Michigan Economy No Longer Dependent on Auto Industry

Media pundits in Michigan repeatedly state that the auto industry dominates this state’s economy.

A recent example came when MLive columnist Rick Haglund wrote, “Michigan, which is heavily dependent on the auto industry, needs a strong national economy to prosper.”

However, government statistics may tell a different story. According to the U.S. Bureau of Labor Statistics, as of June 2015 Michigan had 174,475 jobs in the “transportation equipment” field, which includes workers who make cars and make car parts. This is roughly 1 out of every 23 jobs in the state.

Compare that to the 462,000 people working in retail, or 192,278 employed by private sector hospitals, both of which exceed the number of jobs in the auto industry.

In one area, though, Michigan’s auto industry has dominated other industries: Collecting corporate welfare benefits paid for by state taxpayers. Last winter, it was revealed that the previous administration had granted some $9 billion in tax credits payable over the next 20 years, much of which will be distributed in the form of checks from the state. Ford, GM and Chrysler will collect a large share of that $9 billion.

“The presumption that the auto industry is king in Michigan has led to some extreme billion-dollar favors to the Detroit-3,” said James Hohman, the assistant director of fiscal policy for the Mackinac Center for Public Policy. “But the auto industry’s economic importance has lessened and other sectors have increased.”

Don Grimes, a University of Michigan economist, said the national economy will determine if Michigan is declining or growing, and the auto industry will determine the magnitude of those swings.

“The key question is, what happens to the Michigan economy when auto sales and employment flatline or decline slightly?” Grimes said in an email. “Will Michigan flatline too, or will it continue to grow at a rate close to the national average? I suspect we will begin to find the answers to that question over the next year or so. If job/income growth stagnates when auto sales do then we will still be tied to the auto industry for long-term prosperity. If we continue to grow, but at slightly less than the U.S. rate then we will have diversified the economy so that our long-term future will be ‘less’ tied to the auto industry.”