Corporate documents: Lansing politicians should care about science | News, Sports, Jobs
During the coronavirus pandemic, there has been a lot of talk about who is and who is not “following the science”.
If evidence and academic work are, in fact, important, politicians should pay attention to what the research has to say about something else: government grants for some for-profit companies.
The results are clear: although many politicians like them, they don’t work.
Senate Bill 615, introduced in late August, is a repeat of the Good Jobs for Michigan grant experiment, which expired in 2019. This time it’s called the Michigan Employment Opportunity Program.
The Good Jobs Experiment was itself a repackaged version of the Michigan Economic Growth Authority, or MEGA, which cost Michigan taxpayers billions with little in the way of results.
As with Good Jobs, the new program would send Treasury checks to certain companies. The state would keep track of how much income tax it collects from workers at these companies, and then send the money to their employer rather than spending it on public services.
The amount each business receives would be based on the number of new jobs it creates and what it pays those employees, but it could be 100% of what employees pay in income taxes.
The legislation would cap statewide payments at $ 300 million and expire at the end of 2026.
It’s more of the same failed approach from the past.
Whether the state pays a grant from its General Fund account or from a special fund makes no difference. State elites would again distribute favors through a corporate incentive program, although almost all scientific evidence indicates that such programs are, on the whole, ineffective.
In 2020, the Mackinac Center analyzed state incentive programs dating back to 1983. We compared information from previous state programs with a database, the National Establishment Time Series, which tracks employment. and sales in businesses over time.
We found that only three of the nine types of programs we looked at had a statistically significant impact on job growth (i.e., job gains could not be explained by chance) .
Even then, the benefits came at the hefty price of $ 600,000 in incentives offered per job.
Our study, entitled “Economic development? State Handouts and Jobs ”, revealed that MEGA, on which the Good Jobs program and the newly proposed program are based, costs $ 125,000 in incentives offered per job created.
Six scientific analyzes, including our own, examined MEGA and five found no or negative impact. A seventh study, titled “Did Incentives Help Municipalities Recover From the Great Recession?” », Described MEGA as a debacle.
Researchers who have looked at similar programs elsewhere have found an equally dismal record.
Economist and university professor Nathan Jensen published an analysis of the Promoting Employment Across Kansas program in 2014.
Michigan’s new Senate bill follows the way PEAK was set up. PEAK allows businesses to capture employee income taxes (up to 95%) that would otherwise go to the state. Jensen found that companies subsidized by this program were no more likely to create jobs than similar companies that did not.
An excellent academic review of several of the hundreds of studies on the subject of government business grant programs was published in 2004. It concluded that “there are very good reasons – theoretical, empirical and practical – to believe that development incentives impact the location of the business and investment decisions.
Nothing published since suggests that the new programs will have better results.
You may be asking yourself, “What are lawmakers presenting, then, in opposition to this mountain of research showing that such programs are ineffective?” ”
The short answer is “next to nothing”.
Indeed, their evidence is comparable to: “The program works because we say it is.”
Only once in 25 years of political work have I seen politicians or their lieutenants advocate for these programs using independent, scholarly research. Even then, it involved redirecting a pointed question.
The anecdotes that proponents of such programs cite as successes come from the PR spin doctoring, not from unbiased scholarship grounded in a search for the truth.
Members of Lansing’s political class owe us proof that their corporate charity programs are working before adopting another. Many academics with no interest in Michigan’s political struggles have analyzed data from business grant programs for years.
They repeatedly concluded that they were not working.
It is imperative that those pushing SB 615 show hard evidence to the contrary or abandon their efforts to distribute an additional $ 300 million to the companies chosen by the state.
Michael LaFaive is the Senior Director of the Morey Fiscal Policy Initiative for the Mackinac Center for Public Policy.