Why are the governor’s moves encouraging? Because of the policy focus on retaining and attracting talent. Scholarly work done by Michigan Future, Inc. tells us that talent is mobile, that talent locates where it most wants to live, and that jobs follow talent. Research shows that talent is the key driver for economic prosperity across the socio-economic spectrum. 

From a professional point of view, I’m encouraged by the recognition that placemaking is occupying an increasingly important role within policy making decisions. Placemaking means creating places people want to live, work, play and learn in. I define that as amenities that exist year-round: neighborhoods with unique characteristics, restaurants and dining options, walkability, housing options, schools, recreation & exercise options, cultural arts and related events/options, easily accessible transit options.

As a museum professional, I can attest to the impact museums have on visitors. It’s a range for sure, but it’s also the reason that the greatest cities in the world have great museums and cultural institutions. The ability to partner with community-based organizations and entities of higher education not only enriches experiences but connects the community and makes a statement to the broader public. I applaud the growing appreciation of the cultural arts as a key component in an overall placemaking strategy.

I’m encouraged – and hopeful – that these efforts will catch the attention of my own adult children. They are aged 24 through 31 and are living in Austin, Chicago, Salt Lake City, and Norfolk. After visiting them, I’m convinced that there is nothing those places have that we can’t have here in Michigan. In fact, we already have advantages and assets that those places don’t. But the ingredients we do have must be focused on, enhanced, and used to create an experience that reflects the history, culture, background, and uniqueness’s of the localities that will retain and attract the talent we desire. Because without such a focus, talent like my own children will continue to go elsewhere.  

There is one caveat, and that is how much are we, as a people, willing to do? The focus on the ingredients I mentioned above will require a sizable investment to have the impact we truly need to reverse the population decline and achieve population growth.  As citizens, we need to be prepared to support bold moves proposed by our Michigan leaders. It means starting where talent concentrates in our urban centers. And it means funding for neighborhood streetscapes, transit, and infrastructure that attracts and accommodates use every day of the year. These investments can’t be everywhere at once and will require consensus and support for focused efforts in a few chosen places. We must be willing to go forward in faith and knowledge that the benefits will be realized and that they will positively impact the entire state. 

Our impressive and storied history has changed the nation – and the world – and tells me we can do it, because we’ve done it before. Over the course of our history, we’ve built the infrastructure to produce the talent that we, and all other regions, seek. Our educational system includes top notch colleges and universities and innovative K-12 schools. The graduates of our schools, including my own children, must be the picture of our future who would choose to make their way in the world from their home here in our great State of Michigan. 

Dale Robertson is the President & CEO of the Grand Rapids Public Museum and is a member of the Michigan Future, Inc. board of directors.

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Transformative placemaking should be the driving force for successful economic development.The key to growing high-wage jobs in Michigan is attracting college-educated and skilled members of Generation Z after they finish their education. Michigan cannot get prosperous again until and unless we become a talent magnet for these young people. Focusing on traditional economic development priorities while failing to concentrate young talent in the state will ensure Michigan remains a permanently low-prosperity state.

Because young talent is the most mobile, economic development policies should be squarely focused on creating the kinds of places where highly-educated young people want to live and work. Attracting and retaining highly-educated young people is the state’s primary economic imperative – both keeping the young talent that grows up here and attracting young talent from any place on the planet.

The data show that highly-educated young people are increasingly concentrating in regions with vibrant communities, central cities, dynamic neighborhoods, and ex-urban small towns that:

• Offer an attractive, attainable, safe, and welcoming landscape.
• Incorporate a mix of walkability, good transit, and density.
• Are amenity-rich with artistic, cultural, and outdoor activities.
• Concentrate professional and social networks in diverse, open communities.

Michigan’s current economic development playbook focused largely on business attraction is endangering the long-term health of our economy and the economic well-being of households because it does not incorporate the value of place. To recreate a Michigan with lots of good-paying career opportunities – we need to strengthen and create more vibrant neighborhoods in our central cities and small towns that can attract and retain young talent. These neighborhoods – our country’s best talent magnets – vary in many ways, but all share common characteristics: they are dense, walkable, high-amenity neighborhoods, with parks, outdoor recreation, retail, and public arts woven into residents’ daily lives. And they offer plentiful alternatives to driving.

There are 14 percent fewer recent college graduates living in Michigan than graduated from Michigan institutions. Other states, including Illinois and Minnesota in the Great Lakes, are able to retain and attract more recent college graduates than recently graduated from a college within its borders. What do they all have in common? All have talent-magnet central cities filled with vibrant, dense neighborhoods.

