Section » Michigan Talent
Talking with Lucy Ann Lance
Had an opportunity to talk everything Michigan Future with Lucy Ann Lance on her WLBY Business Insider radio show. We discussed mainly our new report on the Michigan economy, but also discussed our Detroit high school initiative. You can find a summary of the interview and a link to the entire interview here. It always is a pleasure to appear on her radio show. Lucy Ann asks insightful questions and gives you time to answer them in more than just sound bites. So if you listen to the interview you will get a good overview of our work.
Turns out that due to our high school initiative – in a quite a surprise to me – Michigan Future is one of three nominees for the Washtenaw County non-profit of the year by AnnArbor.com. Lucy Ann is a co-emcee of the award event. It is one of the topics discussed in the interview.
A couple of other media coverage of our work are also worth checking out. I was a guest on Dan Gilmartin’s WJR Prosperity Agenda radio show. You can listen to the show here. The show was co-hosted by Grand Rapids Mayor George Heartwell and explored the importance of quality of place in growing the economy. A central theme of our work.
Finally Chad Selweski wrote a great column for the Royal Oak Daily Tribune on the importance of a college degree for both individuals and the Michigan economy. Refuting the growing notion that because many recent college graduates are having difficulty finding a professional job immediately after graduating that a college degree is not all the valuable. What nonsense!
Michigan’s Transition to a Knowledge-based Economy: Fourth Annual Progress Report
This is Michigan Future’s annual report on Michigan’s transition to a knowledge-based economy. How well Michigan does in this transition will, in large part, determine whether we get more prosperous or poorer.
As we detailed in our 2006 A New Agenda for a New Michigan report, Michigan’s decline is caused, in large part, because Michigan – its citizens, enterprises and communities – has been slow to adapt to a rapidly changing global economy. Today, leading-edge communities are leaving behind the Industrial Age. They are adapting quicker and better to a more knowledge-driven and entrepreneurial economy: the flat world.
This report details what has happened to the national and state economy over the past decade. As well as details on what states and metropolitan areas are doing the best and why.
Click here for the full report
Click here for the executive summary
Click here for Appendix A1
Click here for Appendix A2
Click here for Appendix A3
Click here for Appendix B1
Click here for Appendix B2
Click here for Appendix B3
Click here for Appendix B4
Michigan’s failure to move toward knowledge economy hurts incomes
The following press release was issued in conjunction with the Michigan Future annual update which took place on Oct. 17 at 3 p.m. at the Detroit Regional Chamber offices. Please contact David Waymire with questions, 517-290-3610.
New report finds most prosperous states focus on high-education jobs, which hold key for Michigan’s economic rebound
Michigan’s economy continues to founder because it remains primarily a factory-based economy that has not taken important steps aimed at increasing the proportion of college graduates living in the state, a new report by Michigan Future, Inc. shows.
The 2011 progress report on Michigan’s transition to a new economy, issued this week by Michigan Future and available at www.michiganfuture.org, also reports that since the start of the Great Recession job losses in low-education sectors (manufacturing, construction, retail, hospitality and temporary services) have accelerated around the nation and in Michigan, further proving the need for Michigan to focus more attention on preparing, attracting and retaining the talent that high education industries require.
Nationally since the start of the Great Recession in December 2007 through May 2011, 7 million jobs have been lost, 6.4 million of them in the low education attainment sectors. The high education attainment sectors – primarily health care, education, professional and technical services, information, financial services and insurance – have held nearly constant, losing just 546,000 jobs. Approximately 9 percent of the low-education industry positions have been eliminated compared to 1 percent of positions in high-education attainment sectors.
“What we found is stunning. The trends we have written about in past reports have accelerated,” said Glazer, president of Michigan Future, who conducted the study with Donald Grimes, Senior Research Specialist at the Institute for Research on Labor, Employment and the Economy at the University of Michigan. “It’s even more apparent now than before: What made Michigan prosperous in the past is no longer our path to prosperity. We will not prosper by chasing low education jobs. This is an inescapable truth.”
This contrasting fortune of high education attainment vs. low education attainment sectors is part of a two decade long trend. Since 1990 high education attainment industries have experienced job growth of 36 percent compared to 7 percent in the rest of the economy.
