Examines the employment effect of nearly $100 million in grants disbursed to companies in the greater Detroit area as part of the New Economy Initiative’s mission to spur economic development in Southeast Michigan.
“The New Economy Initiative (NEI) is a collaboration of multiple foundations with the purpose of driving economic growth in Southeast Michigan through entrepreneurship and small business development. Responding to the dire economic conditions in the Detroit area, 10 foundations in Michigan stepped forward in 2007 and pledged $100 million to help turn around the loss of jobs and the loss of entrepreneurial spirit in the area (p. 3).”
“From 2000 to 2010, when employment fell to its lowest, the Detroit metro area lost nearly a quarter of the jobs it had at the beginning of the decade, and the loss of jobs in the city of Detroit was even worse. Since 2010, the employment picture has looked a little brighter, although much more needs to be done, in the words of NEI, ‘to return Detroit to its position as a global economic leader (p. 3).’”
From January 2010 to August 2015 NEI “supported, through its own grant-making and partnerships with other resources, more than 1,600 companies in the greater Detroit area, giving out 215 grants totaling more than $93 million…. NEI contracted with the Upjohn Institute for Employment Research to estimate the impact of its investment on the greater Detroit regional economy. The purpose of this analysis is to estimate the number of jobs created—both directly by the organizations supported by NEI and indirectly by the impact those jobs have in creating additional jobs across the region (pp. 3-4).”
To estimate the employment effect of the NEI, “the number and type of direct jobs were derived from the final reports of NEI grantees in which they were asked to determine the number of jobs created by the organizations they assisted (p. 4).” Additionally, “Upjohn staff interviewed grantees that reported large numbers of jobs created and NEI staff to help verify the accuracy of the estimates. Upjohn staff used a standard econometric model from Regional Economic Models, Inc. (REMI) to estimate the number of indirect jobs based on the number and type of direct jobs. Indirect jobs are created from the activities generated by the increase in income within a region that results from more people working and by some earning higher wages from an increase in direct jobs (p. 4).”
Full publication title: The Employment Impact of the New Economy Initiative (NEI) on the Detroit Region and the State of Michigan
Major Findings & Recommendations
“Estimates produced by the Upjohn Institute show that organizations supported by NEI were responsible for the creation of 7,468 direct jobs and that these jobs in turn created an additional 10,022 indirect jobs, totaling 17,490 jobs. The largest industry group impacted by NEI was Professional, Scientific, and Technical Services, which follows from NEI’s focus on funding activities related to foundational infrastructure to support entrepreneurs engaged in innovative activities, typically related to scientific and technical areas (p. 4).” The study also found that “[t]he weighted average of annual pay across all sectors in which the 7,468 jobs were created is $44,000 per job,” a figure similar to the average annual pay in the greater Detroit area for all occupations, according to the Bureau of Labor Statistics (p. 11).