News Story

Special Deals Yield Far Fewer Jobs Than Projected

About nine months before an Auditor General's report questioned the accuracy of job projections in tax incentives handed to companies by the state, the Mackinac Center for Public Policy did its own study highlighting the problem.

On Aug. 31, 2009, the Mackinac Center for Public Policy's Michael LaFaive and James Hohman reviewed data from 219 credits from 1995 to 2004 involving the Michigan Economic Growth Authority.

The MEGA agreements are tax incentives designed to induce businesses to locate in Michigan. In return for the tax incentives, the businesses pledge to create new jobs.

The Mackinac Center found company projections of jobs seldom matched the real-life jobs created. In fact, their investigation of MEGA deals found that of the 61,043 jobs projected in news releases, companies only created 17,971 jobs. The Mackinac Center study states that for every 1,000 jobs companies projected they would create, about 294 jobs were actually created, on average — about 29 percent.

That report was vindicated by the Auditor General report that was released April 23. The report looked at company projections from 2005 through 2007 and concluded that about 28 percent of projected jobs came to fruition.

The Auditor General report stated 184,951 new jobs were projected while 52,286 were actually created.

"It confirms the fears we had," Hohman said. "The fear was they weren't really paying attention and that the jobs weren't real and the state was still giving out credits."

The Mackinac Center's analysis of MEGA's jobs impact didn't include the "retention credit jobs" which are defined as jobs that already existed but that were supposedly threatened if the state did not approve the tax credit.

Hohman said at the time of the Mackinac Center report, the Michigan Economic Development Corp., which administers MEGA, reporting figures included only one retention credit.


Recent Michigan Capitol Confidential coverage of state economic development planning:

Lawmaker Says 'Willful Neglect' Is the Rule at Embattled State Agency

Analysis of Michigan Film Subsidies: Two Years, $117m — and No Film Job Growth

State Websites Give History a Rewrite

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.