Section » Michigan Cities
Why Young Talent?
There are many who question why it is that folks like us place such a high priority on retaining and attracting recent college graduates. Why pick one demographic group over the others? Aren’t they all important?
No one asked that question for the past century when we paid special attention to high paid factory workers. And for more than a century as we continue to pay special attention to farmers. We did both because we thought their success enriched us all.
Today the role that high paid factory workers played for the past century is now being played by mobile talent. Young professionals will do fine wherever they go. But if they choose not to live and work in Michigan its the rest of us who are the losers. Because, to quote Forbes publisher Rick Karlgaard, “where they go, robust economic activity will follow”.
So the overly simplistic answer to why pay special attention to young professionals is: its the economy stupid! We close all our presentation with the tag line: either we get younger and better educated or we get poorer.
Michigan’s demographic trends are that we are aging far quicker than the country and that we are stuck in the mid thirties in college attainment. In a knowledge-based economy, that is a recipe for being one of the poorest states in the nation. An important reason – and the most promising way to reverse those trends – is we have not created the kind of places where our college educated kids and grand kids – and their peers from across the planet – want to live and work.
Some facts from our Young Talent in the Great Lakes report make crystal clear the magnitude of the challenge. Metro Detroit and Grand Rapids have fifty percent fewer young professional households than metro Chicago and Minneapolis. That is a 35,000 household gap in metro GR and a 140,000 in metro Detroit. Its hard to imagine any other demographic group with that kind of disparity.
Why do metro Chicago and Minneapolis matter? They are the most prosperous regions in the Great Lakes. With per capita incomes roughly twelve percent higher than metro Detroit and twenty five percent higher than metro GR. And the major reason for that gap: the proportion of adults with a four year degree. Its by far the single best predictor of prosperity.
The maps in the report dramatically depict why vibrant central cities matter. Young professionals – the most mobile of all demographic groups – before they have kids are increasingly concentrating in central city neighborhoods that are high density, mixed use and walkable. When they have kids they move to the suburbs. But because mobility declines dramatically as you get into your thirties and have kids, its the suburbs of the city they live in, not Michigan’s, where most will raise their kids.
The numbers: in the City of Chicago there are 226,000 young professional households; 43,000 in Minneapolis and St. Paul combined; in Detroit 15,000 and in Grand Rapids its 10,000.
So young professionals are the group we are having the most difficulty getting to live here and they are the most important to future economic success. That is the reason to make them a priority. Somehow we have failed to understand what seems like common sense, that if we don’t create a place where our own college educated kids want to live, we will not have a vibrant economy in the future. Its that simple!
State Budget Part II
I had a chance a few weeks ago to lay out for the State Board of Education how I would deal with the state’s long term structural budget deficit. Here is the agenda I presented:
1. Restructuring the Michigan tax system so that it produces adequate revenue now and, most importantly, grows with the Michigan economy long term. That means increasing income taxes and expanding the sales tax to consumer services. It should be done in a way that eliminates the MBT surtax and possibly lowers other business taxes.
2. Restructuring state and local spending. The deficit Michigan faces is more structural, than cyclical. Although, the current great recession makes it much worse. Over the decade we have gotten poorer: falling from eighteenth to thirty seventh in per capita income. Getting poorer means you can afford fewer publicly funded service. No matter what you do with taxes, we need to cut low priority services and reduce compensation to state and local public employees and retirees. Hard to do, but essential.
3. But stopping there would not do much to grow the economy. If you only do items one and two you are managing decline: adjusting to the new realities of a low prosperity Michigan. That would be a big mistake. We need to pursue an agenda to recreate a high prosperity Michigan. That is where public investments come in. We need to do items one and two in a way that create enough revenue to invest in things like education and quality of place that are key to preparing, retaining and attracting talent. Talent is what matters most to recreating a high prosperity Michigan.
4. Increasing transportation taxes. Ultimately through a mileage tax. Combined with a restructuring of transportation priorities. Including fixing roads, rather than building new; quality transit systems in all our big metros; high speed rail; rail over trucks for freight movement and support for biking and walking as alternatives to driving. All are key amenities that will characterize successful new economy regions and states.
5. In terms of K-12 education we are having the wrong debates: more of the same vs. less of the same and charter vs. public. The key, at whatever funding level we decide on, is transforming teaching and learning so that it is aligned with the realities of a flattening world. All of education needs reinvention. Most important is to substantially increase the proportion of students who leave high school academically ready for higher education.
All five are politicly difficult. But this is one of those times that doing the difficult is required. We are on the wrong path. Our only chance for future prosperity is if we follow a new path.