Glazer and Grimes show Michigan and its largest metropolitan areas are lagging in the transition to a knowledge-based economy. In 2009, Michigan ranked 37th in per capita income, an unprecedented drop of 19 places in a relatively short nine-year period but in line with its position as 36th in college attainment. Michigan also ranked 30th in the share of wages from knowledge- based industries.
“Metro Detroit ranked 41st in per capita income of the 55 metropolitan areas with populations of one million or more, 31st in knowledge-based industries concentration and 39th in college attainment,” Grimes said. “Metro Grand Rapids was even further behind, ranking 54th in per capita income, 54th in knowledge- based industries concentration and 44th in college attainment,” the report says.
“Unless we substantially increase the proportion of college-educated adults, especially in our biggest metropolitan areas, Michigan will continue to be a low-prosperity state.”
New data shows earnings from private sector employment highest in high education states
New in this report is data on the components that make up per capita income for the nation, states and big metros.
Nationally employment earnings account for 72 percent of the country’s personal income. Non-natural resources private sector employment earnings are 58 percent of personal income. Transfer payments are nearly 18 percent. If you combine transfer payments and government employment earnings, you find that 31 percent of national personal income comes from government revenue.
The top 10 states in earnings attributable to non-natural resources private sector per capita (taking out the non-natural resource jobs reduces the impact of the oil and grain economy on certain states) were Connecticut, Massachusetts, New York, New Jersey, Minnesota, Delaware, Illinois, New Hampshire, Colorado and California. Except for Delaware, all of the top ten states are also high college attainment states.
The bottom 10 states in that category were, from the very bottom and moving up, Mississippi, West Virginia, New Mexico, Arkansas, Idaho, South Carolina, Montana, Kentucky, Alabama and Oklahoma. The report notes that all of those states except Montana have very low percentages of their population with college degrees.
As should be expected given Michigan’s relatively low education attainment status, our state looks more like the bottom 10 than the top 10. Employment earnings account for 70 percent of Michigan’s personal income. Non-natural resources private sector employment earnings are 57 percent of the state’s personal income. Transfer payments are more than 22 percent. And if you combine transfer payments and government employment earnings, nearly 34 percent of Michigan’s personal income comes from government revenue.
The report highlights data on non-natural resources private employment earnings. It is an essential ingredient in any state or region being prosperous in the long term, and it is what policymakers at the state and local level are primarily focused on when they put forward economic development policy and programs.
“There are two clear messages from the data,” said Glazer. “First, for Michigan to return to prosperity it must focus on accelerating employment earnings, particularly from the private sector. And secondly, to accomplish that the key ingredient is talent. Quite simply, in a flattening world, economic development priority one is to prepare, retain and attract talent.”
These findings reinforce the action agenda laid out in the New Agenda report:
• Build a culture aligned with (rather than resisting) the realities of a flattening world. We need to place far higher value on learning, an entrepreneurial spirit and being welcoming to all.
• Creating places where talent – particularly mobile young talent – wants to live. This means expanded public investments in quality of place with an emphasis on vibrant central city neighborhoods.
• Ensuring the long-term success of a vibrant and agile higher-education system. This requires a renewed commitment to public investments in higher education – particularly the major research universities.
• Transforming teaching and learning so that it is aligned with the realities of a flattening world.
• Developing new private and public sector leadership that has moved beyond both a desire to recreate the old economy as well as the old fights. Michigan needs leadership that is clearly focused, at both the state and regional level, on preparing, retaining and attracting talent.
For a copy of the report and more on Michigan Future Inc., visit www.michiganfuture.org.
Below are edited versions of Tables 13 and 14 in the report.
