Section » Millennials
Good news. Both Detroit and Grand Rapids are on Forbes list of 15 emerging downtowns across the country. Obviously good news for Michigan’s two largest cites. But, more important, its good news for their region’s and the state’s economy.
Why? Because as Forbes writes –– and we have noted repeatedly –– “One of the main factors businesses consider when deciding on where to relocate or expand is the available pool of college-educated workers. And that has cities competing for college-educated young adults. … And there’s one place this desired demographic, college-educated professionals between the ages of 25 and 34, tends to want to live: tight-knit urban neighborhoods that are close to work and have lots of entertainment and shopping options within an easy walk.” (Emphasis added.)
The reality is that the most prosperous places in the country, by and large, are big metros anchored by vibrant central cities. With the core characteristic of the central city being a high proportion of its residents with a four year degree. The all too prevalent Michigan belief that central cities are part of our past is simply wrong. As is the notion that cities are only where the poor live. College educated Millennials in particular are increasingly choosing to live in and around big city downtowns. Michigan needs it biggest cities –– Detroit primarily, but also Grand Rapids and Lansing/East Lansing –– to be talent magnets. If not, its hard to imagine Michigan being competitive in retaining and attracting the knowledge-based enterprises which are increasingly driving the American economy.
As Forbes recognizes, Detroit and Grand Rapids are making progress. But there is a long way to go. Its time for the state to make central cities a lynchpin of its economic development efforts.
The Detroit News published today an op ed I wrote about what is needed to recreate vibrant central cities in Michigan –– particularly Detroit. The op ed can be found here.
Its basic theme: “The purpose of the exercise: It is not simply to reduce the deficit, but to ensure prosperity. Solvency is vital, but it is not enough.” From That Used To Be Us by Thomas Friedman and Michael Mandelbaum.
As we enter the age of financial managers for Michigan’s major cities we need to follow the advice of Friedman and Mandelbaum. Balancing city budgets, certainly necessary, is not enough. The end game should be cities that are attractive places to live, work and play. That individuals and enterprises want to call home. And that requires adequate financing and the ability to provide basic services and amenities. Simply balancing budgets is not enough.
Getting this right matters most in Detroit. As we explored previously not just for the city but also for the region and state. If Detroit does not become a talent magnet its hard to imagine how either the region or state are prosperous in the long term.
The Detroit Regional Chamber’s second annual Detroit Policy Conference was terrific. Worth attending in future years. 800 folks turned out to focus on how to accelerate the revitalization of the city.
As we have written frequently a vibrant Detroit is essential to Michigan’s future prosperity. Because in an increasingly talent driven economy, central cities are where young mobile talent wants to live, work and play. The most prosperous places across the country are big metros anchored by vibrant central cities with a high proportion of its residents with a four year degree or more.
(MLive just published an article that starts with: “It seems kids these days just don’t want to work in the suburbs. Campbell Ewald knows this. Dan Gilbert knows this. The idea of driving to corporate islands away from the vibrancy and amenities of downtown life may have been appealing to someone at some point, but for years now the trend has been that young American professionals want to be downtown.”)
No one articulates this better than Dan Gilbert. Who makes the case as well as anyone that metro Detroit and the state need the city of Detroit to work. More importantly Gilbert is a major force in making Detroit a talent magnet. Matt Cullen CEO of Gilbert’s Rock Ventures was one of the highlights of the Detroit Policy Conference. (MLive did a good overview of his presentation which you can find here.) Cullen reviewed the progress made in the last few years –– a pretty astonishing list –– and what is coming in the near future to make downtown Detroit an attractive place to live, work and play. New residents moving in, new residential development underway, more and more companies locating downtown with more on the way, new office building development, plans for new retail, thousands of internships available at companies downtown, M1 light rail, the continuing development of the riverfront walk and bike path and the list goes on and on.
The private sector and private foundations have been driving Detroit’s growth without a lot of support (or even worse barriers) from the city, regional and state governments. Even with an emergency manager on the way for the city, now is not the time to shrink government support for Detroit. The imperative for the city, but also for the region and state, is to grow –– not shrink –– Detroit.
Everyone seems to be ready to embrace the need for a substantial boost in state funding for transportation, even as they try to find the least politically objectionable way to do it.
