Detailing the failure of Michigan’s motor vehicle factory strategy

As Rick Haglund chronicled for Crain’s Detroit Business, since General Motors in 1992 chose Arlington Texas over Willow Run for a motor vehicle assembly plant, Michigan’s economic development priority has been to compete for auto assembly and auto parts plants. That motor vehicle factory strategy has failed.

Data from the Quarterly Census of Employment and Wages, Bureau of Labor Statistics makes the magnitude of that failure abundantly clear. (The data below is from the fourth quarter of each year.)

In 1990 motor vehicle manufacturing employed 93,000 Michiganders. In 2021 it was 47,000. The state’s share fell from 37.4 percent of the nation’s to 17.9 percent. Motor vehicle parts manufacturing employment fell from 189,000 in 1990 to 123,000 in 2021. The state’s share fell from 26.0 percent to 22.9 percent.

To make matters worse, these are declining sectors of the American economy. In 1990 the two industries combined employed 1.1 percent of American workers. In 2021 it was 0.6 percent. (In Michigan the two industries combined employed 8.5 percent of workers in 1990 and 4.6 percent in 2021.)

So Michigan both chose as its economic development priority a declining industry and suffered employment declines in those industries far worse than the nation. Losing in the two industries a combined 112,000 jobs. A decline of an astonishing 40 percent.

The cost of the state’s failed motor vehicle factory strategy unfortunately goes far beyond just the loss of motor vehicle industry jobs. Since the predominant lever the state deploys to attract motor vehicle factories is subsidizing motor vehicle manufactures, it reduces the revenue needed to invest in education and placemaking. Which are the keys to attracting and growing knowledge-based enterprises which are the high-growth/high-wage sectors of the economy.

The combination of Michigan’s motor vehicle manufacturing failure and being a national laggard in knowledge-based industries growth led to a decline in total state employment from 3.6 percent of the nation’s employment in 1990 to 2.9 percent in 2021. And a decline in average weekly wages from 108.9 percent of the nation’s in 1990 to 90.7 percent in 2021.

If Michigan still had 3.6 percent of the nation’s employment there would be 855,000 more Michiganders working today. If Michigan still had average weekly wages 8.9 percent above the nation’s Michigan workers would be earning $262 more each week which adds up to $13,624 more annually for full-time, year-round workers.

It is far past time that Michigan abandon its low-tax/high business subsidy dominant economic strategy. And it is far past time that Michigan abandon its motor vehicle factory dominant economic strategy. Both have failed and will continue to do so in the future.

The goal of Michigan’s economic strategy should be good-paying jobs growth. That requires a fundamental transformation in Michigan’s economic strategy. From factory focused to knowledge-enterprise focused. From competing for business investments based on low costs to competing for business investments on high talent––particularly young adults with four-year degrees or more––concentrations focused. To do that requires substantially higher public investments in education for all Michigan children from birth through college and in creating places where talent wants to live, work and play.

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