The campaign season has been filled with claims from candidates that they will create jobs. A common strategy is to target a business or an industry for special state support and to claim credit whenever jobs are added by companies receiving support. A quick look at the job creation and loss figures for the economy as a whole shows that this approach is not a workable one.
There is a surprising amount of job creation and loss in the economy. Michigan added 214,000 jobs and lost 194,000 jobs in the fourth quarter of 2013, according to the Bureau of Labor Statistics. In just three months, one out of every 16 jobs was created and one out of every 18 jobs was lost.
The state already has its own programs to give state tax money to select businesses that locate or expand in Michigan. The most frequently used program today is the Michigan Business Development Program. As Michigan was adding 214,000 jobs and losing 194,000 jobs, the state offered 22 companies $17 million to produce 2,962 jobs.
While MBDP appears to have a better track record at converting announcements into jobs than its predecessor MEGA, the actual jobs created at these companies do not equal the number of jobs promised. They are also not likely to appear in the same quarter as announced, nor can it be guaranteed that these jobs would have located elsewhere without state assistance.
But even at its best, selecting these companies for special favors would only account for 1.4 percent of the job gains in the last quarter of 2013. And the $17 million offered to these companies has to come from somewhere, including the struggling companies that shed jobs in the quarter.
The sheer magnitude of job turnover suggests that the way to improve the economy is to enact broad-based changes to the state’s business climate. Gov. Snyder's administration has a number of accomplishments in this area — eliminating the Michigan Business Tax and enacting right-to-work, for instance.
The state should move away from the programs that use tax money in an attempt to pick winners and losers and provide a fair field for all.
Permission to reprint this blog post in whole or in part is hereby granted, provided that the author (or authors) and the Mackinac Center for Public Policy are properly cited.
Permission to reprint any comments below is granted only for those comments written by Mackinac Center policy staff.