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According to the U.S. Census Bureau, Michigan created 554,000 jobs in 2003, the latest available year for this particular data. It’s virtually certain that in each year since then the figure has been in the same ballpark — 500,000 or more new jobs. Given these extraordinary numbers, one might wonder why our economy is not the wonder of the modern world, rather than in the midst of a one-state recession.
The answer is, in 2003 Michigan also lost 545,000 jobs, and in succeeding years that number has also surely been of the same magnitude. In 2002, the figures were 587,000 jobs gained and 591,000 lost.* These job loss/gain quantities represent an overall employment turnover of around 10 percent of the entire state work force. In other words, at any given moment one in 10 jobs that exist right now will have disappeared in a year, and approximately the same number of new ones will be created.
The "job churning" these figures describe is not unique in Michigan — every state experiences comparable turnover. Nationwide, more than 10 percent of all jobs disappear every year, and in recent years slightly more than that have been created.
This is the dynamic U.S. economy at work, and it’s one of the reasons we have been more successful in generating economic growth in recent decades than, say, Europe, which has dampened the churn with restrictive labor laws that make it harder to create or eliminate jobs. For most of the past quarter century, the U.S. economy has grown at double the rate of Europe’s, and our unemployment rates are typically much lower as well.
Those growth and unemployment statistics illustrate the value to workers of not making employers reluctant to add employees who they know will be very hard to dismiss. In a fast-changing world economy characterized by rapid innovation, more high technology and increasing trade volumes, these growth disparities dramatically illustrate the economic value of having a flexible workforce.
Beyond that, though, the state job churn figures show something else: The utter futility of government "economic development" programs aimed at selecting particular firms or industries to be the beneficiaries of discriminatory favors in the hope that they will be the "job providers of the future." The number of jobs supposedly created through all the various direct and indirect subsidies granted by state and local governments are a drop in the bucket compared to the ocean of job churning that takes place every year in the dynamic U.S. economy.
Given the magnitude of these job churn figures, state "economic development" officials and politicians should be embarrassed by press releases they issue claiming that various "winners" they have selected "created" 75 jobs here or 2,000 jobs there.
More than 500,000 jobs are created in Michigan every year? Amazing. Who predicted where they would be created? No one did. No one possibly could predict this — certainly not the central planners at the Michigan Economic Development Corporation.
Michigan loses more than 500,000 jobs each year!? How can we possibly find jobs for all those people? "We" cannot. But unpredictably, individual entrepreneurs and investors who think they can make money by creating jobs do. Every year.
Since it’s unpredictable, we should stop trying to predict, which means no more picking winners and losers for targeted tax credits, abatements, "private activity government bonds," selective infrastructure subsidies and all the rest of the "economic development" empire politicians and bureaucrats have erected.
Instead, we must accept the reality that there’s only one way to ensure that over time the number of jobs created in this state exceeds the number that disappear: Establish conditions under which investors and entrepreneurs really can make money by creating jobs here, including lower taxes and major reforms of state environmental and labor regulations.Since we can’t predict who will try, those conditions must apply equally to all entrepreneurs and investors, not just those selected through an intrinsically futile process of government trying to pick winners and losers
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*The 2002 and 2003 job churn figures cited here may confuse some because the net jobs lost or gained are not the same as those shown in the more familiar monthly establishment and household surveys, which show increases or decreases in the absolute levels of payroll and overall employment, respectively. Instead, the dynamic employment data from the Census Bureau is an amalgamation of data from at least six different sources. Finding the sources of the relatively small differences between the figures in this and those other data series is possible, but is not relevant to the purpose of using these findings to illustrate the job churning that is a fact of life in Michigan’s and the national economy.
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Jack McHugh is a legislative analyst and Michael D. LaFaive is director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy, a research and education institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.
The Mackinac Center for Public Policy is a nonprofit research and educational institute that advances the principles of free markets and limited government. Through our research and education programs, we challenge government overreach and advocate for a free-market approach to public policy that frees people to realize their potential and dreams.
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