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.

The post Minnesota has not lost a congressional seat in six decades appeared first on Michigan Future Inc..

As Rick Haglund chronicled for Crain’s Detroit Business, since General Motors in 1992 chose Arlington Texas over Willow Run for a motor vehicle assembly plant, Michigan’s economic development priority has been to compete for auto assembly and auto parts plants. That motor vehicle factory strategy has failed.

Data from the Quarterly Census of Employment and Wages, Bureau of Labor Statistics makes the magnitude of that failure abundantly clear. (The data below is from the fourth quarter of each year.)

In 1990 motor vehicle manufacturing employed 93,000 Michiganders. In 2021 it was 47,000. The state’s share fell from 37.4 percent of the nation’s to 17.9 percent. Motor vehicle parts manufacturing employment fell from 189,000 in 1990 to 123,000 in 2021. The state’s share fell from 26.0 percent to 22.9 percent.

To make matters worse, these are declining sectors of the American economy. In 1990 the two industries combined employed 1.1 percent of American workers. In 2021 it was 0.6 percent. (In Michigan the two industries combined employed 8.5 percent of workers in 1990 and 4.6 percent in 2021.)

So Michigan both chose as its economic development priority a declining industry and suffered employment declines in those industries far worse than the nation. Losing in the two industries a combined 112,000 jobs. A decline of an astonishing 40 percent.

The cost of the state’s failed motor vehicle factory strategy unfortunately goes far beyond just the loss of motor vehicle industry jobs. Since the predominant lever the state deploys to attract motor vehicle factories is subsidizing motor vehicle manufactures, it reduces the revenue needed to invest in education and placemaking. Which are the keys to attracting and growing knowledge-based enterprises which are the high-growth/high-wage sectors of the economy.

The combination of Michigan’s motor vehicle manufacturing failure and being a national laggard in knowledge-based industries growth led to a decline in total state employment from 3.6 percent of the nation’s employment in 1990 to 2.9 percent in 2021. And a decline in average weekly wages from 108.9 percent of the nation’s in 1990 to 90.7 percent in 2021.

If Michigan still had 3.6 percent of the nation’s employment there would be 855,000 more Michiganders working today. If Michigan still had average weekly wages 8.9 percent above the nation’s Michigan workers would be earning $262 more each week which adds up to $13,624 more annually for full-time, year-round workers.

It is far past time that Michigan abandon its low-tax/high business subsidy dominant economic strategy. And it is far past time that Michigan abandon its motor vehicle factory dominant economic strategy. Both have failed and will continue to do so in the future.

The goal of Michigan’s economic strategy should be good-paying jobs growth. That requires a fundamental transformation in Michigan’s economic strategy. From factory focused to knowledge-enterprise focused. From competing for business investments based on low costs to competing for business investments on high talent––particularly young adults with four-year degrees or more––concentrations focused. To do that requires substantially higher public investments in education for all Michigan children from birth through college and in creating places where talent wants to live, work and play.

The post Detailing the failure of Michigan’s motor vehicle factory strategy appeared first on Michigan Future Inc..

The 21st Century path to prosperity––to a broad middle class––is concentrating talent. Not factory jobs. Why? Because today’s mass middle class are professionals and managers who work in offices, schools and hospitals. Not production workers who work in factories.

You can see that clearly in the table at the bottom of this post. We compared Michigan to three states with a high proportion of adults with a four-year degree or more (places that are concentrating talent) and three states with a high proportion of production jobs. Minnesota, Colorado and Washington are the three in the first category. Tennessee, Kentucky and Alabama are in the second.

The table looks at each state’s per capita income ranking in 1990 and 2020; their rankings in B.A. attainment in 2019; and their concentration compared to the nation in production (blue collar factory) jobs in 2020.

(Location quotient compares an occupation’s share of state employment with its share of national employment. A location quotient of 2.0 means a state’s employment is twice as concentrated in that occupation as the nation. A location quotient of 0.5 means a state is half as concentrated in that occupation as the nation.)

In 1990 Washington, Colorado, Minnesota and Michigan had nearly identical per capita income rankings. No more. Over the past three decades Washington, Colorado and Minnesota have become more prosperous compared to the nation, while Michigan has fallen from a high-prosperity state to a low-prosperity state.

