OTTAWA — Last week’s announcement that a Volkswagen subsidiary will open a battery plant in St. Thomas, Ont., came with big promises from Prime Minister Justin Trudeau about the economic benefits. Economists are skeptical. 

Subsidy: VW is getting $8 billion to $13.2 billion from the federal government. The Ontario government is giving VW $500 million in direct incentives and promising “hundreds of millions” more in infrastructure and service improvements for St. Thomas and the surrounding area.

Promise: Trudeau said the plant will create up to 3,000 direct jobs and 30,000 indirect ones and generate about $200 billion in value for the Canadian economy.

Problems: Kent Fellows, an assistant economics professor at the University of Calgary, said the politicians’ language suggests the figures are from an “input-output model,” a particular type of analysis.

“They’re very, very data-rich, and there’s a lot of equations in them. But they’re all really simple equations,” Fellows said. You can get one off the shelf from Statistics Canada. They’re not suited to the economic effects of what’s promised to be the biggest factory in Canada, Fellows said.

The math is one-sided, said Thomas Gunton, director of the resource and environmental planning program at Simon Fraser University and a former deputy minister of finance in British Columbia.

“The numbers take a very, very inaccurate assessment and just add up the gains of investment in this particular project without looking at what you have given up by not having that money available to invest in other projects,” he said.

Better models: A different kind of evaluation, a benefit-cost analysis, does consider those effects.

“Generally, politicians do not like to use these other methods, like benefit-cost, because they show much lower net benefits,” Gunton said.

An even better tool is a computational general equilibrium model, said Fellows. He compared that to an F1 car.

“You’ve got to retool it and put different tires on it for different races, whereas the input-output model is kind of a pickup truck—you just throw whatever you want in the box and you’re good to go,” Fellows said.

Also curious: If a $13.2-billion subsidy leads to 3,000 jobs, that’s $4.4 million per job. “I can’t think of another case where a job has cost this much in terms of a subsidy,” Gunton said.

The ratio of 10 indirect jobs for each directly created job is also unusual, Gunton said: “That’s the highest multiplier I’ve ever seen. Most multipliers are in the range of two to three at the most.”

Response: A spokesperson for Innovation Minister François-Philippe Champagne said the government is confident in its economic models but she could not release them.