Economic Incentives are Needed to Compete for Michigan Jobs
Michigan offers manufacturers a long list of reasons to not only locate but also remain right here in the Mitten State.
Manufacturing pride and heritage is evident as Michigan ranks in the top 10 nationally in both skilled trades and advanced manufacturing disciplines. This is in addition to having the highest concentration of engineers in the country, the national center for tool and die and mold, and a robust supply chain.
From a business tax perspective, Michigan continues to face challenges. According to the Tax Foundation’s 2021 State Business Climate Index, our corporate income tax ranks 20th in thenation, and property tax ranks 35th.
Michigan’s manufacturing legacy is an advantage but the state is locked in a high-stakes competition on a global scale. Michigan not only competes with every other state to attract and keep vibrant manufacturers with high-paying jobs, we’re also competing with countries all over the world that are working to become the next center of manufacturing.
The Bottom Line is the Bottom Line
This is where a variety of economic, training and tax incentives, as well as regulatory and cost-of-labor competitiveness come into play. And it all makes the business of attracting high-paying jobs to Michigan very complicated — and highly competitive.
“It’s extremely important that we compete every day for these types of job opportunities,” says Josh Hundt, EVP, Chief Business Development Officer at the Michigan Economic Development Corporation (MEDC). “This is truly a global economy, so we wake up every day thinking about how we can level the playing field to help make Michigan the best place for the future of advanced manufacturing.”
Making the state attractive to large capital investments starts with having an available workforce, according to Hundt. This will take skilled labor, which is perhaps the most important issue facing manufacturing.
“Talent is something that comes up in every aspect of the projects that we look at across the state,” says Hundt. “So, we’re focused on providing programs like the Going PRO Talent Fund that awards funds to employers for training, developing and retraining current and newly-hired employees.”
Hundt also referenced the Jobs Ready Michigan Program that is designed to help manufacturers address the costs associated with recruiting and training workers to be upskilled for high-wage, high-skill and high-demand jobs.
Punctuating these training assistance programs is Governor Gretchen Whitmer’s new 60 by 30 goal. The idea is to ensure that 60 percent of Michigan residents have a credential or some type of post-secondary education by 2030. It’s an initiative to help ensure Michigan has the educated and prepared workforce needed for the manufacturing jobs of the future.
While a skilled workforce is critical to filling high-paying manufacturing jobs, today’s hyper-competitive landscape also requires tangible cost benefits to help draw business to Michigan. Other states very much want our manufacturing assets and are working every day to attract away our companies and incentivize new job creation in their own states.
Ask Mike Johnston, MMA Vice President of Government Affairs, and he’ll tell you that historically Michigan has actively worked at attracting job creation because, if we aren’t active, than other states win.
“That is why we agree with the Governor in her call for reinstating the Good Jobs for Michigan plan,” says Johnston. “Michigan needs to stay in the job attraction game to compete effectively with other states for new jobs. There is a clear consequence for not competing for jobs — losing jobs to other states.”
Since then, these economic development incentives have proven successful and recently evolved into the Good Jobs for Michigan (GJFM) program that many know today. Though this three-year-old program has the support of the Governor’s office and many others in state government, the program sunsetted in 2019 and is pending legislative reauthorization.
“We need programs like GJFM to compete while continuing to drive our strong Michigan economy forward,” continued Johnston. “It’s credited with helping to attract at least six large-scale projects that either relocated to Michigan or expanded here.
“Just a couple examples include Pfizer’s medical device manufacturing facility in the Kalamazoo area and the new FCA (now Stellantis) manufacturing plants in both Sterling Heights and Warren,” added Johnston. “These and other wins have added thousands of manufacturing jobs in Michigan.”
Grants Save Businesses
Public-private partnerships came into sharp focus about a year ago at the start of the pandemic. Without federal assistance that came in the form of the Paycheck Protection Program (PPP) and state programs, many companies would not have survived, says Mark Burton, Senior Partner at Honigman Law Firm.