The common characteristic of Washington, Colorado and Minnesota? A high proportion of adults with a four-year degree or more. This alignment is true across the nation. High per capita income states overwhelmingly are high college attainment states.

What is not a common characteristic of Washington, Colorado and Minnesota? Lots of production jobs. As we explored in our last post, production jobs have been for decades a declining share of employment and now have median wages below the national median. In each state included in the table below, except Kentucky, production jobs have median wages lower than the state median wage.

As Washington, Colorado and Minnesota have gotten more prosperous over the last three decades compared to rest of the country the exact opposite is true for Tennessee, Kentucky and Alabama. In 1990 they were national laggards in per capita income. In 2020 they have fallen even farther behind. And unfortunately Michigan is in the same boat, even more so. Falling from 20th in per capita income in 1990 to 33rd in 2020.

What do Tennessee, Kentucky, Alabama and Michigan have in common? Low college attainment and high concentration in production jobs. Yes Tennessee, Kentucky and Alabama have been successful in those three decades in attracting auto plants and auto supplier plants. Most recently Ford’s decision to locate an electric vehicle assemble plant and three battery plants in Tennessee and Kentucky. But that auto factory attraction success has most definitely not been a path to prosperity for Tennessee, Kentucky and Alabama.

As Rick Haglund detailed in a recent article for Crain’s Detroit Business, since General Motors chose Arlington Texas over Willow Run for an assembly plant in 1992, Michigan’s economic development priority has been retaining and attracting motor vehicle factories. It has most definitely not been a path to prosperity for Michigan. Per capita income in 1990 in Michigan was 97% of the nation. In 2020 it is 90%. If Michigan had just stayed at 97% per capita income in Michigan in 2020 would have been higher by $4,400.

While Michigan was declining by more than seven percentage points compared to the nation, Washington––the most prosperous of our talent concentrated states––was growing by 10 percentage points compared to the nation. If Michigan had grown by 10 percentage points since 1990 per capita income in Michigan in 2020 would have been higher by $10,351. To do that Michigan would have to have focused on concentrating talent, rather than competing for factories.

Rather Michigan chose to compete with production jobs concentrated states. Tennessee––the most prosperous of our production jobs concentrated states––had per capita income growth less than one percentage point compared to the nation. It moved from 14 percent below the national average to 13 percent below. Yes it narrowed the gap with Michigan from 11 percentage points to three. But that is almost all because of Michigan’s decline, not Tennessee’s rise.

Post Arlington Michigan has chosen a low-prosperity state economic development strategy. One that might be categorized as chasing factories. To recreate a high-prosperity Michigan, that was the wrong strategy then and is the wrong strategy today.

The path to prosperity for Michigan is having an economy like Washington, Colorado and Minnesota not like that of Tennessee, Kentucky, Alabama. And the key to having an economy like Washington, Colorado and Minnesota is concentrating talent. Which means an economic development strategy that makes preparing, retaining and attracting talent––not factories––THE priority.

The post Concentrating talent is the path to prosperity appeared first on Michigan Future Inc..

More than a decade ago we asked if the state’s economic development strategy worked, what state would you want Michigan to look like?

Our answer was Minnesota. At the time the most prosperous state in the Great Lakes. And cold weather and non coastal so that mirroring their economy seemed realistic for Michigan.

As the murder of George Floyd made clear, the City of Minneapolis (and almost certainly the region and state) are not a model when it comes to policing and racial equity. Being a high-prosperity state, one with a broad middle class, does not guarantee an economy that provides equal opportunity to all or that benefits all.

More than a decade later Minnesota remains a high personal income state. As well as a high employment rate, high education attainment, and low poverty rate state. Far better on all these measures than Michigan.

The 2020 Census results reveal Minnesota also is the Great Lakes leader in population growth, growing this last decade by 7.6 percent, compare to 2.0 percent in Michigan.

That population growth largely occurred in metro Minneapolis. Metro Minneapolis grew by 10.7 percent, accounting for 88 percent of the state’s population growth. And the Twin Cities were big growers too: Minneapolis up 12.4 percent, St. Paul 9.3 percent.

