Michigan Economic Incentives Analysis: $1.8 Billion Spent for 602 Jobs

High Cost of Job Creation in Michigan

Michigan spent $1.8 billion on economic incentives that resulted in the creation of only 602 jobs. This represents a staggering expenditure of approximately $2.99 million per job created, highlighting a significant gap between government spending and actual employment outcomes.

Analysis of Subsidy Efficiency

Even when considering broader projections, the cost-per-job remains exceptionally high. Data analyzed by Hohman regarding eight major projects—defined as those receiving over $100 million in payments and significant media attention—shows a total of $2.7 billion in promised incentives.

While the governor's office claimed these major subsidy projects would create 20,595 jobs, the math still results in a cost of approximately $135,000 per job. Critics argue that such a high subsidy per position is an inefficient use of public funds.

Systemic Issues in Government Investment

Discussion surrounding these figures suggests several systemic failures in how the state manages economic development:

Lack of Due Diligence

Historical precedents in Michigan indicate a pattern of poor vetting. One reported instance involved the state awarding a $9.1 million check to an individual later identified by locals as a known conman living in a trailer. In another case, state funds were diverted from employee retirement plans to invest in a Boston-based venture capital firm that had no obligation to invest within the state and ultimately closed after delivering low returns.

"Picking Winners" vs. Market Forces

There is a strong consensus among critics that government officials are poorly equipped to "pick winners" in the market. Arguments have been made that targeted incentives act more as bribes or selective giveaways to large corporations rather than sustainable economic drivers.

Regulatory Environment

Some analysts suggest that one-time cash transfers and tax incentives are insufficient to offset broader business-unfriendly laws and regulations. In this view, targeted investments cannot solve structural regulatory issues that discourage long-term business growth.

Proposed Alternatives for Economic Growth

To avoid the pitfalls of corporate subsidies, several alternative strategies have been proposed by observers:

• Support for Small Businesses: Shifting focus from large corporations to open, competitive programs based on project quality for smaller companies.
• State Investment Banks: Establishing state-run banks to provide low-interest loans for factory expansion, similar to models used in other global economies.
• Equity-Based Investment: Requiring that government investments come with shares in the company at market rates to ensure the state recovers its investment and shares in the profit.
• Transparency and Accountability: Implementing strict transparency requirements and criminal penalties for executives who misuse public funds.