Corporate subsidies cost Michigan $335M; 40% of deals create low-paying jobs

• Gov. Gretchen Whitmer has bet big on corporate subsidies, promising they will bring in ‘good-paying jobs’
• Michigan pledged $335 million last year to 83 companies that plan to create 11,408 jobs, records show
• In all, 40% of jobs created pay less than average, and nearly 90% of incentives fund manufacturing jobs, Bridge found

Time and again in 2023, Michigan Gov. Gretchen Whitmer pledged that using corporate incentives would help fund “good-paying jobs.”

From a pickle factory in the Thumb and recycling center in Muskegon to a startup factory making energy-efficient glass in rural southern Michigan, Whitmer’s public pronouncements made clear the investment of taxpayer money would pay off in jobs with good wages.

“We will continue competing against other states and nations to bring projects home to Michigan, creating good-paying, high-skills jobs,” Whitmer said in September, announcing a handful of projects in southeast Michigan.

Those wages are rarely disclosed in public announcements, however, and a Bridge Michigan investigation found 4 in 10 of the jobs to be created by the subsidies will pay less than $45,510, the state’s median annual base wage.

In all, last year, Whitmer’s administration committed $335 million from the state’s main subsidy programs to help 83 companies create 11,408 jobs. 

That’s an investment of $29,000 per job. The median pay of those jobs: $50,689, about $24 per hour. Half of the promised jobs will pay less than that. 

In all, Michigan committed $228 million to subsidize jobs that pay less than the state median wage, according to Bridge's analysis of subsidies by the Michigan Economic Development Corporation (MEDC.)

“There has been way too much focus on the number of jobs … and not enough on wages,” said state Sen. Mallory McMorrow, D-Royal Oak.

She said Michigan can do better than “focusing our incentives and our attraction efforts on minimum wage jobs.”

McMorrow is among the lawmakers — including Whitmer’s fellow Democrats — pushing to change a state incentive strategy that has largely relied on heavy investment in manufacturing companies.

Some legislators want to use $100 million per year in deferred taxes to target higher-paying jobs and help grow Michigan’s stagnant population. Republicans want to restore research and development tax credits to grow wages.

 “Gov. Whitmer prefers to trumpet announcements of subsidized jobs that end up paying below-median wages,” said Rep. Andrew Beeler, R-Port Huron, adding that cutting taxes and reducing bureaucracy could grow the economy.

“We should be … cultivating a healthy, growing economy for everyone, not hunting for the next big prize that’s too good to be true.”

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Whitmer, through her aides, declined multiple requests for comment from Bridge. But she has said the subsidies are essential for Michigan to remain competitive, especially as the auto industry transitions to electric vehicles.

Otie McKinley, spokesperson for the MEDC, said pay is only one factor in incentives. So are the levels of investment by companies, as well as the impact on local economies. 

Indeed, while 40% of jobs that will be created pay less than the median wage statewide, 84% pay more than their regional median wage, which McKinley said is a key factor in state decisions about incentives.

“There is no one-size-fits-all (plan) when it comes to incentive packages, and how they are structured,” McKinley told Bridge. 

“We continue to seek projects with the greatest impact on economic prosperity.”

Lou Glazer, president of Michigan Future Inc., said lawmakers “should be debating” whether it’s a “reasonable strategy” to use tax money for jobs that pay less than $50,000.

“The strategy that Michigan needs to be prosperous is high-wage jobs,” said Glazer, who co-authored a recent study that examined wage growth in Michigan.

While manufacturing fueled Michigan’s prosperity in the 20th century, pay in the industry has fallen. In 1999, Michigan ranked 16th in among states in personal income per capita. 

Now, it is 39th and could be in the bottom 10 next year, Glazer predicted.

Ford creates urgency

Michigan upped the ante for job subsidies in 2021, with a bipartisan vote among lawmakers to approve $1 billion for large-scale incentives to attract mega projects with thousands of jobs.

