Minnesota is a high tax state. Has been for decades. Minnesota is the Great Lakes States best in economic well being and demographic outcomes. Has been for decades.

Michigan is not a high tax state. Its taxes per capita far lower than Minnesota’s. Minnesota is far ahead of Michigan in all well being and demographic outcomes.

Minnesota has been a successful high tax state for decades. The Census Bureau reports in 1980 Minnesota had the 6th highest state taxes per capita in the country. Michigan ranked 13th. Minnesota’s state taxes per capita were 122 percent of Michigan’s. In 2021 Minnesota had the 5th highest state taxes per capita in the country. Michigan ranked 28th. Minnesota’s state taxes per capita were 163 percent of Michigan’s.

There is no question Minnesota is a high tax state––its residents paid $2,145 more in 2021 than Michigan residents in state taxes alone. So for decades Michigan chose lower taxes as its prime lever to compete for economic growth and population. While Minnesota for decades chose to use its higher taxes for public investments in good schools and high quality communities as its prime lever to compete for economic growth and population.

When you combine state and local taxes per capita in 2020 Minnesota was the 7th highest in nation, Michigan was the 10th lowest. State and local taxes per capita in Minnesota are $6,507, 116 percent of the national average. State and local taxes per capita in Michigan were $4,263, 76 percent of the national average.

As reported by the Tax Foundation, on all the major state taxes Minnesota has substantially higher rates than Michigan:

Minnesota has a graduated individual income tax, with rates ranging from 5.35 percent to 9.85 percent. Minnesota also has a 9.80 percent corporate income tax rate. Minnesota has a 6.875 percent state sales tax rate, a max local sales tax rate of 2.00 percent, and an average combined state and local sales tax rate of 7.49 percent.

Michigan has a flat 4.25 percent individual income tax rate. There are also jurisdictions that collect local income taxes. Michigan has a 6.00 percent corporate income tax rate. Michigan has a 6.00 percent state sales tax rate and does not levy any local sales taxes.

We have been told over and over again for decades that high taxes leads to economic decline and depopulation. Think again!

• Minnesota has not lost a congressional seat in six decades while Michigan’s congressional delegation since 1960 has declined from 19 to 13.
• A recent study found that Minnesota is one of only nine “brain-gain” states with 8 percent more recent college graduates residents compared to those who graduated from its college and universities. Michigan is a “brain-drain” state with 14 percent fewer college graduates compared to those who graduated from its college and universities.
• In November 2022 Minnesota was tied for the second lowest unemployment rate in the country, Michigan was tied for 43rd.
• In November 2022 Minnesota was fifth in labor force participation, Michigan was 40th.
• In 2021 per capita income in Minnesota was three percent above the national average, ranking 13th. Michigan was 12 percent below the national average, ranking 35th.
• In 1979 Minnesota per capita income was one percent above the national average, Michigan was three percent above. So as Michigan’s state taxes per capita declined from 13th highest in the nation to 28th the state’s per capita income declined by fifteen percentage points compared to the nation. While Minnesota gained two percentage points while staying a high tax state.

Why is the conventional wisdom that high taxes leads to economic and population decline so wrong? Former New York City Mayor got it right when he wrote in a Financial Times op ed:

Many newly successful cities on the global stage – such as Shenzhen and Dubai – have sought to make themselves attractive to businesses based on price and infrastructure subsidies. Those competitive advantages can work in the short term, but they tend to be transitory. For cities to have sustained success, they must compete for the grand prize: intellectual capital and talent. I have long believed that talent attracts capital far more effectively and consistently than capital attracts talent. … Economists may not say it this way but the truth of the matter is: being cool counts. When people can find inspiration in a community that also offers great parks, safe streets and extensive mass transit, they vote with their feet.

At its core the Minnesota playbook for economic and demographic success has been higher taxes used for public investments to “compete for the grand prize: intellectual capital and talent” by offering good schools from birth through colleges and creating places where people want to live by offering high quality basic services, infrastructure and amenities.

Minnesota has used those higher taxes for services and investments that matter in a knowledge-based economy. An educated work force, efficient transportation systems, vibrant cities and metropolitan areas, and a secure safety net.