Tami Door, CEO of the Downtown Denver Partnership, writing in 2012 got it exactly right. Today, of course, the future workforce is Generation Z. She wrote:

“Employers will follow the workforce. For a city to remain economically competitive in the future, it must attract the millennial generation, the future workforce. Nationally, employers recognize that the millennial generation is more likely to choose to live and work in or near an urban center. Mountains and oceans have become secondary to downtown amenities.”

Tami Door, CEO of the Downtown Denver Partnership

For Michigan’s population to get younger and more talented will require significant public investment. Those public investments must be designed explicitly to provide the infrastructure and amenities that Generation Z demands. This is not a set of recommendations that can be done on the cheap or by tinkering at the edges. The states that have won in the transition to the high-wage knowledge economy are those that have invested deeply and sustainably in the infrastructure and amenities of their central cities.

If we make the tough decisions and the big investments, we can see a Michigan with a growing population, prosperous citizens from all backgrounds, and neighborhoods that rival the best in our nation.

But that future only happens with decisive action to successfully transition to the high-wage knowledge economy by investing in our young people and creating vibrant cities that attract talent from across the globe.

– Warren Call, president and CEO, Traverse Connect

– Lou Glazer, president, Michigan Future Inc.

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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.

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For nearly two decades we have urged Michigan economic policy makers to use Minnesota as a model. Because Minnesota across the board has the Great Lakes best economic outcomes. From low unemployment to high labor force participation to better than the nation personal income and education attainment Minnesota is far ahead of Michigan.

We also chose Minnesota because it is a cold-weather, non-coastal, neighboring state. Taking off the table that Michigan’s poor and declining outcomes are because of the weather or the apparent advantages of states on the two coasts.

Now that demographic challenges––more Michiganders leaving than entering the labor market––are becoming policy priorities, once again Minnesota is a model. With by far the best results for decades in the Great Lakes.

Highlighted by Minnesota being the only Great Lakes State that has not lost a congressional seat from 1960 on. Each decade from 1960 on Minnesota has had 8 congressional seats. In 1960 Michigan had 19 congressional seats, today it has 13. Michigan has lost at least one seat in congress each of the last five decades. The last time Michigan had as few as 13 congressional seats was the 1920s.

Not losing a congressional seat since 1960 means Minnesota’s population has grown at near the same rate as the nation’s for the last six decades. Its 2020 population is 167 percent larger than it was in 1960. Minnesota’s population growth is concentrated in metro Minneapolis. The region’s population in 2020 is 217 percent of what it was in 1960.

Over that same time period Michigan’s population has grown 128 percent. If Michigan’s population growth since 1960 had been the same of Minnesota’s, Michigan population would be around 13 million rather than the 10 million it is today.

It’s not just Michigan, all the other Great Lakes states have lost congressional seats since 1960:

• Illinois from 24 to 17
• Indiana from 11 to 9
• Ohio from 24 to 15
• Wisconsin from 10 to 8

Minnesota’s population growth demonstrates that much of what passes for conventional wisdom when it comes to where people are choosing to live post pandemic is not accurate. So much for the conventional wisdom that people are fleeing cold weather places. So much for the conventional wisdom that people are fleeing high density places––particularly big cities. So much for conventional wisdom that people are fleeing high tax places.

Rick Haglund’s conclusion in our Minnesota case study describes Minnesota’s decades-long strategy that has led to its Great Lakes leading economic and demographic outcomes:

Lawmakers and governors in many states, including Michigan, have focused primarily on cutting taxes and shrinking the size of their governments as the path to prosperous economies.

As this report has shown in detail, Minnesota has traveled a different path. There is no question Minnesota is a high tax state—as stated earlier, its residents paid $2,145 (updated for 2021) more than Michigan residents in state taxes alone.

But it has largely invested that additional revenue in 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 for those making the transition to a global economy all matter in creating a prosperous state.

Minnesota has made those necessary investments and enacted policies making the state welcoming to all. It really shouldn’t be surprising, then, that it has the strongest economy in the Great Lakes region and one of the most vibrant in the country.

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Last month Oracle announced they are bringing 8,500 jobs at an average salary of $110,000 to central city Nashville. The company will invest $1.2 billion to build out its new campus, including $175 million for public infrastructure.

The city, in its statement about the Oracle investment, writes:

“We are thrilled that Oracle is ready to make a billion-dollar bet on Nashville,” said Mayor John Cooper. “Oracle will bring a record number of high-paying jobs to Nashville and they will pay upfront all the city’s infrastructure costs. This is a huge win for our city. In an unprecedented deal structure for Nashville, no new debt is being issued and there is no burden on our taxpayers. Oracle’s presence will transform the East Bank, and I’m equally excited about the ways Oracle can transform education and career pipelines in Nashville.”