The vote came as Whitmer and lawmakers were reeling that fall after Dearborn-based Ford Motor Co. invested $11.4 billion for new electric vehicle battery production in Kentucky and Tennessee. 

“A lot of (lawmakers) woke up that morning, those that weren't really excited about incentives, and began to understand that (Michigan isn’t) in the ball game,” then-state Sen. Ken Horn, R-Frankenmuth, told Bridge in 2021.

In response, legislators and Whitmer fast-tracked the creation of the Strategic Outreach and Attraction Reserve (SOAR) fund, uniting Democrats and Republicans with unusual urgency as waves of additional EV battery-related deals were taking shape in the U.S.

Last year, Michigan publicly funded 83 businesses. Bridge’s analysis found:

• Nearly 88% of last year’s business subsidy dollars went to manufacturers.  Among them, 21 expected to pay less than $22 per hour. Four others didn’t disclose pay, while 30 companies paid more. Five companies told the state the average pay for their new jobs would be less than $20 per hour (under $40,000 per year).
• The lowest average subsidized pay was $16.60 per hour, or $34,528 per year, to auto supplier Shyft Group of Charlotte. The state contributed $800,000 for a planned $16 million expansion to build electric fleet vehicles. The project is expected to create 680 jobs.
• Ten companies, mostly tech-based, pledged average annual wages of more than $100,000. But tech jobs accounted for just 9% of the dollar value of 2023’s incentives. The highest average pay was promised by electric truckmaker Scout Motors of Novi at $193,128.
• Seven of the state documents released to Bridge did not include pay details. Among them was Frankenmuth’s Bavarian Inn, which Whitmer said would bring “good paying jobs” when she announced a $750,000 grant for the hotel to build a new water park.

State officials emphasize incentives are performance-based and companies don’t  receive money until they fulfill new job or investment requirements.

Also of note is that a company’s average wage may not mean the lowest-paid job that is part of the incentive, since averages can include high-paid executives or managers.

Ford, for example, received $210 million in incentives in 2023 for a planned $3.5 billion battery factory in Marshall that was expected to create 2,500 jobs that averaged $45,000 per year.

The subsidy was part of $2.1 billion in incentives that included property tax breaks, money for road repairs, land development and other sweeteners. 

The corporate grant award is the largest from 2023 and the only SOAR award in this analysis. Ford’s subsidy accounts for about 60% of the incentive total and 20% of the jobs promised in 2023. 

Since then, however, the EV market has cooled. Ford has cut the number of jobs it expects at the site to 1,700 but said they may pay more because of a new contract with the United Auto Workers. 

Construction hasn’t started, and the state says the automaker has not received any direct funding. Negotiations continue about how the project downsizing may affect the incentive, McKinley said. 

The impact

While much of the incentive process occurs in public, details about wages are often difficult to track down.

Most incentives are approved during 11 annual public meetings of the Michigan Strategic Fund, a 13-member board appointed by the governor that oversees the Michigan Economic Development Corp.

But the board isn’t required to vote on subsidies of less than $1 million. That happened 61 times in 2023, records show.

After votes, information about projects is announced publicly by the MEDC or Whitmer and eventually added to the agency’s website. 

Bridge found that none of the news releases from the governor’s office and MEDC included specifics on pay. Neither did the project summaries on the MEDC’s website. 

In the documents provided to Michigan Strategic Fund board members before they meet  — including briefing memos and project summaries — 56 of the awards had no mention of wages for the companies receiving incentives, while wage information was included online for 27 companies.

Bridge received information about subsidies that weren’t publicly posted by requesting it from MEDC.  Seven still did not include information about wages.

The lack of accessible pay data prevents honest debate about whether the incentives are working, experts said. 

“If the public is providing funds to help encourage job growth, ideally you would want reporting that enables you to judge the quality of the jobs,” said Tim Bartik, senior economist at the W.E. Upjohn Center for Employment Research in Kalamazoo. 

Nationwide, disclosures about corporate subsidies are often incomplete or nonexistent, making comparisons between states and conclusions about the effectiveness of programs difficult.

