Only one of every 11 jobs promised by Michigan politicians and public officials in business subsidy announcements actually gets created, according to a new study by the Mackinac Center for Public Policy. The study follows up on two decades of front-page news stories about government grants to private businesses, revealing that these deals rarely meet their job-creation goals.

As the Michigan Legislature considers more corporate welfare handouts during its lame-duck session, the new study dives into the promises made about taxpayer-funded business subsidies. The Mackinac Center finds that only 9% of the jobs announced in major state-sponsored deals from 2000 to 2020 were ever created.

Analyzing front-page headlines from the Detroit Free Press, the study found that while companies promised 123,060 jobs through subsidy agreements, only 10,889 materialized. Worse, half of the companies created no jobs, and just 15% of them met or exceeded their job projections.

“News headlines frequently tout the promise of new jobs but rarely report when the programs fail to deliver on their promises,” said James Hohman, director of fiscal policy at the Mackinac Center and author of the study. “This creates a misunderstanding among the public that job announcements are the same thing as actual jobs created. Yet lawmakers continue to rubber-stamp these ineffective and costly deals.”

The study details 41 job announcements and their results, including the three below.

• A 2007 deal with a Detroit pharmaceutical company promised to create 600 jobs. Instead, the company added zero new jobs and closed its facility by 2014.

• A 2009 deal with General Electric promised 1,200 jobs. Zero jobs were created.

• One local official proclaimed she could not “overstate the impact” of a 2015 deal to create 1,000 jobs. The company created 26 jobs.

Even in cases where job claims did pan out, it is not clear that the state support is what compelled the private companies to start or expand operations in the state. Amazon’s subsidized distribution centers accounted for a third of the successful job announcements, but the company operates at least 20 facilities in Michigan, only four of which received subsidies. A previous Mackinac Center analysis found that when incentive deals do create permanent jobs, they come at a high cost to taxpayers.

"The state has delivered two decades of false promises as the companies and politicians involved in these deals rarely deliver on their promises," Hohman said. "Michigan lawmakers should rethink their reliance on corporate welfare as an economic development tool, and the media should use more skepticism when reporting on these deals. At a minimum, journalists should provide context that job announcements are different from actual jobs and have a poor track record of success.”

The United Auto Workers at General Motors received a 33% pay raise as a result of last year’s strike, but GM announced another round of layoffs on Nov. 15.

GM laid off 1,000 employees worldwide, including 507 workers at its Warren, Michigan, location. The news comes after GM’s tech center in Warren lost 634 jobs in August, and the company cut 1,314 jobs from its Orion plant in December, two months after the strike ended.

Legacy media, including The Detroit News, noted in November that GM posted record profits. Some experts say that as the company announces job cuts, it is looking at projections for the future, not just the recent past.

GM faces steep competition from China and electric vehicle manufacturers such as Tesla.

“Tesla and foreign automakers are the true winners in UAW strike,” Wedbush Securities analysts said during the 2023 strike, according to Investopedia. The substantial increase in labor costs put GM at a disadvantage.

A perfect financial storm could be brewing for General Motors and the other Big Three car manufacturers, Ford and Stellantis.

Edmunds reported that 73% of consumers said they held off purchasing new vehicles due to high prices. This hesitation could exacerbate problems for GM, which now has higher costs to contend with.

“The leadership at GM must make decisions based on future earnings,” Gary Wolfram, an economics professor at Hillsdale College, told Michigan Capitol Confidential in an email. “My suspicion is that given the instability of its relationship with the autoworkers union, with GM dealing with a strike in 2019 and 2023, it will be finding a way to substitute physical capital for labor.”

Using more machinery, such as robots, will make GM less susceptible to increased wage demands of its workers, said Wolfram, a member of the Mackinac Center’s Board of Scholars. He added that the move to electric vehicles may also change the mix between capital and labor.

Profits change but labor costs of multiyear contracts only increase, said Rachel Greszler, senior research fellow of workforce and public finance at The Heritage Foundation, told Michigan Capitol Confidential in an email.

“Having gone through a bankruptcy in 2009 that was largely the result of excessive labor costs, GM’s layoffs are likely part of the company’s plans to remain competitive in the long term,” Greszler wrote.

Considering the tight labor market, with manufacturers struggling to hire and keep the workers they need, it is telling that the Big Three automakers have laid off thousands of workers over the past year, Greszler said.

“The combination of significant pay hikes in the UAW contract and losses from EV investments that auto manufacturers were effectively compelled — by government policies — to make are likely the driving forces behind these recent layoffs,” Grezler wrote.

The layoffs come after the Michigan Legislature and Gov. Gretchen Whitmer approved $600 million in taxpayer handouts for General Motors in 2022 to build electric vehicles. Those payments would be based on how much GM spends on buildings and equipment, James Hohman, fiscal policy director at the Mackinac Center, wrote in a blog post recently.

The company agreed to create 3,200 jobs from the project. If GM fails do so, it will, for a time, have to repay some of the money, with the amount determined by the number of new jobs.

“The company can also keep all of the $600 million even if it closes facilities,” Hohman said. “The state’s deal only lasts until 2031, so the company could eliminate jobs at the plants any time after that without giving the state its cash back.”

The $600 million grant to GM comes on top of the Michigan Legislature’s secret 2009 agreement that will give GM up to $3.8 billion, payable until 2030. Michigan Capitol Confidential reported that the Legislature created laws that penalized any legislator who discloses terms of the deal.

The Michigan Supreme Court ruled June 29, 2022, that the deal must be made public.