…The deal would not burden the city with any additional debt. The proposal does not require any funds from Metro’s operating budget. There are no job grants or bonds required as part of the proposed deal.

In the proposal, Oracle will make a $175 million investment in public infrastructure that a city would ordinarily be required to purchase itself. This includes costs such as a pump station for water and sewer, a pedestrian bridge, street widenings, and environmental remediation. Per the Economic Impact Plan, half of Oracle’s future property taxes would go to reimbursing the company for its upfront infrastructure investment, without any interest payments.

The other half of the new property tax base would benefit the city’s general operating fund, from which funds can be directed to investments in affordable housing and neighborhood infrastructure. “The remaining property tax revenue from the project, the ‘Oracle bonus,’ can fund investments throughout the city. Creating and preserving affordable housing will be my top priority with those funds,” added Mayor Cooper. In addition to the increase in the property tax base, local sales and use tax collections from the proposed project are expected to reach about $8.8 million annually.

News 4 Nashville describes Oracle’s reasons for choosing Nashville this way:

Oracle is interested in Nashville because it provides access to world class higher education institutions and a talented workforce, boasts a diverse populations with a vibrant culture, has a high quality of life while maintaining affordability, and is a top destination for new employees.

Wow! 8,500 new high-paying jobs with very little public subsidy. Why? Because this is an economy in which talent attracts capital. The asset that matters most to high-wage employers is concentrated talent. Particularly young professionals in a wide variety of professions. 45.2 percent of Nashville/Davidson County residents 25 and older have a four-year degree or more. And Nashville has become one of the nation’s leading talent magnets.

This is the new economic development success recipe: talent driven, not business incentives driven.

There are five essential lessons our state and regional economic leaders can and should learn from Nashville’s success in attracting Oracle:

• The core of being an economic development competitive state and region is a region’s human capital, not what is included in the offer for a specific business investment opportunity.
• Placemaking––creating a place where people want to live and work––is key to retaining and attracting high-wage employers.
• Creating places where people want to live and work is driven by public investments in quality basic services, infrastructure and amenities.
• Welcoming to all is a core characteristic of high-prosperity regions. People will not live and work in a community that isn’t welcoming.
• High-wage jobs will continue to be concentrated in offices in high-density, high-amenity big cities. As we bring the virus under control people––particularly young professionals––are going to want to live in high-density, high-amenity central city neighborhoods an employers are going to want their high-wage employees working together to boost productivity.

For Michigan and its regions to be competitive with leading-edge communities like Nashville the state and its regions need to completely redesign its economic development strategy and practice. What we think of as state and regional economic development now is the icing on the cake, not the foundation of building a high-wage economy. What Michigan needs, first and foremost, is a human capital centered economic strategy not a business creation, retention, attraction centered economic strategy. The 21st Century economic development foundation is high-quality education systems that prepares the next generation for the economy they are going to work in and communities where mobile talent wants to live and work.

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K-shaped economy is how many describe our economy since the pandemic. And most expect the recovery to be K-shaped as well. The reality is that the Michigan economy was K-shaped pre-pandemic. With those at the top doing well, but far too many households struggling in the strong 2019 Michigan economy.

As we explored in our last post, the Michigan Association of United Ways calculates that nearly four in ten Michigan households in 2019 could not pay for basic necessities. So a K-shaped economy is structural. A reality when the Michigan economy is expanding as well as when it is contracting. A reality when unemployment is low and high. A reality when the stock market is booming as well as when it is collapsing.

It is now crystal clear, far too many of our families have not been succeeding for far too many years. If they are not succeeding, our state is not succeeding.

Figuring out how you get an American capitalism that as it grows benefits all is the economic challenge of our times. We can––and should––debate how to achieve an economy that benefits all. What we should not do is celebrate an economy that is leaving so many behind.

It is far past time that we commit to turning a K-shaped economy into an economy that benefits all. We need a new economic strategy in Michigan. One that starts with rising income for all as the state’s economic mission. Income––particularly good-paying jobs and careers––needs to become the prime focus of economic policy and economic and workforce development programming.

We believed before the onset of the pandemic––and even more so now––that this is the time to make fundamental change in the state’s playbook to increase the economic well-being of all Michiganders. That now is the time for a transformative redesign of our approach to the economy. To us mid-course adjustment in what we have been doing is not the path to achieving rising income for all. So our recommendations for turning our K-shaped economy into an economy that benefits all are explicitly designed for fundamental change. To rethink what is foundational to state policy and programming to achieving rising income for all and go big in building that foundation.

