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Worth reading
While I have been using this post to explore the findings in our new report, I have stockpiled lots of articles that I wanted to write about. Rather than wait until I get to them here is a list of recent articles that I think are worth checking out.
• Probably the most important education article I have read in a long time comes from the New York Times Magazine by Paul Tough. It deals with the essential question of what skill set students need to succeed in college. And suggests that character – actually performance, rather than moral, character – may trump academics. Built around the common learnings of an elite private school and a KIPP middle school.
• The Atlantic’s Can the Middle Class be Saved is highly recommended. It provides a good overview of how a changing economy is eliminating or lowering wages of formerly middle class jobs. Core to all of our work at Michigan Future is the belief that globalization and technology are mega forces – far more powerful than public policy – which are fundamentally changing our economy. This article raises all the right questions about winners and losers in that transition.
• A disturbing Yahoo News article deals with the widening wealth gap between the old and young. Now the widest it has ever been. The typical U.S. household headed by a person age 65 or older has a net worth 47 times greater than a household headed by someone under 35, according to an analysis of census data released Monday. While people typically accumulate assets as they age, this wealth gap is now more than double what it was in 2005 and nearly five times the 10-to-1 disparity a quarter-century ago, after adjusting for inflation.
• Another disturbing and thought provoking article comes from Bloomberg Businessweek. Its title and subtitle say it all: Why Americans Won’t Do Dirty Jobs: In the wake of an immigrant exodus, Alabama has jobs. Trouble is, Americans don’t want them.
• A terrific Ron Dzwonkowski column for the Free Press entitled: Forget taxes and regulations, Michigan must build it so they’ll come. Based on the Michigan Municipal League’s new book The Economics of Place. (I am one of the chapter authors.) Read the article, better yet if you have time, buy the book.
• Last, but certainly not least, another Yahoo News story. This one an interview with Erik Brynjolfsson and Andrew McAfee, the authors of the new book Race Against The Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy. More on the constant change being driven by technology. Specifically the ability of machines to do more and more of the work humans used to.
How residents of metro Lansing earn their income
We conclude our look at the components of income data from our new annual report with how residents of metro Lansing earn their income. We use the broadest definition of the region which includes four counties: Clinton, Eaton, Ingham and Shiawasee.
Per capita income for metro Lansing in 2009 was $33,273. By major components it was:
- Private sector employment earnings $16,672
- Government employment earnings $7,769
- Dividends, Interest, Rent $4,796
- Transfer payments $6,952
We also looked at per capita income growth between 1989 and 2009 corrected for inflation. Over that 20 year period real per capita income grew by $5,351. An increase of 19 percent. By component the twenty year growth was:
- Private sector employment earnings $829
- Government employment earnings $1,222
- Dividends, Interest, Rent $2
- Transfer payments $3,721
As you can see, transfer payments account for a large proportion (69 percent) of metro Lansing’s real personal income growth over the past two decades. The other obvious highlight (really lowlight) is small real growth (a little more than 5 percent) over two decades in private sector employment earnings. The region’s private sector employment earnings are 29 percent below the national average. Both of these trends need to change if metro Lansing is going to be a high prosperity region.
In 2009 73 percent of metro Lansing’s personal income came from employment earnings (50 percent from private employers and 23 percent from government employers.) Transfer payments were 21 percent. And if you combine transfer payments and government employment earnings, you find that 44 percent of the region’s personal income is paid for with government revenue. Twenty years earlier employment earnings were 81 percent of personal income (57 percent from private employers and 24 percent from government employers.) Transfer payments were 12 percent. And personal income paid for with government revenue was 35 percent.