A Budget to Grow the Michigan Economy
Balancing the state’s budget in an era of substantial, structural revenue decline is difficult. The bottom line, is getting poorer is hard. You have to give up a lot that we have enjoyed for years. But when you go from eighteenth in per capita income to thirty seventh (and going lower) in eight years, there is no option. Michigan in a blink has gone from one of the most prosperous states to one of the poorest.
We can no longer afford the level of public services we put in place when we were prosperous. We will, for sure, end up with substantially fewer publicly funded services. And probably with higher taxes. And probably with real cuts in salary and benefits for public employees and retirees. What matters, of course, is the mix of the three.
The focus in Lansing has been on how to mix tax increases (if any) and spending cuts to balance this year’s budget. As hard as that is, its not what we need. First, we need an agreement on how we are going forward for the long term. Next year’s budget will be even tougher. And the declines we implement the next couple of years will be the new base for a long time. This will not be a normal recovery from a national recession. For decades Michigan did worse than the nation in recessions and better in national expansions. Not this time!
Maybe even more important than balancing the budget for the long term, is the need to also free up resources to grow the Michigan economy. We can either adopt budget priorities that align with the new reality that Michigan is now one of the poorest state in the country or we can use the budget to reverse the trends. To once again put Michigan on the path back to prosperity. To do that requires more sacrifice now, so that we can invest in what will make us better off in the future.
Just balancing the budget is not enough.That would be a big mistake. We need to pursue an agenda to recreate a high prosperity Michigan. That is where public investments come in. We need to do spending cuts, tax increases and reductions in public employees and retirees compensation in a way that create enough revenue to invest in things like education and quality of place. Those are the keys to putting Michigan back on a path to prosperity.
How Do We Grow?
A couple of recent news articles struck me as representing where the Michigan is now and how we might turn it around. The first is from Brian O’Connor at the Detroit News on how Michigan is in for another decade of slow growth at best.
It quotes some of the best economists on the Michigan economy – including my colleague Don Grimes – on the likelihood that we will have fewer jobs a decade from now than we did in the Nineties. The reason, of course, is that factory jobs – which have been the core of Michigan’s economy for a century – are not coming back in large numbers. In the article Sophia Koropeckyj of economy.com projects that at most we will add 50,000 manufacturing jobs over the next several years. That compares to a loss of about 500,000 the last decade.
Its a hard lesson for Michigan to learn – and one we haven’t learned yet – but there is no path back to prosperity based on factory jobs. That’s reality even if the alternative energy industry – the new hope for a factory-based economy – is centered here. The new reality is that what made us prosperous in the past, won’t in the future.
So if factory work isn’t the path to prosperity what might be? That is where the second article comes in. Its from Toby Barlow at the New York Times. What initially caught my attention is that it is a positive story about the city of Detroit. How often does that happen in the national media?
The story is about a young foreign born entrepreneur opening a creperie in the city. And how he has drawn support from other food entrepreneurs in the city. Obviously, the Michigan economy is not going to boom on the opening of a few new restaurants. But what is the most likely path back to prosperity will be built on the entrepreneurial drive of talented people from anywhere on the planet who choose to live and work here.
And because young talent – across the country – is increasingly concentrating in central cities, having a vibrant Detroit matters to us all. The article is encouraging, because without a lot of fanfare, there is some progress (as Matthew also wrote about in a recent blog) in creating a Detroit that is attractive to young talent.
If we can retain and attract a large enough pool of increasingly mobile talent they will create new enterprises in all industries. Some of them will be local service businesses – like eateries – but other will be export based. Its those new enterprises that will help build the new growing Michigan economy. Its why at Michigan Future we have come to believe that retaining and attracting talent should be at the core of our economic growth strategy.
Detroit’s Offer to Creatives – Space, Food and Time
The revival of Detroit is happening, slowly but surely. The best indicator is the pulse of the so-called “creative class” that are typically the first to re-enter and re-catalyze an urban area.
This weekend, I met up with a friend who is a prototype of the creative class – an artist and musician who organizes underground music events, plays shows on tours around the country , and works freelance as a computer programmer. And, he has been living in downtown Detroit for almost ten years. He is living the pulse.
His response to why Detroit is a great place to be an artist – space, food, and time.
For 1/4 the cost of a renting a single room in Chicago or New York, my friend has a stunning and raw 1000 square loft with 20 foot high ceilings that he shares with one other person. For a quarter the cost, he gets 10 times the space in Detroit. He has all the room he needs to live, to create music and art, and to put on events in his space.
Untrue to the common gripe about no grocery stores in Detroit, my friend is within walking distance to fresh, local, inexpensive food 365 days a year at Eastern Market, the largest open air market in the country. In fact, this weekend, bell peppers were selling 5 for a dollar – can’t beat that.