And some of that population growth came from people moving into the region. The region’s Metropolitan Council estimates that “the region gained 116,000 residents from migration during the 2010s, compared with a net loss of -26,000 during the 2000s. (These numbers include both international and domestic movers.)”

In Michigan metro Grand Rapids and metro Detroit also accounted for almost all of the state’s population growth. But lagged metro Minneapolis’ growth. Metro Grand Rapids grew 9.5 percent, the city grew 5.8 percent. Metro Detroit grew 2.2 percent. The City of Detroit saw it population decline by 11.7 percent.

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.

Minnesota, of course, has been pursuing a much different economic development strategy than Michigan for decades. While we focused on being a low-tax, low-cost state, Minnesota has focused on making public investments in education from birth through college and creating high quality of living communities. Minnesota’s policymakers understood that this is an economy where talent attracts capital. So that preparing, retaining and attracting talent is economic development priority #1.

It is hard to look at the data and not conclude than Minnesota’s strategy has worked, while Michigan’s has not.

We have documented Minnesota’s economic development strategy in a case study written for us by Rick Haglund entitled State Policies Matter: How Minnesota’s Tax, Spending and Social Policies Help It Achieve The Best Economy Among the Great Lakes States.

Because, as the Census data demonstrates, so much of a state’s economic success is driven by their big metro(s), we also asked Rick to write a case study of the economic development strategy of metro Minneapolis. It is entitled Regional Collaboration Matters: How Metro Minneapolis has forged one of the wealthiest and most livable metropolitan regions in the United States.

The Census data makes a strong case for a second look at both those case studies. It should be clear that it is far past time for Michigan to put in place a new economic development strategy. Just as a decade ago, Minnesota offers the state, and metro Minneapolis offers our regions, a model for what that strategy should look like.

The post Minnesota led the Great Lakes in population growth appeared first on Michigan Future Inc..

Federal Reserve Chair Jerome Powell made clear in recent Congressional testimony that a strong safety net is the not the cause of the decline in labor force participation. In a terrific article about Powell’s testimony, the Washington Post writes:

U.S. senators asked Federal Reserve Chair Jerome H. Powell about labor force participation this week, especially after Powell said getting more people into the job market is a “national priority.”

In response, Powell told senators to blame the education system and the opioids epidemic, not welfare.

“It isn’t better or more comfortable to be poor and on public
benefits now, it’s actually worse than it was,” Powell said.

… “It’s very hard to make that connection, and I’ll tell you why,”
Powell told (Senator John) Kennedy. “If you look in real terms, adjusted for inflation, at the benefits that people get, they’ve actually declined,
during this period of declining labor force participation.”

Powell’s assessment is aligned with the lessons we have learned from Minnesota, the Great Lakes’ most prosperous state. That there is little or no evidence that a too-generous safety net is a prime reason for Michigan being a national laggard in the proportion of adults working.

Summarizing his findings on the topic, from our How Minnesota’s Tax, Spending and Social Policies Help It Achieve the Best Economy Among Great Lakes States report, Rick Haglund writes:

Many states have cut benefits to the poor and unemployed in the belief that these payments dissuade people from looking for paid work.

Minnesota takes a different view. It has created one of the strongest safety nets in the country, spending generously on benefits to help those who have lost jobs or been stricken by poverty get back on their feet.

That protective net has not trapped Minnesotans and turned them into a bunch of government-dependent slackers. Far from it.

Minnesota’s employment-to-population ratio of 67.2 percent in April was the fourth highest in the country, according to the latest data of the Brookings Institution’s Hamilton Project.

In Michigan, which has trimmed welfare and unemployment benefits, 56 percent of the adult population was working in April. Michigan ranked 41^st in that measure.

The data in Rick’s report is from 2014. In 2018 Michigan ranked 38th in the proportion of those 16 and older who worked. Minnesota ranked 3rd. If the same proportion of Michiganders worked as Minnesotans there would have been 725,000 more Michiganders working pre-pandemic. So much for a strong safety net leads to people preferring public benefits over working.