| Top 10 in Non-Natural Resources Private Sector Earnings | Non-Nat Resources
Earnings |
Share of Personal Income | Govt. Earnings &
Transfers Share of PI |
| Connecticut | $33,070 | 59.8% | 24.9% |
| Massachusetts | $32,957 | 66.4% | 25.6% |
| New York | $29,479 | 63.4% | 31.2% |
| New Jersey | $28,554 | 57.1% | 26.1% |
| Minnesota | $26,029 | 62.2% | 27.6% |
| Delaware | $25,792 | 65.1% | 31.8% |
| Illinois | $25,789 | 61.6% | 26.8% |
| New Hampshire | $25,546 | 59.9% | 24.3% |
| Colorado | $25,515 | 60.9% | 25.8% |
| California | $24,795 | 58.5% | 28.3% |
| United States | $22,758 | 57.4% | 30.8% |
| Michigan | $19,545 | 57.0% | 34.3% |
| Bottom 10 | |||
| Oklahoma | $17,114 | 47.8% | 35.9% |
| Alabama | $17,094 | 51.2% | 38.1% |
| Kentucky | $17,092 | 53.0% | 39.9% |
| Montana | $16,663 | 47.8% | 35.4% |
| South Carolina | $16,599 | 51.1% | 38.6% |
| Idaho | $16,397 | 51.5% | 32.3% |
| Arkansas | $16,308 | 50.5% | 37.6% |
| New Mexico | $15,367 | 46.2% | 41.2% |
| West Virginia | $14,450 | 45.0% | 42.6% |
| Mississippi | $14,012 | 46.1% | 42.3% |
Density drives economic growth
In our 2006 A New Agenda for a New Michigan we wrote: For many Michiganians, vibrant central cities are part of the past. No longer relevant or just something you visit in unique places like Manhattan, Toronto or Chicago. Think again! They are an important ingredient to future economic success. The pattern across the country is clear: high prosperity metropolitan areas have central cities with a concentration of knowledge workers. … So metropolitan Detroit, and to a lesser degree, metropolitan Grand Rapids, are highly likely to be the main drivers of a prosperous Michigan. In fact, it is hard to imagine a high prosperity Michigan without an even higher prosperity metropolitan Detroit.
In a must read column in the New York Times Ryan Avent explains why this is the case. Why high density places are the most productive places and therefore the engines of economic growth. Avent writes: Cities have long been incubators and transmitters of ideas, and, correspondingly, engines of economic growth. … But what makes a city a city and a not-city a not-city is the fact that a city is dense and a not-city isn’t. … And when it comes to economic growth and the creation of jobs, the denser the city the better.
Avent continues: Density simply facilitates interaction. Interactions translate into wealth when a population is educated and local institutions support private enterprise and entrepreneurship. … The world’s richest places tend to be dense, with well-educated residents and a free-market-orientation (or tax havens or oil-rich) — think of New York and the Bay Area, of Singapore, Hong Kong and the Netherlands. Without a stock of skilled workers and a relatively open marketplace, density’s impact on growth and productivity will be limited.
He explains why this is the case using as an example a low tech industry: ethnic restaurants. Small towns, no Vietnamese restaurants; midsize maybe one; big metro many. And because of lots of customers and workers with the right skills to support many you get competition, variety and innovation. What works for Vietnamese restaurants, works for all industries. Density allows for greater specialization; increases competition which drives prices down and quality up and peer to peer learning. All of which increases productivity and spurs innovation and creativity which are the engines of economic growth particularly in an increasingly knowledge-based economy.
Michigan’s two big metros are lagging. Of 55 regions with populations of one million or more metro Detroit is 39th in college attainment and 41st in per capita income. Metro Grand Rapids ranks even lower at 44th in college attainment and 54th in per capita income. If those rankings don’t change Michigan is going to be one of the country’s lowest income states. End of story. Everything else we do to grow the economy are trumped by not having dense places with large talent concentrations.
Michigan talent attracting companies
Mlive recently ran an article on HP opening a new IT services office in Pontiac. According to the article “the center expects to hire more than 200 technically skilled employees as well as an undetermined number of support personnel.” Why is HP coming to metro Detroit? According to HP Vice President Rick Sullivan:
This is consistent with our core belief that in an increasing knowledge-based economy, talent/human capital is the asset that matters most and is in the shortest supply. That increasingly companies will go where talent is concentrated. Rich Karlgaard, publisher of Forbes magazine, summed it up best: “Start with this proposition: The most valuable natural resource in the 21st century is brains. Smart people tend to be mobile. Watch where they go! Because where they go, robust economic activity will follow.”
What this means is that preparing, retaining and attracting talent is now economic development priority #1. Being human capital friendly – more than physical capital – will determine Michigan’s future prosperity.
Its not just HP. Crain’s recently ran an update article on GE’s new Manufacturing and Software Technology Center in Van Buren. Same basic story. Crain’s writes: “General Electric Co.’s hiring spree in Southeast Michigan is anchored by local talent experienced in information technology.” Once again Michigan talent attracting a world class company. In this case it is 1,100 jobs or more with an average pay, according to the company, of more than $100,000! Crain’s writes: “the company is hiring about 10 IT professionals a week, and by 2013, the Van Buren facility is expected to house the largest concentration of GE IT employees in the world.”
