Out of Control Policy Blog

Green Jobs Illusion

When Democratic Governor Jennifer Granholm entered the governor's mansion, she promised to turn Michigan's economy around with an investment in high-tech, green jobs. Well, things haven't turned out so well. Over the last decade, the state has seen 870,000 jobs disappear, 632,000 on her watch. How many jobs does the governor's office claim it has "created" using tax incentives, abatements, and other inducements? According to the Washington Post:

Four years ago, Jennifer M. Granholm set out to remake her state, which took an exceptional walloping with the decline of the auto industry, as a pioneer in creating environmentally friendly jobs. Today, however, jobs are still disappearing much faster than she can create them, raising questions about how long it will take Michigan and other hard-hit states to find new industries to employ their workers.

Since taking office in 2003, Granholm has created 163,300 positions, her office says. She expects that a recent infusion of more than $1 billion from the Obama administration aimed at nurturing car battery and electric-vehicle projects will generate 40,000 more positions by 2020.

In the past decade, however, as the auto industry has grown smaller, Michigan has lost 870,000 jobs -- about 632,000 of them during Granholm's tenure. The number is expected to reach 1 million by late next year, the end of her term.

Personal charisma (or Karma) isn't enough to turn an economy around. Indeed, elected officials probably can do very little to steer an economy. The best they can hope for is to create a general business climate that supports investment and entrepreneurship.

The Mackinac Center for Public Policy has chronicled the poor performance of Michigan's state economic development agency for years. The Center's most recent report notes:

The record, however, shows that most of the promised jobs [from the Michigan Economic Development Corporation] never come to pass. Specifically, the Mackinac Center analysis found that job promises contained in MEGA tax credit agreements are actually more than triple the eventual job counts: For every 1,000 jobs that the MEDC announces, only 294 are created.

Moreover, the jobs that do appear are actually associated with a net employment loss. The study found that giving $1 million in tax credits to manufacturing firms was associated with the loss of 95 manufacturing jobs in the counties where the projects were located.

MEGA has awarded over $324 million in tax credits since 1995 — out of $3.3 billion offered — and has already ramped up its operations. In just the first six months of 2009, MEGA entered into agreements promising up to $1.7 billion in future tax credits.

MEGA does not improve Michigan's economic prospects, because
it does not change the institutions that govern Michigan's economy.
Instead, it changes the rules only for a small percentage of Michigan businesses. Jobs "created" through MEGA deals equal just 0.45 percent of jobs in this state. True, this is only one of the state's programs, and it offers dozens more at the state and local level. But experience with other programs shows they are also questionable.

So much for the optimistic projections of industrial policy advocates. If it can't work in Michigan, what makes them think it will work on the national level?

Samuel Staley is Research Fellow


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