As Chairman Powell noted we should be serious about getting more Michigan adults into the workforce. My former colleague Patrick Cooney summarized our recommendations on how best to that:

The welfare reforms of the mid 90s were built on this central idea: cash supports would now be temporary, but the government would put more resources into ensuring people had the supports needed to put them on a path towards a family supporting wage.

Michigan’s safety net has failed on both of these fronts. Through policy changes and under investment in the state’s TANF system and unemployment insurance system, a large chunk of out of work Michiganders receive little to no cash assistance, nor do they receive the supports needed to obtain family-supporting work.

Our solution, as detailed in our Sharing prosperity with those not participating in the high-wage knowledge-based economy report, is built around two pillars:

The first pillar is to make it easy for those out of work to receive some form cash assistance. Cutting cash benefits both removes some semblance of stability for poor families, and removes the individual from the system of supports that can help put them on a path to family-supporting work. We should want Michiganders to be able to access benefits, both to provide desperately needed stability, but also to connect parents to valuable work-supports.

This means removing arbitrary lifetime limits on the receipt of cash assistance, increasing the generosity of cash benefits in both our welfare and unemployment insurance system, and using TANF dollars for core TANF purposes (cash assistance, work-related supports, and childcare assistance), rather than using the funds to plug holes elsewhere in the state budget.

Paired with a more generous safety net, the second pillar of our plan is to dramatically increase the supports individuals receive to get on the path towards family-supporting work. Our proposed approach is based on a 2014 House Budget Committee report by Paul Ryan titled Expanding Opportunity in America. In the report Ryan describes a system in which all supports would revolve around a central caseworker who would refer clients to a range of service providers, help them navigate a thicket of services and benefits, and recommend potential educational and job placement pathways.

This approach offers the flexibility to offer comprehensive and customizable supports to a range of individuals – from those facing multiple barriers to employment to those that are just temporarily out of a job – and has the potential to support individuals not just into a first job, but through multiple steps on the path to family supporting work. In a hypothetical case Ryan presents, a case manager guides a client from an entry-level retail job all the way through to college graduation and a full-time teaching position. Safety net benefits continue until the recipient is in stable good-paying employment.

The post Jerome Powell on the safety net and work appeared first on Michigan Future Inc..

We are committed to the goal of re-creating a high prosperity Michigan. We believe the goal of state economic policy should be raising household income for all Michiganders. High prosperity is different from the most often used measure for economic success, low unemployment. It is being a place with a broad middle class where wages and benefits allow one to pay the bills, save for retirement and the kids’ education and pass on a better opportunity to the next generation.

For years we have used Minnesota as a comparison state, because it is the Great Lakes state (taking weather and the excuse that Michigan can’t be like the coasts off the table) that has enjoyed the best economic outcomes, by far. We began our policy work with a case study of Minnesota.

We asked Rick Haglund to do this initial case study. For decades, Rick was one of the best journalists—if not the best—covering the Michigan economy. He brings a deep understanding of how state economies work and the role policy plays in shaping the economy.

That report proved so successful that we asked Rick to follow it up with a case study of the policies that have made metro Minneapolis the most successful region in the Great Lakes. The difference in economic outcomes between Minnesota and Michigan can largely be explained by the superior performance of metro Minneapolis compared to metro Detroit and metro Grand Rapids. Metro Minneapolis is 12th in per capita income among the 53 regions with a population of 1 million or more, best in the Great Lakes states. Metro Detroit is 30th, metro Grand Rapids 38th.

In addition to exploring the Twin Cities’ approach to taxation and spending, education, placemaking and being welcoming to all—the topics we have identified for years as critical to economic well-being—we asked Rick to explore two additional topics. First, regionalism in metro Minneapolis. For years, Minneapolis’ approach to regionalism—particularly tax-base sharing—has been viewed as a major ingredient in that region’s economic success. And second, business leadership. The Twin Cities also has a national reputation for big company CEO leadership on issues beyond the typical business-friendly agenda. We wanted to learn much more about that.

We are excited about the report Rick has produced. Our hope is that it will expand the conversation in Michigan and its regions about what economic policy should be to return Michigan to prosperity in an economy being transformed by globalization and technology.