You read that right: Michigan home to the largest concentration of GE IT employees in the world. GE made this decision in 2009. According to those living on plant ideology – many of whom are state policy makers – this can’t be true. Remember those are the days when Michigan supposedly had the least friendly business climate in the country that prevented us from attracting private sector investment to create new jobs. What nonsense!
Michigan’s fundamental challenge is that we are 36th in the proportion of adults with a four-year degree. Where we have talent we are creating and attracting new jobs. If we do what is necessary to concentrate talent here we will prosper, if we don’t we will get poorer.
Triumph of the city: the data
As we explored in my last post, Edward Glaeser in his terrific new book, Triumph of the City, compellingly makes the case that vibrant central cities that anchor big metros are the geographic engines of economic growth across the planet, not just here in the US. They are the most productive places and the places where the innovations that create the future happen.
But as Glaeser makes clear it is not all central cities. The ones that drive the economy are what he calls smart cities. Places where college educated adults concentrate. The book includes a chapter called Why Do Cities Decline? which features Detroit. In it he compares Detroit’s decline over the past four decades to New York City’s stunning revival. As he writes:
Cities thrive when they have many small firms and skilled citizens. … Detroit’s twentieth-century growth brought hundreds of thousands of less-well-educated workers in vast factories, which became fortresses apart from the city and world. While industrial diversity, entrepreneurship, and education lead to innovation, the Detroit model led to urban decline. The age of the industrial city is over, at least in the West.
Consistent with Glaeser’s work, Don Grimes and I have found in our research that one of the core characteristics of almost all prosperous states is a big metropolitan area anchored by a central city with a high proportion of its residents with a four year degree. In 2009 for the 12 metros of one million or more with the highest per capita income, the central city college attainment rates are:
- San Jose: 35.7%
- Washington DC: 48.5%
- New York: 34.0%
- Hartford: 12.3%
- Boston: 44.7%
- Seattle: 56.0%
- Houston: 40.8%
- San Diego: 41.3%
- Denver: 40.4%
- Philadelphia: 23.2%
- Minneapolis: 42.4%
- Chicago: 33.1%
As we demonstrated in our Young Talent in the Great Lakes report having a central city that is an attractive place for college educated adults to live is a terrific asset in creating high prosperity metros and states. It is a lesson we are having a hard time in Michigan learning. But it is a lesson we need to learn quickly: Michigan’s future prosperity will be greatly enhanced by a vibrant Detroit and to a lesser degree Grand Rapids and Lansing. Vibrant central cities matter!
Triumph of the City
In my post on ineffective green subsidies I featured a column by Harvard’s Edward Glaeser. To me the key take away of that column is his claim that: In the long run, America will be richer than China only by having smarter citizens, and that requires the skills that come from schools and cities, not dispersed factories.
Skills that come from schools and cities. Think about how different that is from the our normal approach to economic development. Most policy makers and practitioners would think you are from Mars if you suggested that schools and cities are the levers that matter most for economic success. They almost exclusively focus on retaining and attracting businesses.
Glaeser’s terrific new book Triumph of the City details the reasons why cities are the drivers of economic growth and prosperity.
For centuries (think Thomas Jefferson) – despite all the evidence to the contrary – Americans have viewed central cities as a problem. The place where “they” live that drag down the country. The reality is as Glaeser writes: The ideas that emerge in cities eventually spread beyond their borders and enrich the rest of the world. Massachusetts rises or falls with Boston just as Maharashtra rises and falls with Mumbai. You read that right: cities are the engines of economic growth.
When it comes to economic development Glaeser concludes: The bottom up nature of urban innovation suggests that the best economic development policy may be to attract smart people and get out of the way. You read that right too: the foundation of economic development should be creating central cities where smart people want to live and work. Because where they concentrate you get the ideas, innovation and entrepreneurship that drives the economy across the planet.
The facts are: Within the United States, workers in metropolitan areas with big cities earn 30 percent more than workers who aren’t in metropolitan areas. These high wages offset the higher costs of living, but that doesn’t changes that fact that the high wages reflect high productivity. The only reason why companies put up with the high labor costs and land costs of being in a city is that the city creates productivity advantages that offset those costs. Americans who live in metropolitan areas with more than a million residents are 50 percent more productive than American who live in smaller metropolitan areas.
