The Hobbit jobs

Tracy Watkins at Stuff reports:

As Hobbit fever builds, the Government is touting job creation as the biggest win from incentives that add up to hundreds of millions of dollars of taxpayer subsidies for movie producers.

But Green Party co-leader Russel Norman says those jobs did not come cheap – and at tens of thousands of dollars a job, he questions whether the Government should be backing other industries instead.

Taxpayers have reportedly shelled out more than $500 million in the past decade subsidising Hollywood productions like Sir Peter Jackson’s Lord of the Rings trilogy. is expected to snare as much as $60 million in subsidies.

Hollywood Studios have pressed the Government to raise the subsidies even higher – and Hobbit director Sir Peter Jackson reiterated that call yesterday.

Prime Minister John Key suggested that was unlikely, but said the Cabinet would be looking at extending them to television productions.

The Hobbit had created 3000 jobs, he said.

But Dr Norman said there needed to be a cap on the cost of producing those jobs. If 2000 jobs were created over a year at a cost of $100 million that was a cost of $50,000 a job.

“If the Government is willing to pay $50,000 a job for a Hobbit job, it does beg the question why they won’t give any support whatsoever to the manufacturing sector and are happy to see us lose tens of thousands of jobs there and do nothing about it.

Firstly it is good to see Russel Norman concerned about inefficient job subsidies. I hope his concern extends to his proposals for massive investment on “Green Jobs” as these tend to represent a subsidy of over $100,000 a job.

I’m not a huge fan of the film subsidies, but as I understand them they are close to fiscally neutral. They basically represent the a refund on the GST spent by the production. Now as the movies can be made anywhere, the argument is that if there was no subsidy then they would not be made here and the Government would not gain the GST on the production.

This is a reasonable argument. It is also quite different from subsidising a particular industry over another, where the investment would be happening regardless.

So the argument is that the taxpayer doesn’t actually lose money on the subsidy, as they gather it back from the increased GST take. And on top of that you have the wider economic activity from the production.

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