The Minnesota good schools and quality communities strategy has paid off in the best in the Great Lakes economic and demographic outcomes. Michigan’s low tax/low public investment strategy has been accompanied by a decades long decline compared to the nation in both economic and demographic outcomes.

The post Minnesota is a successful high tax state appeared first on Michigan Future Inc..

For years we ended our presentations with a slide that said Michigan must get younger and better educated or we will get poorer. Where younger meant a place where Michigan was retaining those who grew up here and attracting mobile young talent from any place on the planet. And better educated primarily meant increasing the proportion of adults––particularly young adults––who had a four-year degree or more.

We didn’t get younger or better educated and we did get poorer. Falling from 99 percent of the nation in per capita income in 2000 to 89 percent in 2020. Falling from 18th to 33rd. If Michigan had just stayed at 99 percent per capita income in Michigan in 2020 would have been higher by $5,656 in 2020.

Maybe more concerning is this from a 2020 Automotive News article: Rivian CEO RJ Scaringe “believes California is a cool place to be and Detroit has an old technology image,” a former Rivian executive told Automotive News. “He thinks California represents tomorrow and Detroit is all about yesterday.” Where Detroit means the region and the automotive industry, not just the city.

Another way of saying this is California is young, Michigan is old. Where yes old means the average age of its residents, but also our communities and our economy. Michigan is over concentrated in neighborhoods of drivable suburbanism and under concentrated in neighborhoods of walkable urbanism. The state’s economy is over concentrated in declining sectors and under concentrated in the growing, high-wage knowledge-based sectors.

Michigan’s fundamental economic problem is that we do not have enough young adults––new entrants into the labor market––to replace retiring Boomers. And that the young adults we do have, too few are high-skilled, particularly too few have a four-year degree.

Using the Rivian CEO’s framing that California represents tomorrow here is what the ratio of 20-29 year olds compared to 55-64 year olds looks like in the U.S., Michigan and California: US: +4.3 percent, California: +15.9 percent; MI: -2.0 percent

If Michigan had the same ratio as the U.S. there would be 85,000 more 20-29 year olds in Michigan today. If we had the same ratio as California there would be 243,000 more 20-29 year olds in Michigan today.

In terms of young adults with a four-year degree or more in 2019 37.1 percent of the nation’s 25-44 year olds had a B.A. or more; California was at 38.2 percent, Michigan at 34.4 percent. Michigan ranked 31st. (Massachusetts is the leader at 52.9 percent. Minnesota is the Great Lakes best at 43.5 percent.)

What is particularly worrisome is Michigan is doing worse on both measures in 2020 compared to 2010 at the end of the so-called lost decade. In 2010 Michigan’s 20-29 to 55-64 ratio was 100 percent vs 98 percent in 2020. In terms of 25-44 with a four-year degree or more Michigan trailed the nation in 2010 by 2.2 percentage points compared to 2.7 percentage points in 2019.

If the state doesn’t change these realities the state’s economy cannot grow much. Not having enough young adults is the path to slow growth. Not having enough young talent is the path to low prosperity.

Over two decades of research has taught us one fundamental lesson: Talent = economic growth. Then New York City Mayor Michael Bloomberg got it right when he wrote in a Financial Times column:

Many newly successful cities on the global stage – such as Shenzhen and Dubai – have sought to make themselves attractive to businesses based on price and infrastructure subsidies. Those competitive advantages can work in the short term, but they tend to be transitory. For cities to have sustained success, they must compete for the grand prize: intellectual capital and talent. I have long believed that talent attracts capital far more effectively and consistently than capital attracts talent.

Creating a place where people want to live and work becomes even more important as Michigan goes through at least a decade and a half where the number of older workers leaving the labor market will exceed younger workers entering the labor market. Regions without the quality of place that mobile talent is looking for will be at a substantial disadvantage.

To create those places––to get younger and better educated––will require five fundamental shifts in Michigan’s approach to economic policy:

• Shift from an emphasis on being a low-cost state to a state that develops, retains and attracts human capital as its core strategy for economic success.
• Shift from intolerance to welcoming all people from any place on the planet
• Shift from an economic strategy based on low taxes to one that recognizes taxes must be balanced with the need for public investments in education from birth through college and in creating places where people want to live and work.
• Shift from state limitations that prevent cities and regions from controlling their own destinies to giving them the flexibility to develop, finance and implement their own quality of place strategies.
• Shift from accepting a crumbling 20th century infrastructure to providing a world-class 21st century infrastructure.