The main reason big metros anchored by vibrant central cities are so much more productive is concentrated talent. As Glaeser writes: Cities enable the collaboration that makes humanity shine most brightly. Because humans learn so much from other humans, we learn more when there are more people around us. Urban density creates a constant flow of new information that comes from observing others‘ success and failures. … Cities make it easier to watch and listen and learn.
And the big city/concentrated talent advantage is growing in a flattening world. Glaeser poses and then answers the essential question about why cities can be the engines of growth despite being the most expensive places to live and do business:
Once you can learn from Wikipedia in Anchorage why pay New York prices? But a few decades of high technology can’t trump millions of years of evolution. Connecting in cyber-space will never be the same as sharing a meal or smile or kiss. … The most important communications still take place in person, and electronic access is no substitute for being in the geographic center of an intellectual movement. The declining cost of connecting over the long distances has only increased the returns of clustering close together. … The death of distance may have been hell on the goods producers in Detroit, who lost out to Japanese competitors, but it has been heaven for the idea producers of New York and San Francisco and Los Angeles who have made billions on innovations in technology and entertainment and finance.
Welcoming West Michigan?
As readers of our work know, we believe that culture trump policy. In a world where economic growth is driven by knowledge and innovation, the most successful regions are those which highly value learning, an entrepreneurial spirit and being welcoming to all. The evidence is that Michigan is having trouble with all three.
More evidence of our welcoming challenge comes from Holland where the city council recently voted against adding sexual orientation and gender identity to its anti-discrimninations policies. MLive has a good overview article. What is encouraging is the reaction from the business community which understands how being gay friendly matters to the region’s current and future prosperity. The article includes: “I’m concerned about Holland’s ability to keep and attain talent because, in the future, there will be a talent war,” said Dean Whittaker, whose Holland-area consulting firm, Whittaker Associates, supplies companies with market research data. And: “We’ve heard it’s not just about recruiting gay people, it’s about recruiting people who want to live in an open and accepting place,” said Jeff Padnos, president of Louis Padnos Iron & Medal. “I think the vote was an unfortunate statement about our community.”
The West Michigan business community, through its innovative talent attraction organization Quaeris, organized a forum with the mayors of Grand Rapids, Norton Shores and Holland to discuss attracting and retaining young talent to the region. As MLive reported the event underscored the different approaches to growing the region’s economy. As they wrote, Grand Rapids Mayor George Heartwell said: “What cities can do to attract talent has more to do with place-making. If you create a vibrant area where people want to be, then I think (recruitment) happens.” … Butting heads with Heartwell, (Holland Mayor) Dykstra said tax and regulatory policies are the best means to attract talent and economic investment. “Capital goes where it’s welcome,” Dykstra said. Said Heartwell: “Place trumps tax rate any day.”
Melissa Preddy in a terrific article for the Center for Michigan reminds us that gay friendly is a statewide, not just West Michigan, issue. She contrasts what is going on in Michigan to New York where big business was a vocal supporter of the state’s gay marriage legislation. She writes: … a powerhouse group of industry leaders signed a public letter to lawmakers urging marriage equality for gays. The signers, including the chairmen of companies such as Alcoa, General Electric and Goldman Sachs, along with chief executives and senior managers at other household-name corporations, made an economic case for legalizing same-sex marriages. They wrote: “To remain competitive, New York must continue to contend with other world cities to attract top talent. Increasingly, in an age where talent determines the economic winners, great states and cities must demonstrate a commitment to creating an open, healthy and equitable environment in which to live and work,” …
She quotes State Representative Jeff Irwin as summing up the Michigan approach as: “There’s been a lot of energy spent in trying to shut down the equal rights we should be giving to everyone,” Irwin said. “What’s going on in Lansing now sends the wrong message to the rest of the world and we risk turning people away. Michigan will be a more economically prosperous place when we try to bring the best and brightest here. Inclusiveness is a big part of that.”
All of our work supports Mayor Heartwell and Representative Irwin’s beliefs that it is talent – which chooses the place where they want to live and work – that is driving regional and state economies. And that welcoming to all is one of the place characteristic that many of them are looking for.
• Copyright 2009 • Twitter: #michiganfuture