Michigan is doing a fine job of providing large corporations with billions of dollars in support to maintain and grow their operations here.
But is the investment worth it? Would it be better to use public incentives to nurture and attract more startup businesses in Michigan?
Consider, if the state wound up contributing $1.75 billion in planned incentives for Ford Motor Co.’s BlueOval Battery Park plant now under construction in Marshall, it works out to $700,000 in taxpayer funds for each job created.
That’s based on what was Ford’s initial $3.5-billion plant investment that called for 2,500 workers being paid an average wage of $45,136 per year. But things have changed dramatically since the EV battery plant was announced two years ago.
Sales of electric vehicles have since tanked due to high costs, limited range, and the lack of a national battery charging network. As a result, automakers are pulling back from EV production and Ford’s Marshall plant will now be much smaller.
Rather than throwing so much money and incentives at big corporations, why not take a larger portion of public economic investments, mix in added support from colleges, universities, and foundations, and earmark them for startups?
At the same time, raise the stakes with a bold and audacious campaign that provides money and incentives for new businesses. Take $1.25 billion that lawmakers readily furnish for large projects and offer startups from around the world $50,000 each to establish their operations in Michigan over a given period of time.
That equates to 2,500 businesses, the same number of workers Ford would have originally hired at its Marshall facility. The difference is emerging companies, if successful, wind up creating new jobs, while the workforce in Marshall remains the same.
Granted, the track record for startups is daunting, but not insurmountable. According to 2023 data from the U.S. Bureau of Labor Statistics, 23.2 percent of new businesses failed after the first year, and half of the companies were still around after five years. The figures don’t account for mergers and acquisitions.
Yet, look at the upside. If a handful of those businesses wind up creating 10,000 jobs, the state’s economic output would be much larger. Touting the successes to a global audience would generate even more interest in setting up shop here.
In turn, with a huge supply of office space generated by a rise in remote workers, along with a rich network of colleges and universities, there’s plenty of space to put startups. A deep ecosystem of support organizations is in place, as well.
For example, there’s TechTown Detroit, an early player on the startup support scene launched by Wayne State University, Henry Ford Health, and General Motors Co., along with Detroit Venture Partners, Newlab Detroit, Beacon MFG, OU INC, Ann Arbor SPARK, and more.
In addition, there’s a promising initiative called Innovate Michigan, announced in May and led by the Detroit Regional Chamber and the University of Michigan, to keep skilled graduates from leaving the state and help identify financing and other incentives for businesses founded by researchers.
Standing pat and retreading longstanding economic models, which is the playbook of Gov. Gretchen Whitmer, needs to change. Now in her sixth year in office, Michigan ranks 40th in Forbes’ 2024 ranking of the best states to start a business.
Which begs the question, with more business incentives awarded than ever before in Michigan, why aren’t we No. 1?
R.J. King