How does metro Lansing compare to the US? Not well! The region’s per capita income is now $6,362 (16 percent) below the national average. Over the past two decades the region’s real per capita income grew $2,446 slower than the nation. About two-thirds the growth the country experienced. By component compared to the nation the 2009 levels and 20 year growth were:
- Private sector employment earnings -$6,655/-$2,684
- Government employment earnings $2,536/$302
- Dividends, Interest, Rent -$2,347/-$718
- Transfer payments -$32/$616
How residents of metro Grand Rapids earn their income
We continue our look at the components of income data from our new annual report with how residents of metro Grand Rapids earn their income. We use the broadest definition of the region which includes seven counties: Allegan, Barry, Ionia, Kent, Muskegon, Newaygo and Ottawa.
Per capita income for metro Grand Rapids in 2009 was $31,637. By major components it was:
- Private sector employment earnings $20,396
- Government employment earnings $2,877
- Dividends, Interest, Rent $4,887
- Transfer payments $6,355
We also looked at per capita income growth between 1989 and 2009 corrected for inflation. Over that 20 year period real per capita income grew by $3,700. An increase of 13 percent. By component the twenty year growth was:
- Private sector employment earnings $889
- Government employment earnings $440
- Dividends, Interest, Rent -$55
- Transfer payments $2,994
As you can see, transfer payments account for a large proportion (81 percent) of metro Grand Rapids’ real personal income growth over the past two decades. The other obvious highlight (really lowlight) is small real growth (less than 5 percent) over two decades in private sector employment earnings. Both of these trends need to change if metro Grand Rapids is going to be a high prosperity region.
In 2009 73 percent of metro Grand Rapids’ personal income came from employment earnings (64 percent from private employers and nine percent from government employers.) Transfer payments were 20 percent. And if you combine transfer payments and government employment earnings, you find that 29 percent of the region’s personal income is paid for with government revenue. Twenty years earlier employment earnings were 79 percent of personal income (70 percent from private employers and nine percent from government employers.) Transfer payments were 12 percent. And personal income paid for with government revenue was 21 percent.
How does metro Grand Rapids compare to the US? Not well! Particularly when you take into account that big metros on average are doing far better than the nation. The region’s per capita income is now $7,959 (twenty percent) below the national average. Over the past two decades the region’s real per capita income grew $4,097 slower than the nation. Less than half the growth the country experienced. By component compared to the nation the 2009 levels and 20 year growth were:
- Private sector employment earnings -$2,931/-$2,624
- Government employment earnings -$2,346/-$482
- Dividends, Interest, Rent -$2,256/-$755
- Transfer payments -$629/-$111
How residents of Metro Detroit earn their income
We continue our look at the components of income data from our new annual report with how metro Detroiters earn their income. We use the broadest definition of the region which includes nine counties: Genesee, Lapeer, Livingston, Macomb, Monroe, Oakland, St.Clair, Washtenaw and Wayne
Per capita income for metro Detroit in 2009 was $37,083. By major components it was:
- Private sector employment earnings $22,723
- Government employment earnings $4,103
- Dividends, Interest, Rent $5,938
- Transfer payments $7,783
We also looked at per capita income growth between 1989 and 2009 corrected for inflation. Over that 20 year period real per capita income grew by $3,747. An increase of 11 percent. By component the twenty year growth was:
- Private sector employment earnings -$542
- Government employment earnings $730
- Dividends, Interest, Rent -$104
- Transfer payments $3,727
As you can see, transfer payments account for virtually all of metro Detroit’s real personal income growth over the past two decades. The other obvious highlight (really lowlight) is no real growth over two decades in private sector employment earnings. Both of these trends need to change if metro Detroit is ever again going to be a high prosperity region.
In 2009 72 percent of metro Detroit’s personal income came from employment earnings (61 percent from private employers and 11 percent from government employers.) Transfer payments were 21 percent. And if you combine transfer payments and government employment earnings, you find that 32 percent of the region’s personal income is paid for with government revenue. Twenty years earlier employment earnings were 80 percent of personal income (70 percent from private employers and 10 percent from government employers.) Transfer payments were 12 percent. And personal income paid for with government revenue was 22 percent.