The conventional wisdom seems to be that due to more fuel efficient vehicles, Michigan drivers are spending less on gasoline, therefore less on the gasoline taxes, and the state’s transportation budget is suffering because of it. We need to find more money to make sure our roads are well maintained and commerce can move forward.
While the need for additional investment in critical infrastructure – and in mass transit – is obvious, the reality is that Michigan today is spending more tax dollars on roads today than it did in 2000 – a lot more, largely due to federal support. Meanwhile, in other equally vital areas of the state’s budget – higher education and cities – the state is spending a lot less. And there’s little groundswell of support for greater investment in those areas, even though they are vital to preparing, attracting and retaining college graduates, the key source of prosperity in the knowledge economy.
Here are the numbers (courtesy of the Senate Fiscal Agency):
In 2000-01, the state spent $3.036 billion on roads, including federal funds. In the 2012-13 fiscal year we are now in, that will be $3.466 billion, a $410 million or 13 percent increase.
Turn to higher education. In 2000-01, the state spent $1.910 billion, including federal funds. This year, it will spend $1.399 billion. That’s a 26 percent cut in overall spending, down $511 million.
Revenue sharing? In 2000-01, the state sent $1.555 billion to cities. This year: $1.096 billion – a $459 million cut, 29.5 percent less than a decade ago.
Meanwhile, the miles of roads and number of bridges the state is responsible for likely has changed very, very little over that decade. But the number of college students has increased by more than 8 percent.
It’s good for people to argue that we need to invest more in the state’s transportation system. That’s particularly true when it comes to mass transit.
But the argument for investment in higher education and cities is equally – if not more – important if Michigan is going to win the war for prosperity by moving our state firmly into the 3.0 economy where good paying jobs are being created.
As we start the new year I thought it would be helpful to take a step back from the specifics I normally write about to delineate the themes that these posts are about. For the past several years––no matter who was in office in Lansing or Washington––I have written about 100 posts per year. Each is about animating six main ideas that we think matter most to our efforts to be a catalyst for Michigan prosperity. Recreating a Michigan with a broad middle class.
Globalization and technology are mega forces––more powerful by far than politics or policy––that are constantly reshaping the economy. Machines increasingly can do more and more of the work humans use to plus help create new industries that make old industries obsolete. And globalization keeps spreading so that more and more folks compete with us for work. No one can predict what changes will occur and when. But the new reality is the job you have, the company you worked for and even the occupation you are in are less stable today than yesterday and almost certainly will be less stable tomorrow than today. The people and places that align with––rather than resist––these new realities will do best.
The places with the greatest concentration of talent win. The new path to prosperity is the broad knowledge-based economy. High prosperity is occurring chiefly in those places where knowledge-based enterprises across many sectors are concentrating. Increasingly that is states and regions with a high proportion of adults with a bachelor’s degree or more. Michigan’s fundamental economic challenge is that we rank 34th in the proportion of adults with a four-year degree.
Factory-based economies no longer support a broad middle class. The high paid, lower education attainment factory jobs that made Michigan one of the most prosperous places on the planet in the 20th Century, won’t in the 21st. Manufacturing will continue to be an important part of the American economy, but it is now a source of, at best, slow job growth (as machines do more and more of the work) and no longer a sustainable source of high paid jobs.
Quality education matters most. The evidence is overwhelming: the individuals and places that are the most prosperous––have the highest income––are those with the most education. Particularly a four year degree. So that a high quality p-20 education system (from early childhood through undergraduate college) matters most to Michiganders success. In addition to its economic power, education also is the foundation of the American belief that all children should have an equal opportunity to live the American Dream. Michigan seems to be moving away from that commitment as policy makers push to (1) decrease investment in both k-12 and higher education, (2) move away from providing every student with a real opportunity to leave high school ready, if they choose, to pursue a four year degree or more in favor of schools preparing students for immediate job openings with Michigan employers and (3) allow anyone, without quality standards, to access public funding to educate our kids.
Strategic public investments are the policy priority. Economic growth priority #1 is preparing, retaining and attracting talent. The policy priorities to create a knowledge-based Michigan are public investments in education and quality of place. With a particular emphasis on higher education and central cities. The first to prepare Michiganders for the economy of the future, the second to retain and attract mobile talent which increasingly is choosing big metros anchored by vibrant central cities.