The post Get younger and better educated or get poorer appeared first on Michigan Future Inc..

As we explored in my last post from the beginning of our republic there has been predictions of the coming demise of high-density big cities. All of them have been wrong. The same is almost certain to be the case of today’s post-pandemic predictions of doom for big cities.

There are two main reasons why those predictions are always wrong. First concentrated talent working face to face significantly boosts productivity. And second, people––particularly young professionals––want to live in high-density, high-amenity urban neighborhoods where you do not have to own a car. It is almost certain the current pandemic will not alter those realities long term.

My last post focused on productivity advantages of high-density big cities. In this post we will look at talent wanting to live in high-density, high-amenity urban neighborhoods.

Evidence of the enduring attraction of big cities and their high-density, high-amenity neighborhoods is present today in the midst of our current pandemic. In a post for City Observatory entitled The exodus that never happened, Joe Cortright writes:

Our recent report, Youth Movement, confirmed the depth and breadth of the long-term trend of well-educated adults moving in large numbers to close-in urban neighborhoods. And the real-time data from real estate market search activity confirmed that cities were still highly attractive, gaining market share in total search activity from suburbs and more rural areas, according to data gathered in April by Zillow and Apartment List.com

Now, with even more data in hand, the picture remains very much the same.  Apartment List.com economists Rob Warnock and Chris Salviati have done a thorough analysis comparing the pattern of apartment search activity in the nation’s 50 largest metro areas between the first and second quarters of 2020; basically the period just before the pandemic struck with full force, and then the three months during which much of America was reeling from the virus and stuck in lock-down, with lots of time to consider possible new living locations.

Bottom line:  As revealed by apartment search activity, interest in cities actually increased in the second quarter compared to the first, relative to other locations, including suburbs, other less dense cities, and rural areas.

What is it about high-density, high-amenity neighborhoods that make them so attractive to young professionals? Then New York City Mayor Michael Bloomberg described it this way in a Financial Times column:

Many newly successful cities on the global stage – such as Shenzhen and Dubai – have sought to make themselves attractive to businesses based on price and infrastructure subsidies. Those competitive advantages can work in the short term, but they tend to be transitory. For cities to have sustained success, they must compete for the grand prize: intellectual capital and talent.

I have long believed that talent attracts capital far more effectively and consistently than capital attracts talent. The most creative individuals want to live in places that protect personal freedoms, prize diversity and offer an abundance of cultural opportunities. A city that wants to attract creators must offer a fertile breeding ground for new ideas and innovations.

In this respect, part of what sets cities such as New York and London apart cannot be captured by rankings. Recent college graduates are flocking to Brooklyn not merely because of employment opportunities, but because it is where some of the most exciting things in the world are happening – in music, art, design, food, shops, technology and green industry. Economists may not say it this way but the truth of the matter is: being cool counts. When people can find inspiration in a community that also offers great parks, safe streets and extensive mass transit, they vote with their feet.

Since Bloomberg wrote this column in 2012 young professionals are concentrating more in big cities. And as Cortright documents in his Youth Movement report concentrating particularly in high-density, high-amenity near-center-city neighborhoods.

The lure of “places that protect personal freedoms, prize diversity and offer an abundance of cultural opportunities” and provide “great parks, safe streets and extensive mass transit” remains as strong today as it did pre-pandemic.

The current predictions of the death of high-density, high-amenity neighborhoods are driven by the belief that high-density makes one far more susceptible to the coronvirus. But as Corthright writes that turns out not to be accurate:

… People might naturally assume that because New York is our densest city, and Coronavirus hit hardest there, that there was some connection. It turns out however, that within the New York metro area, rates of reported cases are actually higher in the suburbs (including Rockland and Westchester counties) than in the five boroughs of New York City. It’s also the case that in the city itself, the hardest hit neighborhoods actually are much less dense than those least affected.

While New York has dominated the awful statistics and headlines of the pandemic, today, the hardest hit area in the US is far away, and far different:  the Navajo Nation.  In the past week, New York’s rate of infection has been surpassed by that on the Navajo Nation, one of America’s least densely settled areas.  The nation covers an area larger than Ireland spread across three states—Arizona, New Mexico and Utah—and consists overwhelmingly of very low density housing.  But its rate has grown to more than 2,449  cases per 100,000 population even higher than New York City’s 2,300.