To us that means a state economic policy laser-like focused on good-paying jobs and careers. We need policies designed so that all Michigan workers have wages and benefits that allow them to pay the bills, save for retirement and the kids’ education and pass on a better opportunity to the next generation.

Specifically we need policies that will:

Increase income and health coverage for today’s low-wage workers through an expanded and no red tape safety net.

Michigan cannot substantially reduce the proportion of households that cannot pay for basic necessities unless it finds ways to increase the amount of work and the pay and benefits for those who work in low-wage jobs. The past four decades have made clear that market forces alone will not turn low-skill, low-wage jobs into family-supporting work. In the strong 2019 Michigan economy 58 percent of payroll jobs were in occupations with a full-time median wage below the nation median of $39,810. We need public policy designed to raise the returns from work.

What low-wage workers need more than anything is more income and health coverage. We need cash-based benefits for those who are working. And we need cash-based benefits for those who have lost their jobs. We also need to make safety net benefits far easier to get. The struggles today that way too many Michiganders are going through to get safety net benefits make clear that we need to go to no red tape cash benefits plus health coverage.

Prepare all Michigan children for good-paying forty-year careers by making the 6Cs the foundational skills for all students from birth through college.

To thrive in the new economy, workers have to be adaptable, have a broad base of knowledge, be creative problem-solvers and be able to communicate and work well with others. In other words, workers need to be really good at all of the non-algorithmic skills computers aren’t good at yet.

The best definition we have found for this complex set of skills comes from the book Becoming Brilliant, by learning scientists Roberta Michnick Golinkoff and Kathy Hirsh-Pasek, who label these skills the six Cs: collaboration, communication, content, critical thinking, creativity and confidence.

In Michigan today the education that is provided for affluent kids is, by and large, designed and executed differently than it is for non-affluent kids. One system delivers a broad college prep/6Cs education, the other delivers an increasingly narrow education built around developing discipline and what is on the test or to narrowly preparing non-affluent children for a first job. Our goal should be to design an education system that provides for all children the experiences that affluent children take for granted. Only then can we say that we’re providing each and every Michigan child with an education that will prepare them for good-paying forty-year careers.

In addition to current education funding, an annual grant from birth through college for all children in households unable to pay for the basics.

We strongly believe Michigan under invests in its children. Particularly its non-affluent children. And even more so its Black and Latino children. There is no path to income equality and racial equality that does not include, front and center, far better education outcomes.

To us the evidence is clear: The formula for ending what is increasingly becoming an education caste system—where for the first time in American history parents’ education attainment is the best predictor of a child’s education attainment—is both far higher quality teaching and learning and substantially more funding for children growing up in non-affluent households from birth through college.

We believe that under investment starts at birth and continues through college. So we propose Michigan substantially increase its investment in the education of every child growing up in a household struggling to pay for basic necessities each year from birth through the age of 21.

Think of this as something that operates, for education related expenses, like a health savings account. An annual government deposit, above and beyond current education spending, for each child 0-21 growing up in a Michigan household struggling to pay for the basics. Where the decision on education-related programming is controlled by parents and students. Including the option of utilizing those funds for extracurriculars and out of school programming.

Create more high-paid jobs by creating places where people want to live and work.

Every Michigan region needs more high-wage jobs. This is an economy where talent attracts capital. Creating a place where people want to live, work and play is what matters most to retaining, attracting and creating more high-wage jobs. Those regions without the quality of place that mobile talent is looking for will be at a substantial disadvantage.

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 central 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 an essential ingredient to their future economic success.

Responsibility and funding should be moved from the state to regions for all modes of transportation (except state highways); water; parks and outdoor recreation (except state parks); housing; and all other local/regional infrastructure, basic services and amenities. Responsibility and funding should be returned with little or no state mandates on how funds can be raised and used. The goal is to empower regions to develop and fund their own strategies for creating places where people want to live, work and play.

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Northern Virginia quite literally won economically in the 21st Century when Amazon chose them as the location for one of two HQ2s. Winning what was described by pundits as the Super Bowl of economic development competitions. HQ2 brings to Northern Virginia a commitment for 25,000 jobs with an average salary of $150,000.

(Amazon also chose New York City as the second site for their H2, but withdrew the offer after the announcement generated significant local opposition.)

As we explored, metro Detroit including Windsor and metro Grand Rapids were among the initial 238 competitors, but did not make the final 20.

This, of course, raises the question why did Northern Virginia win? What were the assets they offered that mattered most to Amazon? Understanding what assets matters most is imperative for Michigan regions to understand because HQ2 is representative of the predominant type of high-paid jobs investments being made employers.