The below presentation includes updated data on the most and least prosperous states and identifies the characteristics of the states with the most successful economies. Together they make the case for a new Michigan. The presentation concludes with our new agenda: what Michigan needs to do to become one of the states with the most successful economies.
Three interesting recent articles on young professionals leaving Michigan for vibrant central cities, particularly Chicago. All worth checking out.
The first in the Detroit News entitled ”Michigan tries to lure best, brightest back“. The article provides a good overview of why where young talent chooses to live and work matters a lot to the Michigan economy, the importance of both job/career opportunity and quality of place in choosing a place to live, the importance of central cites to retaining and attracting young talent and why mobility goes way down once you have kids.
The second a terrific Brian Dickerson column in the Free Press on the impact of legislation passed in the legislative lame duck session on the state’s ability to retain and attract talent entitled “Scaring away the grads Michigan needs to woo”. Dickerson writes:
Post your job openings, he (Governor Snyder) promises, and the young graduates who worked Up North in their high school and college summers will swarm back to buy houses, start families and pay property taxes. Except they haven’t been doing that — not even in sufficient numbers to fill the high-skill jobs Michigan already has. Business Leaders for Michigan (BLM), a consortium of the state’s largest employers, warns that the supply of workers with two- and four-year degrees could fall a million short of the number needed to meet existing employers’ needs by 2025. That’s right — a million fewer college graduates than Michigan needs to fill the jobs Snyder expects to create. Dwindling government support for higher education in Michigan is a major contributor to the shortfall. “At a time when we need to grow our number of college-educated workers, Michigan’s policy on higher education discourages enrollment by making it too costly for many to attend college,” J. Patrick Doyle, President & CEO of Domino’s Pizza, told fellow CEOs at a BLM summit on higher education last May. Doyle and his peers have urged Snyder to reverse spending priorities in Michigan, which lavishes 76% more taxpayer dollars on prisons than it spends on public universities. Yet even many of those who manage to obtain degrees here quickly take them elsewhere — especially to states that haven’t muddled their messages of opportunity with official hostility to reproductive rights, same-sex marriage, immigrants and organized labor. (Emphasis added)
The third in Slate by Edward McClelland, who grew up in Michigan and now lives in Chicago, is much more pointed and quite pessimistic about Michigan’s future. Its entitled Right-to-work bill: Michigan just gives up. An anti-union bill is the wrong response to a brain drain, and ensures the state will only create low-paying jobs. McClelland writes:
Fifty percent of Michigan State students now leave the state immediately after graduation. That ratio doubled in the 2000s, which is known in Michigan as “The Lost Decade.” In those 10 years, Michigan dropped from 30th to 35th in the percentage of college graduates, and from 18th to 37th in per capita income. (Michigan was also the only state to lose population in the last census.) The university system’s main function is giving Michigan’s brightest students a credential to get the hell off that jobless peninsula. … What does this have to do with the right-to-work law? Michigan has lost so many educated workers that the state’s leadership seems to feel it has no choice but to become a low-wage haven. … The kind of place that attracts chicken processors, not software engineers. Unable to adjust to the 21st century, Michigan is going back to the 19th. … Now, Michigan has decided to become the kind of state that Michiganders’ grandparents escaped. When it does, even more of their grandchildren will make the trek along their own Wolverine Highway, to Chicago, to New York or to Silicon Valley.Welcome to Michissippi. (Emphasis added.)
We don’t share McClelland’s pessimism. We do believe that Michigan can be a place where mobile talent wants to live and work. And if we become a talent magnet that we can become a high prosperity state again. A place with a broad middle class. But we do agree we are not going to get there––either a talent magnet or a high prosperity state––if our policies are designed to compete in the low wage, old economy. And the kind of unwelcoming policies Dickerson writes about.
Creating a Michigan with a broad middle class can only happen if the focus of policy makers is on competing in the growing high wage knowledge-based sectors of the economy. That requires a laser focus on preparing, retaining and attracting talent as economic growth priority #1. Specifically:
- Building 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.
- Ensuring the long-term success of a vibrant and agile higher education system. This means increasing public investments in higher education. Our higher education institutions—particularly the major research institutions—are the most important assets we have to develop the concentration of talent needed in a knowledge-based economy.
- 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.
- Transforming teaching and learning so that it is aligned with the realities of a flattening world. Which requires an emphasis on insuring that every child attends a quality school.