The underlying problems in the Navajo Nation are not density, but rather poverty, a lack of health care, and housing over-crowding. Interestingly, these same factors were identifies as correlates of Covid prevalence rates within New York City by a Furman Center analysis of zip-code case data.

And as Emily Badger explores in a New York Times article entitled Density Is Normally Good for Us. That Will Be True After Coronavirus, Too. high-density cities have many health related benefits. She writes:

Since the 1990s, researchers and planners have increasingly come to argue that dense urban environments, derided historically as diseased, can actually foster health. They don’t mean overcrowded tenements, but places where people live close enough to one another to walk where they need to go and to support one another. Such environments offer an alternative to sedentary, car-dependent sprawl, an antidote to growing health problems like obesity.

… In practical ways, density makes possible many of the things we need when something goes wrong. That is certainly true of hospital infrastructure — emergency response times are faster, and hospitals are better staffed in denser places. When one store is closed or out of toilet paper, there are more places to look. When people can’t leave home for essentials, there are alternative ways to get them, like grocery delivery services or bike couriers. When people can’t visit public spaces, there are still ways to create public life, from balconies, porches and windows.

The subtitle of Edward Glaeser’s Triumph of the City summarizes well the enduring value of cities and their high-density, high-amenity neighborhoods: How Our Greatest Invention Makes Us Richer, Greener, Healthier, and Happier. That is not going to change in a post-COVID world.

The post High-density, high-amenity neighborhoods are not going away appeared first on Michigan Future Inc..

Crain’s Chad Livengood begins his story on the new University of Michigan Detroit Center for Innovation this way:

Across the Potomac River from the nation’s capital, Virginia Tech is developing a 1 million-square-foot innovation campus in Alexandria, Va., that’s two Metro commuter train stops away from the second North American headquarters Amazon is building.

In New York City, Cornell University’s tech campus on Roosevelt Island has positioned the prestigious upstate New York school as an urban university across the East River from Long Island City, where Amazon planned to build another headquarters.

Manhattan real estate developer Stephen Ross points to these two strategic locations for world-class universities as the reason why he believes his alma mater, the University of Michigan, needs to have a significant footprint in downtown Detroit.

“Corporations go to urban areas because of the talent they generate,” Ross said in an exclusive interview with Crain’s. “When Amazon was going to come to New York, it was because of Cornell Tech and the students that it was generating for senior management. … So there’s a lot of lessons to be drawn.”

The main lesson Ross has learned is that cities and universities are now the primary drivers of economic growth. They are the keys to growing, retaining and attracting high-wage, knowledge-based enterprises. This is a talent-driven economy. The cities that combine the universities where talent is being developed and the high-density, high-amenity neighborhoods where young talent wants to live and work are the most prosperous places.

In 2012 we wrote a post on the Cornell University campus Ross mentions. Unfortunately its conclusions are still relevant today. Michigan policymakers still, by and large, do not understand that public investments in cities and higher education are the drivers of economic growth. Lightly edited here is that 2012 post:

The elected official in America today who is most aggressively pursuing positioning his community for a knowledge-driven economy is New York City Mayor Michael Bloomberg. He inherited a city already with many assets for that economy: an entrepreneurial culture, a city that is welcoming to all, as well as great public services and amenities that make NYC a place where mobile talent wants to live and work. To his credit Mayor Bloomberg is pushing to enhance those assets.

Unlike many, when the economy collapsed at the onset of the Great Recession he raised taxes (yes raised, not cut taxes) to make sure that the city could maintain quality basic services and amenities. He has been an innovator in improving schools, a national voice for pro-immigration policies and an investor in infrastructure, parks and the arts all of which enhance NYC as a place that can compete globally for talent.

But maybe his biggest and most impactful action has been to sponsor a competition to lure a brand new engineering and technology higher education campus to the city. Talk about outside the box and making a big bet! A mayor getting involved in funding higher education. But Bloomberg understands that higher education––particularly research universities––are a critical economic driver in a knowledge-driven economy. Quite simply you want to be the place where new knowledge is being created and new talent is being prepared. The city offered as an incentive land as well as $100 million in infrastructure improvements.