Just 12 of 250 state programs nationwide fully report both promised and actual wages, according to a 2022 report by Good Jobs First, a Washington, D.C. nonprofit that promotes government accountability.

Exceptions include Illinois and Nevada, where a 2015 law requires the state to disclose recipient-level data for various tax abatements and other incentives.

Unlike Michigan’s annual report on MEDC performance — which is shared with the Legislature every spring —  Nevada publicly lists wages and job diversification, with percentages of industries represented.

“Without company-specific, deal-specific disclosure, it’s difficult for the public to get at even the most basic return on investment, accountability or equity questions,” the Good Jobs First report concluded.

The lack of timely information on wages tied to subsidies in Michigan is troubling, said John Mozena, president of the Grosse Pointe-based Center for Economic Accountability, which opposes incentives.

“Economic development agencies aren’t putting effort into collecting this kind of data and making it available for analysis because they don't want to answer the inconvenient questions that come up when people are able to actually run the numbers,” Mozena said.

The case for lower-paying jobs

While pay rates aren’t always readily available, some experts say that investing in companies that create lower-paying jobs is still important in smart economic development.

This month, MEDC official Josh Hundt told lawmakers the agency is “focused on those jobs that will increase the median income in a community.”

Nationally, some states advocate considering whether jobs that receive incentives offer a “good career pathway,” said Ellen Harpel, founder and CEO of Smart Incentives, a Virginia-based analytics and consulting firm for communities.

“These are jobs that offer a chance for advancement, skills development, or other training or credentialing opportunities,” Harpel told Bridge. “They are typically intended to support jobs that enable greater economic mobility, especially for individuals who don’t necessarily have a four-year degree.”

The MEDC takes advancement into consideration as it evaluates businesses. 

Last year, two companies  —  Jireh Metal Products in Grandville and Aircraft Precision Products in Ithaca — both expected average pay of under $40,000 per year as they received a combined $300,000 in public funding. 

In both cases, the MEDC said the jobs offered opportunities for workers to increase their skills.

In many areas of Michigan, there may not be enough eligible workers to fill jobs created by tech companies or others that require college degrees, said Bartik of the Upjohn Institute.

That’s no excuse, however, for not making public exact pay rates for companies receiving subsidies, since the economic impact of the incentive should raise pay in the local labor market, Bartik said.

“When firms come in and pay a higher wage, it can have positive effects not just on that company, but on other companies nearby because they have to compete with this employer,” he said. 

Raising the wage bar

Debate is increasing as some lawmakers consider incentive reforms, which may include higher wage goals.

Sen. Sam Singh, D-East Lansing, is spearheading the return of the Good Jobs for Michigan incentive program. Now known as High-wage Incentive for Regional Employment (HIRE), it that would allow up to $100 million per year in payroll taxes to be kept by the businesses approved for the program.

Businesses that qualify for the subsidy would have to create jobs that pay up to 175% more than what area workers already earn, according to initial drafts. 

Whitmer recently called HIRE one of her key economic goals, along with R&D tax credits and making it easier for companies to obtain tax-free Renaissance Zone status. 

On March 1, the governor said her $60 million proposal for a new Innovation Fund could help companies “create thousands of good-paying jobs in industries of the future.”

Her prepared statement did not define “good” pay.

McMorrow said the Senate may take months to debate her incentive reform package that includes focusing some funding on community investments instead of directly to businesses.

Michigan isn’t prepared to cut off incentives, McMorrow said, but she said lawmakers could make them better and aim for higher wages.

In a state where half the workforce makes less than $22 an hour, McMorrow acknowledged that, “politically, it’s really challenging” to focus on better-paying jobs.

Critics of subsidies such as state Rep. Dylan Wegela, D-Garden City, said reforms don’t go far enough and there should be “lots and lots” of restrictions to ensure that, if Michigan grants subsidies, they pay for higher-paying jobs.

“We’re missing the mark,” Wegela told Bridge.

— Mike Wilkinson contributed