- Developing new public and, most important, private sector leadership that has moved beyond a desire to recreate the old economy as well as the old fights.
Across the country state and local leaders have made retaining and attracting young college graduates an economic development priority. Not in Michigan. Here, by and large, state and local policy makers and economic developers are missing in action. So are the major business organizations. Some pay lip service to the importance of retaining and attracting talent, and then do nothing. Many are dismissive of the importance of talent to the economy.
This is counterbalanced somewhat by individual business leaders like Dan Gilbert, the Ilitch family and Peter Karmanos and by foundations, most notably in Detroit, the Hudson-Webber Foundation and the Kresge Foundation who are “all in” in doing everything they can and then some to make sure that Detroit becomes a talent magnet. But they can’t do it alone.
A recent Governing article provides a good overview of why attracting millennials is vitally important to economic success and what communities around the country are doing to attract highly mobile young professionals. The article’s author William Fulton writes: “Here are the facts most people know: For the foreseeable future, the so-called millennials (currently ages 18-30) will drive both the housing market and the fast-growing innovation economy. It’s a huge cohort of about 70 million people. And as I mentioned above, they are gravitating toward a select group of metros and small cities.But there are a couple of other facts that we don’t usually think about. Most people settle down by age 35, and usually don’t move from one metro area to another after that. And the demographic group behind the millennials is a lot smaller. Just like baby boomers, the preferences of the millennials will drive our society for two generations. They’re making location decisions based on their idea of quality of life. And they’re going to make all those decisions in the next few years — by the time they’re 35.” (Emphasis added.)
Fulton continues: “So if you’re not one of the hip places today, you have only a few years — the length of one real estate cycle and the time horizon for planning an infrastructure project — to become hip enough to keep your kids and attract others. This might seem like a daunting, if not insurmountable, challenge, but frankly I’m encouraged by what I see. Over the last six months I’ve been to many second-tier cities — Omaha, Neb.; Oklahoma City; Richmond, Va.; Syracuse, Buffalo and Rochester, N.Y.; and Manchester, N.H., among them — that would not to be good candidates for a hip urban core. Yet they’re all developing one.”
What do these cities and many others across the country––many of them in red states––understand that we in Michigan don’t?
- That in an increasingly knowledge-based economy the asset that matters most to economic growth is human capital/talent.
- The places with concentrated talent are far more likely to be the most prosperous places today and even more so in the future.
- That talent is increasingly mobile and that young talent are the most mobile.
- And young professionals decide where to live after college based in large part on quality of place attributes and for many of them that means a vibrant central city neighborhood.
There is no reason Detroit, Grand Rapids and Lansing can’t compete with Fulton’s list of cities. And they need to. If those regions are going to be prosperous in the future they need to get in the game big time. And all of us in Michigan have a big stake in those cities becomming talent magnets. Because the states with the highest per capita incomes, by and large, are those with an even more prosperous big metro anchored by a vibrant central city.
In a previous post we laid out an urban agenda. Its elements are the core of what government (state and local) need to do to create the quality of place that millennials are looking for. The agenda is:
- Public safety matters most. People aren’t safe and/or don’t feel safe they will leave and potential newcomers will not come/stay. This is police, but more. Lighting, clean, code enforcement, etc. matter too.
- Transportation is the lever that can best steer development. For decades we have had––and still do––policies that favor roads and suburban and rural communities. We need a change in transportation funding and policy that makes transit––in metro Detroit that needs to include light rail at least on Woodward––biking, walking etc. a higher priority and steers funding towards big metros and their central cities.
- Development incentives. Quite simply the historic preservation and brownfield tax credits need to be restored. They worked. And there still is a gap between what the market will bear in terms of price and what it costs to redevelop.
- Who provides the services doesn’t matter, the quality does. So if the city government is incapable of providing quality services, fund or create an entity that can. City government incompetence shouldn’t be used as an excuse not to provide funding.
- Something needs to replace the decade of cuts to revenue sharing to cities. The state has historically helped fund the provision of local services. The combination of stricter and stricter limits on local government’s taxing power and revenue sharing and transportation funding cuts results in even the best managed cities unable to provide the basic services and amenities needed to retain and attract talent.
- If the state will not reinvest in cities, then there needs to be some new system of municipal finance put in place. Best done at the regional level. The current system––particularly in a place like Detroit––leaves cities without the tax base to fund the services that are needed.