Wednesday, June 16, 2010

Michigan Battery Factory - Over $1 Million in Construction Costs Per Worker

Midland, Michigan, about 2 hours northwest of Detroit, is going crazy because a joint venture, which includes Dow Chemical, has agreed to build a battery plant in the city of 42,000 people. The press it's getting is a little out of hand, and includes a ribbon cutting ceremony with Vice President Biden.

The interesting thing here in terms of job creation is that the capital cost of the plant, which is reported to be $322 million, and is heavily subsidized by local and Federal government programs, is going to come with just 320 permanent jobs. The issue isn't just the subsidy, but the fact that productivity will be so high, that it will take $1 million of capital investment for each required worker.

Now I don't know how many construction jobs this will create, but it wouldn't be surprising if it rivaled the ongoing manufacturing jobs. This is a great example of the Post-Technology Economy, where automation and productivity have created a situation where very few non-construction jobs come out of such a massive capital investment. You can see even more dramatic numbers in alternative energy generation, where Oregon's Shepherd's Flat Wind Farm will require $845 million in capital outlays, create 400 construction jobs, but just 35 ongoing jobs. So that's about $25 million in capital per permanent job, and an 11:1 construction to operating job ratio.

While I'm not going to say the plant is a bad thing for Midland, the hype:job ratio for the facility is ridiculous.

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