The New York Times reports that Cornell University in partnership with Technion-Israel Institute of Technology won the competition over such prestigious competitors as Stanford, Columbia and Carnegie Mellon. According to the Times the plan calls for about 280 faculty members and 2,500 students in master’s and doctoral programs. The schools have also committed to training at least 200 teachers each year in science education, and to help teach at least 10,000 students, from kindergarten through 12th grade, each year. The initiative includes a $150 million venture capital fund for start-up companies that agree to remain in New York for three years, as well as math and science education support for 10,000 city children. They estimated that building the campus would create 20,000 construction jobs, and that it would spin off 600 new businesses over the next generation, creating 30,000 more jobs and as much as $1.4 billion in tax revenue.

Contrast that to Michigan’s approach to higher education the last decade. Cutting spending by nearly a third, imposing price controls and increasingly micro-managing from Lansing how universities operate. I’m sure there wasn’t anything in the NYC competition that asked universities about whether they offer domestic partner benefits, or placed conditions/restrictions on stem cell research, or affirmative action restrictions or whether or not they have tenured professors who are not teaching full time or placed limits on the tuition they charge. All misguided obsessions here.

This competition is not just about how a state or city value higher education––as a powerful asset for economic growth or wasteful spending institutions that need to be reined in. It is also about whether there are essential assets that matter to economic growth that communities need to invest in whether times are tough or not to be globally competitive. Mayor Bloomberg’s higher education play is entirely consistent with Denver in the 80s, when its economy collapsed, deciding that to be globally competitive they needed a world class airport and Portland in the 70s and Salt Lake City in the 90s deciding that to be competitive they needed rail transit or California in the 50s committing themselves to building a comprehensive, world-class higher education system. The list goes on and on. The lesson is clear: public investments in strategic assets are essential to globally competitive states and regions.

Once again contrast that list of impactful public investments to what is happening here. Where we are letting our roads crumble, walking away from the Woodward light rail even with private investors putting $100 million on the table, weakening what was once one of the great higher education systems on the planet, etc. Ask yourself “who is positioning themselves best to win in a flattening world, those who make big strategic public investments or those––like us––who don’t?”

The post Cities and universities drive economic growth appeared first on Michigan Future Inc..

In preparing presentations about our placemaking recommendations what has struck me is that the key message can be summed up in three words: talent attracts capital.

Where talent means primarily those with a four-year degree or more. What the most prosperous non-energy-driven states and regions have most in common is a high proportion of their adults with a Bachelors Degree or more.

The phrase talent attracts capital comes from a then New York City Mayor Michael Bloomberg Financial Times column. Bloomberg writes:

Many newly successful cities on the global stage – such as Shenzhen and Dubai – have sought to make themselves attractive to businesses based on price and infrastructure subsidies. Those competitive advantages can work in the short term, but they tend to be transitory. For cities to have sustained success, they must compete for the grand prize: intellectual capital and talent. I have long believed that talent attracts capital far more effectively and consistently than capital attracts talent.

This, of course, turns what we think of as state and regional economic development on its head. For decades economic development work has been built on the assumption that capital attracts talent. So, as Bloomberg points out, we have spent most of our time on “price and infrastructure subsidies”. And more broadly on lowering business costs.

It hasn’t worked! While Michigan has been pursuing the lowering business costs strategy the state’s per capita income has fallen from around the national average to ten percent or more below.

Why? Because talent attracts capital far more than capital attracts talent. It is the asset that matters most to high-wage, high-growth businesses. As the Amazon HQ2 competition clearly demonstrated Michigan and its regions are not competitive. The state is consistently in the 30s the proportion of adults with a four-year degree or more.

So understanding the characteristics of where mobile talent is concentrating has become an imperative for all Michigan regions. Bloomberg, in his Financial Times column, describes where talent is concentrating:

The most creative individuals want to live in places that protect personal freedoms, prize diversity and offer an abundance of cultural opportunities. … Recent college graduates are flocking to Brooklyn not merely because of employment opportunities, but because it is where some of the most exciting things in the world are happening–in music, art, design, food, shops, technology and green industry. Economists may not say it this way but the truth of the matter is: being cool counts. When people can find inspiration in a community that also offers great parks, safe streets and extensive mass transit, they vote with their feet.

