April 12, 2013/Grand Rapids Business Journal
By Lou Glazer
We started our work at Michigan Future with the question: “Where do we want to go from here?” Our answer: a high-prosperity Michigan.
We believe the goal should be to create an economy with lots of good-paying jobs, a place with a broad middle class where there is a realistic chance for families to realize the American Dream. Many areas across the country have lower unemployment, but they also have low incomes. That isn’t success to us.
What made Michigan special for folks across the planet — many of whom flocked here — for most of the 20th century was we were one of the most prosperous places on the planet. We were the place that created the American mass middle class. Largely because of high-paid, unionized factory jobs, this was the place where, if you worked hard, you were most likely to realize the American Dream.
Obviously, that was less and less true in the last decades of the 20th century and collapsed in the first decade of the 21st century. As factory jobs were eliminated here by the hundreds of thousands and nationally by the millions, high-paid factory jobs — unionized or not — went extinct.
It is now clear: What made us prosperous in the past won’t in the future. Globalization and technology have changed the world fundamentally. We either adjust to those changes or Michigan will be one of the nation’s poorest states.
Michigan’s fundamental economic challenge is that it ranks 34th in the proportion of adults with a four-year degree. In 2000, at the end of the boom years, Michigan still ranked 18th in per-capita income. We were then, as now, 34th in bachelor’s degree attainment. In many ways, 2000 marked the end of an era when you could have high prosperity with low education attainment. No more! In 2011, Michigan ranked 36th in per-capita income.
As we start to re-grow our economy, basically there are two choices. One is to stay concentrated in the industries that made Michigan prosperous in the past, primarily factories but also tourism and agriculture. But that is no longer a path to a mass middle class. Michigan's traditional engines now are characterized by slow job growth and lower wages.
This shrinking middle-class economy is what you get if you choose to be competitive with states like Indiana. It’s why we find it very disturbing that so many Michigan policymakers justified their actions the past two years as needed to compete with Indiana. Indiana is one of the poorest states in the country. Why would we want to be like it?
The other option involves positioning Michigan to once again be a place with a broad middle class. To do that necessitates transitioning Michigan away from a factory-based economy to one that is concentrated in the high education attainment sectors of the economy: health care, education, finance and insurance, professional and technical services and information. These are the sectors where job growth has been the fastest for at least two decades and where wages are now the highest. This would mean competing with high-prosperity states like Massachusetts and Minnesota.
What distinguishes Massachusetts and Minnesota from Indiana (and Mississippi)? The two defining characteristics of high-prosperity states is they are over-concentrated in the high education attainment sectors of the economy listed above and the proportion of adults with a four-year degree or more. Massachusetts and Minnesota are in the top 11 of each; Indiana is in the bottom 10 of each. This largely explains per-capita income in Minnesota being $10,000 above Indiana. It is $18,000 higher in Massachusetts.
Michigan can do far better than settling for being like Indiana. The state starts with enormous assets, most prominently one of the country’s best public higher-education systems anchored by one of planet’s preeminent universities in the University of Michigan. It also has a concentration of world-class engineering and design connected to the auto industry statewide, as well as the furniture industry in West Michigan.
Giving up on a Michigan with a broad middle class should be unacceptable. There is a path back to prosperity for Michigan, but our leaders must focus on growing the middle class, not shrinking it. That requires state policymakers who are committed to positioning Michigan to compete with high, not low, prosperity states.
Lou Glazer is president and co-founder of Ann Arbor-based Michigan Future Inc., a nonpartisan, nonprofit organization committed to being a source of new ideas on how Michigan can succeed as a world-class community in a knowledge-driven economy.