If we want––and we should––an economic development policy focused on high-wage jobs the reality is they are highly concentrated in professional and managerial occupations. Not just STEM: think workers in offices, schools and hospitals.

And as the Northern Virginia proposal states, where these jobs concentrate benefits the entire economy:

A significant beneficiary of Amazon’s new investment in NOVA will be the region’s small businesses. Retailers, restaurants, contractors, and local service providers derive most of their sales from within the community. Those small businesses will benefit from increased demand from Amazon itself as well as from increased spending associated with Amazon’s employees, both directly and indirectly.

So let’s see how Northern Virginia sold itself to Amazon. Here is the first section of their proposal:

As a partner to Amazon, Northern Virginia (NOVA) brings several distinctive, high-impact assets to the table

North America’s top producer of tech talent.
Greater Washington is the country’s most educated region (~49% of those 25 and older have at least a bachelor’s degree), and it produces more computer science graduates than any other metropolitan area.  The region also has a ready base of talent, with the country’s third-largest pool of software developers and fourth-largest pool of management and legal professionals. The combination of depth, concentration, and growth of talent available in the Washington, D.C. metro area, with additional tech talent production from Virginia’s world-class higher education system, will ensure NOVA maintains and enhances its edge with access to the best and brightest.

A global and inclusive region…
Greater Washington is a global power center, the capital of global democracy, and one of the country’s most racially, ethnically, and internationally diverse regions. Women are twice as likely, and African Americans five times as likely, to work in the technology sector in NOVA than in Silicon Valley. Approximately one in four of its residents was born outside the United States, and the children in NOVA schools speak~100 native languages. Communities in NOVA are ranked among the most LGBTQ-friendly nationwide, and diversity is one the region’s core strengths.

…on a human scale.
NOVA offers something for everyone, with access to some of the country’s most interesting cultural and historical sites, sports teams in all major leagues, and a dynamic food and wine scene. The area is home to a broad range of outdoor activities, from kayaking on the Potomac to hiking in the nearby Shenandoah National Park, all as part of a mild four-season climate.  The region offers a diversity of housing options, some of the country’s top-ranked public schools, and one of the country’s top-rated public transit systems.

The leading metro for public and private sector innovation.
Innovation is in Greater Washington’s lifeblood. The region’s legacy of transformative technologies transcends sectors, from the Defense Advanced Research Projects Agency’s (DARPA) role in inventing the internet and voice-recognition systems; to public/private collaboration to create more than 70 miles of automated corridors for connected and autonomous vehicle testing; to the region’s history as the foundation of the telecom revolution and our current depth of technology companies; and to the National Science Foundation (NSF) whose grant funding through the Digital Library Initiative supported the research and eventual foundation of Google, Inc.— Greater Washington sits uniquely at the nexus of public and private innovation.

A stable and competitive partner with a legacy of exceptional governance.
Virginia is consistently rated among the best states in which to do business by leading publications, and Northern Virginia local governments are well-managed, have a history of visionary leadership, and a commitment to innovation. Of all the Fortune 500 companies based in the greater D.C. area, two-thirds have chosen to locate in NOVA. In 2017, U.S. News & World Report ranked Virginia as the No. 2 best state for governance, considering fiscal stability, budget transparency, and state integrity.

A new model of economic development for the 21st century.
Virginia’s partnership proposal was customized to match the scale of Amazon’s ambition and designed to support shared growth over the long term. While the package includes a competitive, performance-based incentive offering, it focuses primarily on strategic new investments in public assets that would benefit companies and citizens across Virginia.

The state incentive package includes in the order they are mentioned in the proposal:

1. Doubling Virginia’s Tech-Talent Pipeline
2. Regional Transportation Infrastructure Investments
3. Post-Performance Incentives

Here are cash incentives:

Subject to General Assembly approval, the Commonwealth will provide post-performance incentives to Amazon that will be paid annually based on job creation and wage levels, with minimum average wages of at least $150,000, plus benefits, escalated at 1.5% annually.  The company will be eligible to receive up to $550 million in incentives if it creates 25,000 qualifying jobs (i.e., $22,000 per new job). Up to $200 million in additional company incentives (for cumulative total of $750 million) is available if the company were to create a total of 37,850 qualifying jobs within 20 years (i.e., $15,564 per new job in excess of 25,000 jobs, up to 37,850 jobs).