We know how to create welcoming communities. We know how to work together as a region and how to provide services regionally. We know how to pay for and provide high quality basic services and amenities. Our Minneapolis case study, Regional Collaboration Matters and our placemaking recommendations report, Creating Places Where Across Michigan People Want to Live and Work, provide examples and sources of what has worked across the country.

We know how to create high-density, high-amenity, transit-rich neighborhoods. For more than a decade, the Michigan State Housing Development Authority convened Sense of Place Council has brought together the relevant state agencies as well as local and state entities with placemaking expertise. They have laid out what needs to be done and how to do it.

What is missing is an understanding that “talent attracts capital far more effectively and consistently than capital attracts talent”. That the path to prosperity for communities is human-capital driven. That the asset that matters most to employers is talent.

What we think of as state and regional economic development now is the icing on the cake, not the foundation of a prosperous economy. That foundation now is high-quality education systems that prepares the next generation for the economy they are going to live in and communities where mobile talent wants to live and work.

The post Talent attracts capital appeared first on Michigan Future Inc..

There are three key lessons that the Amazon HQ2 competition teaches us in Michigan about what matters to retain and attract high-wage jobs:

• Talent, not low taxes, are what matters most. Former New York Mayor Michael Bloomberg got it right when he wrote: “Many newly successful cities on the global stage – such as Shenzhen and Dubai – have sought to make themselves attractive to businesses based on price and infrastructure subsidies. Those competitive advantages can work in the short term, but they tend to be transitory. For cities to have sustained success, they must compete for the grand prize: intellectual capital and talent”. Amazon did not choose low cost/low tax places, nor did they choose the places that offered them the most money. They chose places, first and foremost, that had the talent they need today and tomorrow.
• Talent is concentrated in big metros. Amazon’s first requirement to be eligible for HQ2 was a region with a population of one million or more. That meant that more than 90 percent of the land mass in America was not eligible even to apply. The reason is that professionals and managers––those with four-year degrees or more––are far over concentrated in big metros. Michigan is fortunate that it has two regions large enough to compete: Detroit and Grand Rapids. Many states have none. But at the moment neither metro Detroit nor metro Grand Rapids have the talent concentrations necessary to be competitive for future HQ2s. If Michigan is going to retain and attract high-wage employers its two big metros most become talent magnets.
• Professionals and managers are the core of the middle class. What made HQ2 the Super Bowl of economic development was 50,000 jobs at an average pay of over $100,000. Those with four-year degree working in professional and managerial occupations in offices, schools, and hospitals are today’s and tomorrow’s mass middle class. High wage jobs at Amazon are in their headquarter jobs, not in their warehouses or those who deliver packages for them. What makes metro New York and D.C. high per capita income regions is their high proportion of adults with four-year degrees or more, not the proportion of those in the skilled-trades or other mid-skill occupations. Michigan is a low college attainment state and therefore is a low per capita income state. The same is true for metro Detroit and metro Grand Rapids.

This all adds up to a simple lesson that Michigan has yet to learn: Preparing, retaining and attracting talent is the economic development priority. Michigan must shift from an emphasis on being a low-cost state to a state that develops, retains and attracts human capital as its core strategy for economic success.

So what are the policies that can best prepare, retain and attract talent? Smart Growth America, in a worth-reading article entitled How can your city snag the next Amazon HQ2?, laid out an agenda for what regions can do to be competitive for the next HQ2:

• Invest in transit, walkability, and other non-car options
• Build more housing, of all different types
• Create mixed-use neighborhoods where jobs, housing, and recreation mix
• Think beyond the central business district
• Invest in public education

Michigan Future will release in the coming days its placemaking agenda. Our ideas about what the state needs to do to create places where people want to live and work. We will highlight the report’s recommendations in this blog during December.

The post What Michigan needs to learn from Amazon HQ2 appeared first on Michigan Future Inc..

The most creative individuals want to live in places that protect personal freedoms, prize diversity and offer an abundance of cultural opportunities. A city that wants to attract creators must offer a fertile breeding ground for new ideas and innovations. … Economists may not say it this way but the truth of the matter is: being cool counts. When people can find inspiration in a community that also offers great parks, safe streets and extensive mass transit, they vote with their feet.

