targeted areas. Even worse, the program costs taxpayers $700 million a year -- and is growing by 30% every year.

The Governor has proposed Enterprise Zone reforms that curb the worst abuses and waste of taxpayer dollars.  The reform would close the outrageous loophole that allows a corporation to get a tax break for someone they don’t even currently employ, and would also require more accountability. Over the last few weeks, VWR and Blue Linx workers and families who have been negatively impacted by the Enterprise Zone program have come out in force to make their voices heard at EZ reform hearings across the state.

The Governor’s proposal is a solid first step to reform this abusive program but much, much more needs to be done. The Labor Federation has made it a legislative priority to reform this wasteful program and prevent another worker from losing their job to EZs. Stay tuned for more updates on legislation.

Posted on 03/04/2013Permalink

More posts by Sara Flocks

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