This winning proposal demonstrates the validity of Michigan Future’s core learning from three decades of research on the evolving American economy, that talent––not low taxes––is the asset that matters most to growing, retaining and attracting high-wage employers. In essence talent attracts capital, not the other way around. That the economic policy priority for a high-prosperity Michigan is to prepare, retain and attract talent.

The Northern Virginia description of the assets they offer starts with their current and future talent concentration of professionals and managers; their being welcoming to all, and their quality of place––with an emphasis on alternatives to the car––so that they are attractive to place for talent to live and work.

And the future investments they offered Amazon build more of those assets. The major investments proposed by state and local government are not cash incentives––their cash incentives were far less than offered by Michigan’s two big metros––but rather increased spending on K-16 STEM, transportation and affordable housing. All of which they describes as “A new model of economic development for the 21st century.”

If Michigan is going to compete with regions like Northern Virginia for high-wage employers we need to completely redesign our economic development strategy and practice. What Michigan needs, first and foremost, is a human capital centered economic strategy not a business creation, retention, attraction centered economic strategy. The economic development 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, from all races, creeds, ethnicity and sexual orientation, wants to live and work. As Northern Virginia teaches us, these are the actions that are what positions you to win economically in the 21st Century.

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Today we’re pleased to feature a guest post from Ned Staebler, the Vice President for Economic Development at Wayne State University and the President and CEO of TechTown, Detroit’s most established business incubator and accelerator.

I’ve been an economic developer for 15 years. After a decade in the private sector at small startups and then at a Fortune 150 investment bank, I went back to graduate school at the London School of Economics and wrote my master’s dissertation on how the United States was responding to globalization through something I had never heard of before: economic development programs. Using Michigan as a model, I did both quantitative and qualitative analysis to learn what works and what doesn’t. Then I came back home to Michigan and took a job at the Michigan Economic Development Corporation. I now serve as vice president of economic development for Wayne State University and president and CEO for TechTown Detroit.

After 15 years as a practitioner, I can tell you that we’re looking at economic development all wrong.

I’m not saying that there is only one true path in economic development or that what we’ve done in the past isn’t worthwhile; quite the contrary. In my years supporting economic growth across the state, and for the last 10 years specifically in Detroit, I’ve learned that there is no magic bullet or single strategy to end our economic woes. For example, mobility is a huge part of our economic future as a state, and we must always be an attractive location for site selectors looking for the next large-scale advanced manufacturing facility. I can also cite chapter and verse of the huge return to be had from continued investments in the now burgeoning venture capital industry and high-tech sectors.

But for far too long, we have ignored the most potentially impactful economic development strategy for Michigan and, really, all across the country­: a comprehensive plan to create, support and scale locally owned, small brick-and-mortar businesses along existing commercial corridors. We’ve never made a significant investment in providing technical assistance ­— aid to determine business viability and customer demand, financial modelling, sales and marketing assistance, e-commerce training, etc. — and financial support to entrepreneurs who live in the residential neighborhoods that surround Main Street, and it shows.

This Michigan State study from 2010  details the benefits to the Grand Rapids economy of spending and investing in local businesses. It leads to a much higher level of wealth recirculating in the community and provides increased charitable contributions, more consumer choices, reduced environmental impacts, less strain on public infrastructure and, generally, a higher quality of life.

To put it simply, we need to invest on Main Street.

This is not an entirely new concept. There have certainly been past efforts in Michigan at the state level, but these efforts primarily focused on the real estate aspect of the problem. While this is a very important part of the strategy, it’s far from sufficient. It’s all well and good to build new storefronts, but they are useless if we cannot fill them with sustainable businesses started by members of the local community.

In addition, the problem is not confined to one locality. It’s happening across Michigan — from Kalamazoo to Detroit to Lansing to Traverse City to Houghton. Even before the COVID-19 pandemic, there were empty storefronts along commercial corridors all over the state. The pandemic has only exacerbated the issue. According to University of Michigan economists, the number of small business locations that are currently open has fallen 30 percent since the beginning of the year with the restaurant, retail and hospitality sectors being particularly hard-hit.

It’s not just about empty storefronts and communities without amenities, however. It’s also about making sure that everyone gets to participate in the economic recovery. According to data from the Global Entrepreneurship Monitor, more than 80 percent of funding for new neighborhood businesses comes from personal savings, friends and families. It’s no surprise then that without intentionality around supporting traditional small businesses, the entrepreneurs that are most likely to be successful come from positions of privilege with intergenerational wealth and personal and familial networks of resources.

