State Loses 200,000 Jobs, MEDC Finds 2,185

Why tax cuts are better than corporate welfare

According to a news release from the Bureau of Labor Statistics, Michigan's economy lost 200,728 private-sector jobs between April and June 2013, a figure equal to 5.8 percent of the state's entire workforce.

On its face, this job loss rate would mean not a single private-sector job will be left in Michigan by 2019.

Meanwhile, in the same period, the Michigan Economic Development Corp. granted special subsidy deals to a few dozen companies that promised to create 2,185 jobs. Even if all those job promises came true (the record shows only 29 percent ever materialize), it would be a drop in the bucket compared to what's needed.

Think about it: Just to stay even, more than 200,000 private-sector jobs need to be created here every three months. Yet even with millions of taxpayer dollars to hand out to lucky "winner" firms, Michigan's economic development officials could barely discover 1 percent of that figure.

But before breaking out a funeral wreath over the imminent death of Michigan's economy, here's the rest of the story reported by that BLS release: Michigan's economy also added 217,038 private-sector jobs last spring, a figure equal to 6.3 percent of the state's entire workforce.

Obviously, it makes no sense to look at just one side of this balance sheet. Adding them together yields a net gain of more than 16,000 jobs last spring — a figure worth celebrating, not a cause for funeral dirges.

The magnitude of the job churn figures in this report is entirely normal — similar figures are released by BLS every quarter. The magnitude of those MEDC job promises also is typical. What the contrasting figures starkly illustrate is just how meaningless this state's corporate welfare regime is for Michigan's economy.

That's 200,728 jobs needed vs. 2,185 jobs promised by the MEDC. If this is the best we have, we're in deep trouble.

Thankfully, it isn't. The job creation figures show that thousands of employers think they can make money by hiring Michigan workers — the only reason any jobs are ever created (nepotism aside) — and hardly any of them needed a government bribe to do so.

All this dramatically shows why policymakers need to focus on broad based improvements to the state's business climate, not just picking a handful of winners for special treatment.

Here's a specific example of what "focus on broad based improvements" looks like: On the same day these job churn figures were released, the state Senate Finance Committee approved a bill to gradually reduce the personal income tax rate from 4.25 percent to 3.9 percent. When fully phased-in, the tax cut would mean Michigan families and job providers would have around $850 million more in their pockets each year to spend and invest.

Yet in that same Senate committee meeting, opponents argued that such "small" savings would probably generate fewer jobs than letting the government take and spend this money.

Job churn figures show how shortsighted this is. When 200,000 new jobs are needed every quarter just to stay even, even small tax changes can make a big difference. They affect millions of people and thousands of businesses, not just a handful.

Letting workers, consumers and job providers keep more of their money will have far greater impact on job creation than politically directed government "investments."

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.