How does metro Detroit compare to the US? Not well! Particularly when you take into account that big metros on average are doing far better than the nation. The region’s per capita income is now $2,552 (6 percent) below the national average. Over the past two decades the region’s real per capita income grew $4,050 slower than the nation. Less than half the growth the country experienced. By component compared to the nation the 2009 levels and 20 year growth were:
- Private sector employment earnings -$604/-$4,055
- Government employment earnings -$1,130/-$192
- Dividends, Interest, Rent -$1,205/-$824
- Transfer payments $799/$622
One final note: metro Detroit is not a big government region. Wasn’t twenty years ago, isn’t today. In fact one can make a better case that it is a small government region. Government employment earnings for the region are 78 percent of the nation’s.
How Michiganians earn their income
We continue our look at the components of income data from our new annual report with how Michiganians earn their income.
Per capita income for the state in 2009 was $34,315. By major components it was:
- Private sector employment earnings $19,785
- Government employment earnings $4,060
- Dividends, Interest, Rent $5,499
- Transfer payments $7,737
We also looked at per capita income growth between 1989 and 2009 corrected for inflation. Over that 20 year period real per capita income grew by $3,962. An increase of 12 percent. By component the twenty year growth was:
- Private sector employment earnings -$181
- Government employment earnings $643
- Dividends, Interest, Rent -$105
- Transfer payments $3,713
As you can see, transfer payments account for almost all (94 percent) of Michigan’s real personal income growth over the past two decades. The other obvious highlight (really lowlight) is no real growth over two decades in private sector employment earnings. Both of these trends need to change if Michigan is ever again going to be a high prosperity state.
In 2009 69 percent of Michigan’s personal income came from employment earnings (57 percent from private employers and 12 percent from government employers.) Transfer payments were nearly 23 percent. And if you combine transfer payments and government employment earnings, you find that 34 percent of state personal income is paid for with government revenue. Twenty years earlier employment earnings were 77 percent of personal income (66 percent from private employers and 11 percent from government employers.) Transfer payments were 13 percent. And personal income paid for with government revenue was 25 percent.
How does Michigan compare to the US. Not well! State per capita income is now $5,320 (13 percent) below the national average. Over the past two decades state real per capita income grew $3,835 slower than the nation. About half the growth the country experienced. By component compared to the nation the 2009 levels and 20 year growth were:
- Private sector employment earnings -$3,542/-$3,694
- Government employment earnings -$1,173/-$279
- Dividends, Interest, Rent -$1,644/-$835
- Transfer payments $753/$608
One final note: Michigan is not a big government state. Wasn’t twenty years ago, isn’t today. In fact one can make a better case that Michigan is a small government state. Government employment earnings for the state are 78 percent of the nation’s. Michigan ranks 47th.
Schools and cities driving economic growth
In a recent New York Times column Harvard’s Edward Glaeser wrote: “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.”
Rick Haglund in an insightful Mlive column reviewing Governor Granholm’s new book makes the same point:
Her prescriptions are heavy on government partnerships with industry, and a focus on “clean energy” and advanced manufacturing. But Granholm says precious little about the areas where most of the good-paying jobs in a changing knowledge economy are being created — information, health care, education and financial services. Nor does she say much about the need for an urban strategy and boosting state financial support for higher education — two areas that are critical in attracting and retaining the young talent Michigan needs. But state government has been cutting revenue sharing to cities and university appropriations for years, a practice Gov. Rick Snyder has continued. Reversing those trends will be hard at a time when Snyder’s fellow Republicans want to abolish as much government as possible. But if Snyder fails in his pledge to make our cities more attractive and our workers smarter, he may find himself hiding behind sunglasses and a ballcap as his days as governor wind down.
Skills that come from schools and cities. Think about how different that is from the 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.
The evidence, in an economy being constantly transformed by globalization and technology, supports Glaeser’s central conclusion: concentrated talent is the most important ingredient driving economic growth. And where are college educated adults concentrating? Big metros anchored by vibrant central cities.
