Michigan Loses 40K Grads; Corporate Welfare Program Paid $127K Each To Keep 125 of Them

Attracting about 125 college graduates a year won’t do much to stop an annual exodus of nearly 40,000. But the corporate welfare arm of Michigan government is happy about spending $126 million for that result.

James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy, questions the assertion made by a state official that a Michigan Economic Development Corporation program is helping reverse a “brain drain.”

Paula Sorrell, the Senior Vice President for Entrepreneurship and Venture Capital for the MEDC, made her pitch for how her organization is helping stop the exodus of young college graduates from the state.

In an op-ed in Bridge Magazine, Sorrell wrote, “The tech sector developed here also serves as a reverse ‘brain drain’ for graduating college students who now stay in Michigan because they want to be part of exciting new tech companies.”

She added, "The state kicked off the 21st Century Jobs Fund about a decade ago and now provides some form of support to about half of the state’s venture capital funds."

The MEDC has a 21st Century Jobs Fund that gives money to venture capital firms. Since 2006, the fund has given $126.4 million to firms that it says will have either retained and/or created 995.5 jobs – that is about $127,000 for each job. The program as a whole has repeatedly fallen short of its projected jobs.

However, the state of Michigan lost 39,207 college graduates in just 2012, according to the Census Bureau.

The 21st Century Jobs Fund doesn’t have a significant impact of attracting college graduates to the state, Hohman said.

“If the program was really about retaining college graduates or reversing the brain drain, it is clearly a failure,” Hohman said.

Nicole Kaeding, a budget analyst with the Cato Institute, said these state investment programs are ineffective and mostly a way for public officials to give the appearance of economic productivity.

"Economic development programs, like the 21st Century Jobs Fund, are popular among policymakers, but their effectiveness is questionable at best," Kaeding said. "State policymakers are inserting themselves into private market activities to entice firms to Michigan. A much better approach would be to lower the costs to businesses in the state by cutting taxes, and lowering regulatory burdens. These sort of development programs are an acknowledgement that Michigan is uncompetitve. Spending more money doesn't solve the issue; it attempts to hide it."