Our research on the changing American economy has led us to conclude that, quite simply, in a flattening world where work can increasingly be done anyplace by anybody, the places with the greatest concentrations of talent win. The new path to prosperity is concentrated talent.

One might ask “what does quality of place have to do with good-paying careers for all?” The answer is talent is mobile and increasingly where they go high-wage, knowledge-based enterprises follow. In his Financial Times article Bloomberg also wrote: “I have long believed that talent attracts capital far more effectively and consistently than capital attracts talent.”

Concentrated talent increasingly is what attracts high-wage employers. Talent is also entrepreneurial, so where it is concentrated increasingly are the places with the most high-wage business start-ups. So talent concentration is essential to high-wage job creation.

And where you have concentrations of high-wage workers you get increased demand for local services. From buying and fixing up homes and second homes, to car and boat purchases to increased demand for retail and hospitality concentrations of professionals and managers are driving local economies just as high concentrations of high-wage factory workers did in the past.

Economies are regional. States and municipalities are political jurisdictions, they are not economic units. State economies can best be understood as the sum of their regional economies.

The evidence from around the country is that quality of place is an––if not the most––important component in retaining and attracting talent. Places with quality infrastructure, basic services and amenities are the places that retain and attract talent the best.

It is also clear that the desirable mix of infrastructure, basic services and amenities differ from region to region. What makes small towns and rural communities attractive places to live and work are different than what makes big metros and their big cities attractive places to live and work. So Michigan’s diverse regions need the resources and flexibility to develop and implement their own strategies to retain and attract talent. It’s the key to their future economic success.

The places where talent is concentrating are increasingly big metros with vibrant central cities. Central cities because mobile talent increasingly wants to live in high-density, high-amenity neighborhoods where you don’t have to own a car. Every high-prosperity state that is not energy driven has an even higher prosperity big metropolitan area that has a high proportion of residents with a four-year degree or more. Michigan won’t be a high-prosperity state unless metro Detroit and metro Grand Rapids are able to compete with national talent magnets like metro Chicago and metro Minneapolis.

These are the placemaking policies that matter most to Michigan and its regions retaining and attracting talent:

• Welcoming to all. Talent is both diverse and mobile. If a place is not welcoming, it cannot retain and attract talent. People will not live and work in a community that isn’t welcoming. That means state policies that provide everyone with basic civil rights and treats everyone the same no matter where they are born, their sexual orientation, race, religion or ethnic background.
• Increased public investments in the provision of quality infrastructure, basic services and amenities as a state, regional and local priority
• Understanding that economies are regional and each region needs the flexibility to develop and implement their own talent retention and attraction strategies
• A substantial increase in returning state revenue from the state to local governments in a way that encourages regional cooperation
• Removing restrictions on local government taxing authority, including local/regional sales tax option
• State and local development friendly regulations that facilitate the creation of high-density, walkable, high-amenity neighborhoods in our cities and inner ring suburbs.

The post Place attracts talent. Talent = economic growth appeared first on Michigan Future Inc..

As I wrote in 2011 if we want the more and better jobs Governor Snyder has set as the goal for Michigan: “To get back on the path to prosperity Michigan needs far more – not less – of what Manhattan has.”

The post NYC still surging appeared first on Michigan Future Inc..

From 2000 to 2010, more college-educated professionals aged 25 to 34 moved downtown than to the suburbs in 39 of the 50 largest U.S. metros. For 35-to-44-year-olds, the same held true in 28 of the 50 largest metros. This revival was true in the places you might expect, like New York City or San Francisco, and in places you might not, like Cleveland. It was true despite historical trend lines showing that, for the better part of a century, the wealthy typically moved one way when it came to cities: out of them.

Citing new research by Victor Couture, University of California, Berkeley, and Jessie Handbury, University of Pennsylvania the article identifies the density of urban amenities as the primary draw of downtowns for young professionals. CityLab writes: “New living habits of Millennials and Baby Boomers, delays in starting a family, a tougher home-buying market, a hatred of long commutes—those social factors have all altered cities in recent years. But Couture and Handbury pin the return of downtown on a new fondness for service amenities: music venues, theaters, bars, gyms, and the like. Not the growth of these things but a fresh taste for living near them, a broad cultural shift that could make urban revival more durable.”

