Ottawa is spending $1.7M for 10 new jobs at a pasta plant. Are these corporate subsidies worth it?

When the federal government said earlier this week its investment of $1.7 million in a Brampton, Ont., pasta plant would create 10 jobs, some questioned whether that taxpayer money was being put to good use.

One economics professor tweeted he was "legit astonished" by the investment in Italpasta.

"Do they not understand just how insane this is? That spending north of $170k for *one job* is an embarrassment, not an achievement?" wrote Stephen Gordon of Laval University.

And that was just a fraction of the billions in subsidies that were announced recently for the creation of electric vehicle-related plants in Ontario.

While some economists say they understand the political motives for such corporate government subsidies, they say they make little economic sense.

"There is really no underlying economic rationale," said Robert Gillezeau, assistant professor of economics at the University of Toronto's Rotman School of Management. "I think those spends are more about politics than they are about economic development."

"You're introducing an economic inefficiency to the market." 

The $1.7 million subsidy for Italpasta Ltd., billed as the largest pasta manufacturer in Canada will help it "increase production to keep up with growing demand," according to Filomena Tassi, the minister responsible for the Federal Economic Development Agency for Southern Ontario.

"Investments like these are making a difference in our economy & helping businesses grow," Tassi tweeted.

Her press secretary says the money is a 100 per cent repayable loan that Italpasta will use to buy new equipment.

"[That] allows them to triple the production of their pasta products, all while reducing their energy consumption and carbon footprint," Edward Hutchinson said in an email to CBC News.

Meanwhile, the benefits of such government corporate subsidies on a much larger scale were trumpeted by both Prime Minister Justin Trudeau and Ontario Premier Doug Ford last month.

The two leaders stood together at a Honda plant in Alliston, Ont., to announce the creation of four new manufacturing plants in the province, including the construction of Honda's first EV assembly plant and a new stand-alone EV battery plant.

The federal and provincial governments will contribute $5 billion in total in direct subsidies and tax credits, an investment, they say, that will mean 1,000 new jobs.