State jobs subsidies have a 91% failure rate

When Hummer promised to invest up to $9.4 million in a new headquarters in Detroit or Auburn Hills in 2009, the Michigan Economic Growth Authority approved the company for $20.6 million in state tax credits.

The project would create 300 direct jobs and 640 indirect jobs, the Detroit Free Press reported.

But that never happened.

Jobs deals the state conducted from 2000-2020 quietly and almost completely failed, according to a study from the Mackinac Center for Public Policy. Of all the jobs projected, 91% did not get created. The study looked at headlines from the Detroit Free Press to identify deals between the state and various businesses.

While companies promised 123,060 jobs through subsidy agreements, only 10,889 materialized, the study concluded. Worse, half of the companies awarded deals created no jobs at all, and just 15% met or exceeded their job projections.

The study concludes that lawmakers shouldn’t blindly give away taxpayer money to favored companies and hope that new jobs will result.

Since 2023, Michigan has granted $4.6 billion in corporate subsidies.

This study should be a wakeup call to lawmakers, politicians, and taxpayers, said James Hohman, who wrote the study and is director of fiscal policy at the Mackinac Center.

“I don’t blame the media. They’re just responding with their own news judgment, and the Detroit Free Press reporters are covering the beat like every other newspaper,” Hohman said. “The stories are newsworthy. And they are incontrovertible. But lawmakers and administrators don’t have the track record to demonstrate that things happen the way they say, and reporters ought to know that."

In a rational world, the study should “cause the dissolution of the Michigan Economic Development Corporation,” John Mozena, president of the Center for Economic Accountability, told Michigan Capitol Confidential in an email. “Any private sector investment firm that got caught delivering just nine percent of its promised investment returns would get shut down, and the people who ran it would be sued and possibly even prosecuted.”

The MEDC should explain why they think future job creation subsidies will produce better results than they have over the last 20 years, Mozena said.

“Anyone who’s looked at these deals from the outside knows that their real purpose isn’t to create jobs. Rather, it’s to make voters believe that politicians are responsible for creating jobs. So in that regard, the headlines were ‘mission accomplished’ for the MEDC in its efforts to help Michigan’s politicians get reelected and enrich the state’s automakers and other politically connected big businesses.”