And although money is necessary for small business creation, it’s not enough. After working with thousands of small businesses over the past decade, we’ve learned at TechTown Detroit that consistent technical assistance to help the entrepreneur raise and spend capital effectively is even more essential. This requires a variety of hands-on services. Our Retail Boot Camp and 313 STRONG programs have helped hundreds of businesses start and scale. It also requires a network of talented service providers, such as those in our Professional Services Network, who can support entrepreneurs with marketing, sales, legal, accounting and human resources issues. These are skills that are not intuitive to aspiring business owners and are not usually on the schedules of high school and college students. We need more of this prolonged education on how to operate and grow a business so that we are not abandoning our small business owners after they open their doors. It is from that point that the learning has just begun!

Entrepreneurship is a team sport.  Detroit’s small business success is predicated on a strong ecosystem of more than 60 private, public and philanthropic partners, including TechTown, whose work is best exemplified by the incredible Detroit Means Business (DMB) initiative developed in response to the COVID-19 pandemic. DMB has helped thousands of Detroit businesses weather the storm, and the power of the network is so strong it will continue with a permanent home at the Detroit Economic Development Corporation long past the pandemic.

This ecosystem in Detroit didn’t develop overnight. It took more than a decade of consistent investment from organizations like the New Economy Initiative (NEI), a project of the Community Foundation for Southeast Michigan that brought together 13 national and local foundations to grow the entrepreneurship community in Southeast Michigan. NEI invested in more than 30 local service partners that have piloted, refined, rejected, redesigned and implemented what has become a national best practice for inclusive economic growth.

The good news for the rest of the state is that every single program and initiative is completely transferable and adaptable for other communities. What works in Detroit can be just as effective all across Michigan. It only requires local champions and resources, which can come from state or federal government, corporations or philanthropic sources. The beauty of these programs is the political and public relations advantages they have compared to more amorphous high tech or cluster building programs. They present a steady stream of ribbon cuttings and grand openings in visible locations, a dream for state representatives, mayors, corporate CEO’s and foundation presidents.

We need to support our existing small businesses and to help create new ones. It’s absolutely imperative that we have another stimulus package either at the state level, as Governor Whitmer has called for in the lame-duck legislative session, or from the incoming Biden administration. It’s equally imperative that the stimulus is focused on the mom-and-pop small businesses that employ more than half of America’s workers.

In other words, if we want to see real economic development across Michigan, it requires us to invest on Main Street.

Ned Staebler serves as Vice President for Economic Development at Wayne State University and as President and CEO of TechTown, Detroit’s most established business incubator and accelerator. He leads both organizations’ efforts to strengthen the Detroit region’s neighborhoods, businesses and leaders, overseeing a range of activities around innovation and entrepreneurship, business development and attraction, talent retention, transit and mobility, and placemaking.

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Let’s start the new year with the big picture. An overview of the structural economic challenges Michigan faces if we are to have an economy that as it grows benefits all.

1. Redefining economic success. First is understanding that even though Michigan has a historically low unemployment rate and corporate Michigan is doing well (as are those of us who have a lot invested in the stock market in a time of high corporate profits) this is not time for celebration. The simple reality is you cannot have a good economy when 43 percent of households cannot pay for basic necessities. So changing the definition of economic success from a low unemployment rate and a growing economy to one that is based on a rising household income for all is the economic change we most need in Michigan. We will not deal with the structural challenges below if we don’t make the definition of success a Michigan economy that is benefiting all.
2. Too many low-paid jobs. The core reason 43 percent of Michigan households cannot pay for basic necessities is that the economy is producing too many low-wage jobs. This is structural. Lots of businesses that employ lots of people have business models based on low-wage workers. We are not growing are way out of too many low-wage jobs. As Eduardo Porter wrote in a New York Times article the economy is characterized by “a sea of less educated workers who are stuck at businesses like hotels, restaurants and nursing homes that generate much smaller profits per employee and stay viable primarily by keeping wages low”.
3. Too few with the education attainment to get better-paying jobs. The most reliable path to the middle class is a four-year degree. Michigan is a national laggard in college attainment. About 3/4 of Michigan jobs in occupations with median wages of $62,000 or higher require a four-year degree. And for the 1/4 that don’t require a four-yer degree there are too few Michigan adults with the skills required to get those jobs. Even more worrisome is that our education system is almost certainly not preparing way too many of our kids for the good-paying jobs of the future.
4. Too low talent concentrations to attract high-wage employers. Michigan needs more high-wage jobs. But you can’t retain, attract and grow high-wage jobs without large talent concentrations. This is an economy where talent attracts capital. Not the other way around. That is the core lesson of Michigan’s failure to have any region make the final twenty considered for Amazon HQ2. The asset that matters most to high-wage employers are deep pools of workers with four-year degrees––particularly young professionals. Those young professionals are concentrating in high-density, high-amenity neighborhoods where you do not need to own a car. Michigan has way too few of those neighborhoods.
5. Too many Michiganders don’t work. The state’s unemployment rate is at historic lows, it’s employment to population ratio is not. Michigan ranks 38th in the proportion of those 16 and older who work. We were a not great 28th in 2000.

