The following appeared as part of an article in a Dillton newspaper.
“In an effort to bring new jobs to Dillton and stimulate the city’s flagging economy, Dillton’s city council voted last year to lower the city’s corporate tax rate by 15 percent; at the same time, the city began offering generous relocation grants to any company that would move to Dillton. Since these changes went into effect, two new factories have opened in Dillton. Although the two factories employ more than 1,000 people, the unemployment rate in Dillton remains unchanged. The only clear explanation for this is that the new factories are staffed with out-of-town workers rather than Dillton residents.”
Write a response in which you discuss one or more alternative explanations that could rival the proposed explanation and explain how your explanation(s) can plausibly account for the facts presented in the argument.
The city’s lower tax rate and new incentive to relocate to Dillton have created a boom in Dillton’s economy. The new factories are more than 1,000 jobs, but the unemployment rate remains unchanged. The only clear explanation for this is that the new factories are staffed with out-of-town workers rather than Dillton residents. While the city’s lower tax rate and new incentive have no doubt helped to bring new jobs to Dillton, they fail to account for the unemployment figures. Instead, the explanation that the city’s lower tax rate and new incentives have spurred the relocation of these jobs to Dillton is a viable alternative.
The statement above does not inform the reader how the new factories came to be located in Dillton. The city’s lower tax rate and new incentive to relocate to Dillton may indeed have created a boom in Dillton’s economy, but it does not clearly explain how the new factories came to be located in Dillton. The absence of this explanation leaves the reader unable to assess the reliability of the statement.
Without knowing which companies decided to move to Dillton, it is impossible to judge whether the city’s lower tax rate and new incentive to relocate to Dillton created the conditions for better jobs. The statement that the only explanation is ‘the new factories are staffed with out-of-town workers rather than Dillton residents’ is nonsensical. The tax laws of any state and city allow companies to deduct the cost of relocation expenses from their taxable income. The presence of these new factories may thus be attributed to the company operating them taking advantage of this deduction. It is possible that these deductions are large enough to offset the lower tax rates, resulting in no net impact on the city’s economy.
The second alternative explanation for the unemployment figures is that the new factories are staffed with out-of-state workers rather than Dillton residents. In this alternative, the tax incentives and lowered tax rates serve to attract businesses to Dillton, but the city does not have the capacity to handle the increase in jobs. If the new jobs are staffed with out-of-state workers, then Dillton’s new factories are nothing more than service jobs. Service jobs do not generate tax revenue and do not require employees to live in the city. The jobs that do generate tax revenue and tend to require workers to live in the city are manufacturing jobs. If the new factories are service jobs, then the city’s lower tax rate and new incentive to relocate to Dillton have not increased the city’s tax base and, thus, have not increased the city’s ability to keep up with the increased workforce. Consequently, the city has the same unemployment numbers as before.
The statement that the only explanation for the increase in jobs is that the new factories are staffed with out-of-town workers rather than Dillton residents is dubious at best. The absence of a firm explanation leaves the reader unable to evaluate the validity of the argument.