Unless, of course, you are growing it yourself. My friend also had a vegetable garden outside his building, one of an increasing number of urban gardens and farms in Detroit. Detroit can now offer the cultural value of urbanity with the space and sustenance of rural living.
With less cost needed to sustain himself, he has more time for his creative pursuits. The economics of creative work, for those that want a raw urban experience, make sense right now.
And, more and more people are taking up the offer. My friend said the pulse is changing – Detroit is much better than it was 5 years ago and significantly better than when he arrived almost 10 years ago.
Public Investments are the Priority
Just back from a week in beautiful – but rainy – northern Michigan. As I was leaving I circulated a terrific column by Rick Haglund (read it here). It once again provides evidence that lower taxes is not a path to economic success.
Quite surprising it reports that the Tax Foundation – a conservative think tank – rated Michigan with the seventeenth best business climate. Up from twenty eight the year before. Better business climate rating, worse economy. Why can’t folks accept that business taxes have little to do with a state’s economic performance?
A flurry of e mails ensued. Wonks who I associate with are clearly engaged in the debate on the role of taxes in driving economic growth. Mark Murray, Meijer’s President, responded with a question: “why am i spending so much time writing about taxes, when the Michigan Future agenda is focused on public investments?”
As usual, Mark is right. We are debating the wrong issues. And I get sucked into that debate. If you care about recreating a high prosperity Michigan what is most important for state, regional and local policy makers to get right are public investments. Primarily in education and quality of place.
The two that matter most are higher education and central cities. Two areas that have been near the top of the chopping block during a decade of budget cutting in Michigan. Our higher education system – anchored by three terrific research universities – is arguably the best asset Michigan has to grow a knowledge-based economy. And vibrant central cities are essential in retaining and attracting talent that is the driving force of economic growth across the country.
The only reason to spend so much time on taxes is until we get it off the table as the default answer to how to grow the economy, we can’t get to what really matters: preparing, retaining and attracting talent. And the public investments that can most help us grow the Michigan economy.
Seattle Is Closer To Detroit Than You Think
At least we know that it is not weather that is keeping Detroit from being a top destination for young talent. According to the Wall Street Journal, the #1 “Next Hot Youth Magnate City” is Seattle, even with its 226 cloudy days per year (versus 185 in Detroit).
Interestingly, metro Seattle is also not significantly younger than metro Detroit. The portion of the population that is between 25 and 34 in metro Seattle is 25% versus 22% in Detroit. We have just about as many young people in Detroit, proportionally, as Seattle.
In terms of education, metro Detroit has almost as many young people with college degrees as Seattle. Metro Detroit has roughly 140,000 college graduates that are between 25and 34 versus 160,000 in metro Seattle. Yes, Seattle is somewhat smaller than Detroit, but the total is similar and both have critical mass.
So, if people in metro Detroit have similar weather, youth, and college degrees – why isn’t it a magnet?
It is a matter of distribution – where the educated young people are within the metro area. In Seattle, 40% of educated young people aged 25-34 are choosing to live downtown. In Detroit, it is only 8%. That is the biggest difference between these two cities – the educated talent in Seattle are congregating downtown rather than in the suburbs. The same holds true for other hot magnate cities mentioned in the article.
The upside is that educated young talent does exist in Michigan in significant number – just not where it would ideally be and where it would prefer to be. So, the challenge is how to create a downtown Detroit where 40,000 of the current educated young people in Michigan would want to live. If we can, our numbers (and weather) look almost identical to Seattle. No easy task, but absolutely critical.
For some ideas on how, check out a Michigan Future report on How Detroit Can Attract The Millennial Knowledge Worker.
*All population data taken from American Fact Finder at US Census – 2007
Books to Read II
More book recommendations. As you know we have concluded that retaining and attracting talent – particularly young college graduates – is one of the keys to growing the Michigan economy.
Two books cover the topic best:
Who’s Your City by Richard Florida. We believe that human capitol is now the driver of the economy. Florida understood this earlier than most. And was way ahead of most everyone in understanding that increasingly knowledge-based employers – the growth sector of the American economy – are locating where talent is, rather than the other way around. This book provides the data on why retaining and attracting talent is the key to economic growth and what places across the planet are doing it best. Florida makes the case as well as anyone that place matters.
The Option of Urbanism by Christopher Leinberger. If place matters, Leinberger describes the characteristics of the places that are winning the competition for mobile talent. In a word: cities. Unimaginable for most of in Michigan who still think of cities (particularly Detroit) as a liability. Where “they” live. Think again! The most prosperous places across the country are big metropolitan areas anchored by a vibrant central city, where young talent is increasingly concentrating. In neighborhoods that Leinberger describes as walkable urbanism: high density, mixed use, walkable and safe.
• Copyright 2009 • Twitter: #michiganfuture