So the big picture of the Michigan economy is that these are the challenges Michigan most needs to deal with if we are to have an economy that as it grows benefits all. It is way past time that we reject the belief that you cannot have both: a growing economy and shared prosperity. It is time we get to work, on a bi-partisan basis, on creating an economy with both. We can and should debate how you do that, what we shouldn’t do is keep on celebrating an economy where 43 percent of Michigan households can’t pay for basic necessities.

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First, transportation policy must create access for Michiganders to meet their daily needs: jobs, healthcare, education, shopping, and civic life. For most that means well-maintained roads that are not a threat to people and their vehicles. But the reality is that not all of us have access to a car. In every Michigan community, there are some residents who do not own or drive a car—and more and more, as young adults reject a car-based lifestyle.

A survey of Millennials in 10 major U.S. cities released by the Rockefeller Foundation and Transportation for America in 2014 found that 80 percent of respondents agreed that it’s important for communities to have a wide range of options, including car- and bike-sharing, pedestrian- friendly streets, bike lanes, and public transit.

Making a new approach even more urgent is the fact that it’s clear that autonomous vehicles are coming. It is a question of when, not if. And that means radical change in the industry that drives Michigan’s economy, in how we live our lives, and how our communities are structured.

Lyft’s co-founder John Zimmer in a Medium article entitled “The Third Transportation Revolution” predicts: “By 2025, private car ownership will all-but end in major U.S. cities.” He writes:

As a result, cities’ physical environment will change more than we’ve ever experienced in our lifetimes. … The end of private car ownership means we’ll have far fewer cars sitting parked and empty. And that means we’ll have the chance to redesign our entire urban fabric. Cities of the future must be built around people, not vehicles. They should be defined by communities and connections, not pavement and parking spots. They need common spaces where culture can thrive — and where new ideas can be shared in the very places where cars previously stood parked and empty.

So the policy priority for the Michigan is not more money to simply rebuild its current transportation system, it is to find the political will to do what we did for most of the last century: be a global leader in building the transportation system for the future.

In particular, there is good evidence that light rail has the greatest potential to drive economic development, especially when carried out in concert with other community and economic development planning efforts. Politico describes the transformative impact of regional light rail in an article entitled, “The Train That Saved Denver: The car-choked city overcame regional distrust to build a major transit system that is remaking the urban core and the suburbs, too.” Author Colin Woodard writes that ‘Light rail has really moved Denver into the 21st century.”

In 1999, voters in Denver approved two bond measures to finance the highway and light rail system, demonstrating that residents are willing to pay for meaningful transportation investments. By 2006, the $1.67 billion Transportation Expansion Project had added 19 miles of light rail and pedestrian bridges, improved highway merging, and widened 17 miles of highway to relieve congestion and handle 300,000 vehicles per day. When the national recession and budget overruns threatened Denver’s plans to build a 21st Century rail system, then-Denver Mayor John Hickenlooper decided that the city only had one option: they had to go big.

In 2004, after a campaign that was largely led by Hickenlooper, metro Denver voters approved a plan to raise $4.7 billion to build FasTracks, a rail system that boosters believed would benefit the entire Denver region. Hickenlooper insisted that instead of building Denver’s system line by line, the region needed to accelerate plans to build a fully-functional, truly regional rail system to make itself more attractive to Millennials and job creators. The most recent addition to this regional transportation network came in April of 2016, when Denver opened a 22.8-mile spur from its airport to its downtown. Using a unique mixture of public-private partnerships, creative real estate deals and sheer political will, Hickenlooper and his allies pushed the region to create a state-of-the-art system that is widely credited with making Denver an economic growth hub.

Michigan’s current transportation system is far away from being world class on any of the attributes we just explored. Across the state we have a crumbing 20th Century road system; minimal public transportation, just the beginnings of walk- and bike-friendly communities, and, by and large, we have not used transportation as a lever to catalyze high-density neighborhoods and communities.

Our transportation proposals, most importantly, involve redefining the goal and the path of transportation policy. Once Michigan gets on a new path, the state and its regions will find a legion of expertise and experience from across the country on how to design, fund and implement a world-class 21st Century transportation system to help create places where people want to live and work.

Click here for the full report.

Photo credit: JKPhotogenic/Shutterstock.com.

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