Prior to joining Honigman, Burton served as president of the MEDC and oversaw the organization during the COVID-19 pandemic. Thus, he was intensely focused on figuring out what federal and state assistance was available, when it would be available, and how to get it to businesses as soon as possible.
“During the front end of the crisis, the incentives really helped,” says Burton. “Also, state and federal grants allowed businesses to retool during the early stages of the virus, enabling them to stay in business while also helping communities across the state with additional PPE. So as part of that lesson, we at the MEDC were able to continue to work with business leaders, especially in the manufacturing sector, to find more available economic and incentive tools.
“The idea was to utilize the influx of federal dollars available to us to maximize the opportunity here in Michigan, which in large part comes from the manufacturing heft that we've always had in the state,” added Burton.
Burton encourages manufacturers of all sizes to work with the MEDC or your local and/or regional economic development organizations to develop strategies for capitalizing on all that is available to you and your company.
“I believe that, through the public policy debate, as well as both the executive and the legislative branches here in Michigan, there will be additional economic development tools that will create even more growth for current and future Michigan-based manufacturing,” added Burton.
Check out A Brief History of Michigan’s Economic Development Programs
The Multiplier Effect
Attracting large-scale corporate investments such as the Pfizer facility in Portage has direct and indirect benefits. Studies have shown that every new manufacturing job creates and supports 1.7 other jobs. From restaurants and childcare to salons, grocery and charities, to a larger tax base that supports city services for all, the ripple effect of having more high-paying jobs that pour more money and resources back into the local economy makes a huge impact.
“Think about it,” says MMA’s Johnston. “It’s a dramatic impact when you bring in 5,000 people and they're making an average annual compensation of $79,320. Do the math. It injects hundreds of millions of dollars into local commerce just through wages.”
There’s also the suppliers. On average, a car has between 10,000 to 15,000 parts and components and all of those are made by suppliers — the supply base is as big or bigger than the OEMS themselves.
“Many of (the suppliers) are right in Michigan,” says Johnston. “So, there's a huge economic multiplier effect through the supply chain.”
The economic multiplier effect has been in full effect in Detroit with the announcement of a $2.5 billion expansion project from Stellantis that will add nearly 5,000 good-paying jobs in the local community.
And the growth doesn’t stop there. Auto component manufacturer Dakkota Integrated Systems (DIS) has also announced a multi-million-dollar expansion in Detroit, adding another 419 jobs. Dakkota’s expansion is a direct result of the Stellantis investment as DIS will be supplying the instrument panel for the new Jeep Grand Cherokee.
DIS worked closely with the city of Detroit, the Detroit Economic Growth Corporation and the state to move forward on the project, says Mark McCauley, COO for Dakkota.
“We worked hand in hand with them to identify our new property,” says McCauley. “They also helped us with the various approval processes and any complications that popped up.”
Ford Motor Company is also making large capital investments in Michigan, incentivized with economic development efforts. Ford announced in late 2019 that it will be investing $1.45 billion in Wayne County manufacturing facilities that will potentially add 3,000 jobs. In October of last year, General Motors also announced over $150 million in investments in existing facilities to prepare for the burgeoning electric vehicle market. These are just a few examples of investments by these companies and other manufactures across the state.
While the validity of economic and tax incentives for business has been the subject of debate for decades, history has shown that development and economic incentives are key factors to attracting and retaining manufacturers — and they just work. For manufacturers looking to expand, these incentives become tiebreakers in the late stages of location decisions. For the state of Michigan and its communities, these programs help achieve economic, social and developmental goals. Everything from workforce training and infrastructure to private investment and more benefits.
And in many cases, it’s achieved by simply capturing the 4.25 percent of employee income tax, which essentially amounts to offering money that the state never had in the first place because those jobs wouldn’t exist if the company went to another state and didn’t bring its jobs and new investment to Michigan.
Think of it as giving away nothing for a very big and enriching something.
The new Dakkota Integrated Systems components facility is located on the site of former Kettering High School on the East Side of Detroit. The company chose to preserve the large K at the corner of Van Dyke and Hendrie as a testament to the community’s history.