Politicians can’t buy more auto jobs. They’ve tried. They’ve tried very hard.
Lawmakers have authorized $22.7 billion in business subsidies since 2000, mostly aimed at bolstering the auto industry. With that money, they could have run the state government without income taxes for two years during this period.
The nearly $23 billion in subsidies have largely gone to auto and auto parts manufacturers. “We also need to use targeted incentives to help Michigan businesses expand their operations here,” said Gov. Jennifer Granholm in her 2004 State of the State Address. That meant deals for the Big Three and their suppliers. The automakers all got massive deals during the 2007-2009 Recession.
Favors for the automotive industry didn’t stop with the change in administration. Gov. Rick Snyder added new programs where automotive manufacturers were the biggest recipients. And they’ve been the winners of Gov. Whitmer’s expensive bet on corporate handouts.
The state lost auto jobs despite the billions state taxpayers have given the manufacturers. Michigan has lost 145,600 of the 315,000 auto and auto parts manufacturing jobs that it had in 2000.
Auto employment in Michigan has been stagnant since 2016 after a post-recession recovery period. Employment in this industry has not been stagnant elsewhere in the country. The rest of the states added 96,600 jobs since 2016, a 12% increase in employment.
Michigan has lost out on growth in this industry to other states. And it did so even though no other state offers the level of subsidies Michigan does. Only New York has offered more megadeals than Michigan.
Michigan has tried handouts. They don’t work.
This shouldn’t be surprising. The sophisticated reviews of select subsidies made by economists demonstrate that favoritism doesn’t generate jobs. It’s ineffective at creating jobs, unfair to other taxpayers and expensive to the state budget.
Michigan ought to try broad-based improvements in the business climate (here are 101 ideas). Those rules apply to the whole state, not just to automakers.
There are still some manufacturing-sensitive policies lawmakers could pursue that would help. They can regulate electricity providers to prioritize cost and reliability rather than carbon emissions reductions. They can allow businesses to expense the costs of their equipment against their taxes. And lawmakers can again allow people to work for manufacturers without having to pay unions as a condition of employment.
Concentrated cash to select employers is a terrible strategy for job creation. Michigan showered the automakers with taxpayer cash, and we have a little more than half the auto jobs we had before. Lawmakers should stick to the basics.
Permission to reprint this blog post in whole or in part is hereby granted, provided that the author (or authors) and the Mackinac Center for Public Policy are properly cited.
Get insightful commentary and the most reliable research on Michigan issues sent straight to your inbox.
The Mackinac Center for Public Policy is a nonprofit research and educational institute that advances the principles of free markets and limited government. Through our research and education programs, we challenge government overreach and advocate for a free-market approach to public policy that frees people to realize their potential and dreams.
Please consider contributing to our work to advance a freer and more prosperous state.
Donate | About | Blog | Pressroom | Publications | Careers | Site Map | Email Signup | Contact