We found in our just released progress report on Michigan’s transition to a knowledge-based economy that high prosperity is occurring chiefly in those places where knowledge-based enterprises across many sectors are concentrating. They are concentrating in areas with a high proportion of adults with a bachelor’s degree or more.
In 2000, at the end of the boom years, Michigan still ranked 18th in per capita income. We were 34th in four-year 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 2009 Michigan ranked 36th in college attainment and 37th in per capita income — 13 percent below the national average, our lowest since the federal government started keeping statistics in 1929.
Our basic conclusion: what most distinguishes successful areas from Michigan is their concentrations of talent, where talent is defined as a combination of knowledge, creativity and entrepreneurship. Quite simply, in a flattening world where work can increasingly be done anyplace by anybody, the places with the greatest concentrations of talent win. States and regions without concentrations of talent will have great difficulty retaining or attracting knowledge-based enterprises, nor are they likely to be the place where new knowledge-based enterprises are created. The knowledge-based economy is now the path to prosperity for Michigan.
Michigan has lagged in its support of the assets necessary to develop the knowledge-based economy at the needed scale. The assets that matter most: a quality and agile higher education system and big metropolitan areas, anchored by vibrant central cites, where talent want to live and work. These are two areas the state has been disinvesting in this decade. Not smart!
How Americans earn their income
To me the most interesting part of our new annual report is the deconstruction of personal income. Looking at the components that make up per capita income.
In previous reports we have focused almost exclusively on jobs and income that comes from employment—both public and private. The data is clear: we are in an era of long-term structural shift of jobs and employment earnings toward knowledge-based industries and occupations. The states and regions that align with this trend will benefit greatly.
But it is also clear that there are other ways in which residents of states and regions earn income. Employment earnings are a major, but not the only, components of personal income. And that other income benefits not only individuals and households, but the whole community, as folks spend their income.
We decided that we could provide a more complete picture by looking at all components of what makes up personal income. It is clear that some states have achieved high prosperity because of high energy prices. So in the new report we look at employment earnings from three sources: natural resources (mining, agriculture, forestry, and fishing) private sector employment earnings; all other private sector employment earnings; and government employment earnings (which along with local, state, and federal government includes public school districts, public universities, and colleges). In addition we look at investment income from interest, rent, and dividends; transfer payments, and adjustments due to social insurance taxes and people living in one jurisdiction and working in another.
In this post we will focus on how Americans earn their income. In future posts we will do the same for Michiganians and the residents of the states three biggest metropolitan areas: Detroit, Grand Rapids and Lansing. I think you will find the data compelling and surprising. I know we did.
Per capita income for the country in 2009 was $39,635. By major components it was:
- Private sector employment earnings $23,427
- Government employment earnings $5,233
- Dividends, Interest, Rent $7,143
- Transfer payments $6,984
We also looked at per capita income growth between 1989 and 2009 corrected for inflation. Over that 20 year period real per capita income grew by $7,797. An increase of 20 percent. By component the twenty year growth was:
- Private sector employment earnings $3,513
- Government employment earnings $922
- Dividends, Interest, Rent $720
- Transfer payments $3105
As you can see, transfer payments have been a major source of real personal income growth over the past two decades— accounting for 40 percent of the country’s personal income growth, nearly as large as the 45 percent share of growth in private sector employment earnings growth.
In 2009 72 percent of American’s personal income came from employment earnings (59 percent from private employers and 13 percent from government employers.) Transfer payments were nearly 18 percent. And if you combine transfer payments and government employment earnings, you find that 31 percent of national personal income is paid for with government revenue. Twenty years earlier employment earnings were 77 percent of personal income (63 percent from private employers and 14 percent from government employers.) Transfer payments were 12 percent. And personal income paid for with government revenue was 26%.
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!
• Copyright 2009 • Twitter: #michiganfuture