So its a change in consumer preferences not being unable to afford–-because of the bad economy and/or high student loan debt––that is driving young professionals to choose city living over buying a home in the burbs. Particularly in Michigan this has been a hard lesson to learn. Where conventional wisdom––despite lots of evidence to the contrary––is that the preferred good is a house in the suburbs, the inferior good is an apartment or condo in the city. Think again!

The private amenities that Couture and Hanbury emphasize as attractors of young talent require high residential density. Something that by and large has been missing in Michigan cities in part because housing and land use policy has discouraged density.

We believe there also are public amenities that matter as well. Particularly transit and other alternatives to driving or owning a car. This even more is missing in Michigan. Other public amenities that matter are parks and outdoor recreation and support for the arts. Not to mention basic services like public safety.

It all adds up to a need for public policy in Michigan that emphasizes city development––particularly residential development––as a priority. As former New York Mayor Michael Bloomberg wrote for the Financial Times: “Recent college graduates are flocking to Brooklyn not merely because of employment opportunities, but because it is where some of the most exciting things in the world are happening – in music, art, design, food, shops, technology and green industry. Economists may not say it this way but the truth of the matter is: being cool counts. When people can find inspiration in a community that also offers great parks, safe streets and extensive mass transit, they vote with their feet.” Having primarily a Detroit and Grand Rapids with these characteristics is the key to Michigan reversing decades of young college graduated going elsewhere.

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Karlgaard understood years ago what many still don’t today, that increasingly employers are following talent, rather than people moving to where the jobs are. In many ways this is the central insight of Richard Florida’s influential book The Rise of the Creative Class. That talent––primarily those with four year degrees or more––is the asset that matters most to knowledge-based employers.

Increasingly where talent is concentrated––particularly college educated Millennials––are central cities of big metropolitan areas. So it shouldn’t be a surprise that recently GE announced the relocation of its corporate headquarters from suburban Connecticut to Boston. And several months ago ConAgra announced the relocation of its corporate headquarters from Omaha to Chicago. These are just two examples of a larger trend of companies locating in vibrant central cities where young talent is concentrated. (Think Quicken to downtown Detroit.) Both GE and ConAgra cited access to talent as a major factor in their relocation.

In a Minneapolis Star Tribune article entitled ConAgra’s Move from Omaha to Chicago Shows Big Cities Still Reign Lee Shafer writes:

To a lot of us, big cities like Chicago primarily look expensive and crowded. But it’s long been observed by economists that productivity improves in cities. One reason is that good ideas and know how seem to leak between people who share the same place, even if they work for competitors.

Companies can thrive in places like that, in turn attracting engineers, marketers and other highly skilled people. It certainly helps attract them if the region also has a lot of sports, arts, outdoors and other amenities to make the hours after work more pleasant.

All of that means that in this case Chicago, a big metro area in a state so dysfunctional that its legislature and governor still can’t agree on a budget, gets another Fortune 500 company headquarters to add to the 31 already there.

Exactly! Talent trumps a lot of what conventional wisdom claims are the keys to retaining and attracting jobs––particularly high paid professional and managerial jobs. Things like taxes, regulation, well run state and local government, etc.

Former New York city mayor Michael Bloomberg in a Financial Times column summed up best what matters most to retaining and attracting employers this way:

Many newly successful cities on the global stage – such as Shenzhen and Dubai – have sought to make themselves attractive to businesses based on price and infrastructure subsidies. Those competitive advantages can work in the short term, but they tend to be transitory. For cities to have sustained success, they must compete for the grand prize: intellectual capital and talent.

I have long believed that talent attracts capital far more effectively and consistently than capital attracts talent. The most creative individuals want to live in places that protect personal freedoms, prize diversity and offer an abundance of cultural opportunities. A city that wants to attract creators must offer a fertile breeding ground for new ideas and innovations.

In this respect, part of what sets cities such as New York and London apart cannot be captured by rankings. Recent college graduates are flocking to Brooklyn not merely because of employment opportunities, but because it is where some of the most exciting things in the world are happening–in music, art, design, food, shops, technology and green industry. Economists may not say it this way but the truth of the matter is: being cool counts. When people can find inspiration in a community that also offers great parks, safe streets and extensive mass transit, they vote with their feet. 

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