The big picture takeaways from the report are:

• The combination of education attainment, placemaking and welcoming are the most important ingredients to economic prosperity rather than low taxes or more broadly being a low-cost place to operate a business
• Even in a strong economy, structurally there are lots of households struggling. The need to share prosperity doesn’t go away with a strong economy.
• Economies are regional and that the most prosperous places are going to be those who work together to build both strong suburbs and strong central cities
• Business leadership matters enormously. The ability to deal with the three topics listed above is greatly enhance when you have big business CEOs pushing an agenda designed to create an economy that benefits everyone, rather than primarily focused on the normal business friendly agenda.

In the coming weeks this blog will be written by Rick as he explores the lessons we should learn on how the Twin Cities came to be ranked at or near the top among the nation’s large metro areas in a variety of livability measures, including per capita income, educational attainment, transit, quality of government services, and amenities such as parks and bike trails.

Click here to access our new report, Regional Collaboration Matters: How Metro Minneapolis has forged one of the wealthiest and most livable metropolitan areas in the United States.

The post Our new metro Minneapolis case study appeared first on Michigan Future Inc..

In this post I want to concentrate on the consequences of state cuts in revenue sharing. In our placemaking agenda we wrote:

Minnesota, as we documented in our State Policies Matters report, has taken the opposite path. The Citizen’s Research Council report that we reviewed in a our Low Taxes and Low Prosperity post lists Minnesota as a top ten state in both state and local taxes per capita and in state and local taxes as a proportion of personal income. Michigan is low taxes/low prosperity. Minnesota––with the Great Lakes best economic outcomes––is high taxes/high prosperity. Their economic growth strategy emphasizes public investments in education, quality of place and transportation over lower taxes.

Rick Haglund wrote in our Minnesota report:

The state’s tax and spending policy framework was set in the early 1970s. It’s called the “Minnesota Miracle.” The core of the strategy is shifting more of the burden of financing schools and local government—primarily cities—from escalating local property taxes to the state income and sales taxes. Many in the state see the Minnesota Miracle as setting the stage for investment in education, communities and transportation that created a climate for strong economic growth.

Rick found that in 2014 Minnesota spent $468 per capita in state support of local governments compared to $132 in Michigan.

Its far past the time for Michigan to redo its municipal finance system. This is far more that just keeping more and more cities out of fiscal distress––although that alone is worth doing––but also putting Michigan back on the path to prosperity. What Minnesota policymakers understood decades ago––and Michigan policymakers need to understand now––is that having cities that provide high quality basic services and amenities is key to retaining and attracting mobile talent. And concentrated talent is the key to prosperity.

The post Placemaking agenda: municipal finance appeared first on Michigan Future Inc..

But that hasn’t happened. As Rick Haglund reports in a MLive column entitled “Figures show net migration loss for Michigan”. Haglund, based on data from the Census Bureau’s American Community Survey, writes:

Recent college graduates are fleeing Michigan at the fastest rate since 2010 despite an improving economy and a focus by state leaders on retaining and attracting young talent. New census figures show that Michigan experienced a net migration loss of 3.5 percent of people age 22 to 34 with a bachelor’s degree or higher in 2013, the most recent year available. That follows net migration losses of 2 percent in 2011 and 2.2 percent in 2012. Michigan lost a net 4.4 percent of that population to migration in 2010 . (Emphasis added.)

It has been clear for some time the young professionals in making decisions where to live and work after college look at far more than a job. Quality of place and being welcoming are essential components in retaining and attracting young professionals. Former New York City Mayor Michael Bloomberg in a terrific op ed I wrote about previously described what is driving location decisions by recent college graduates this way:

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.

Its a lesson Michigan policy makers need to learn quick. Most everyone agrees that retaining and attracting young talent is a state economic development priority. But we aren’t going to be successful unless we work on, as Mayor Bloomberg lists, protecting personal freedoms, prizing diversity, offering an abundance of cultural opportunities and offering great parks, safe streets and extensive mass transit.

Michigan is a laggard in all of these.

In a terrific MLive column entitled “Think Michigan’s anti-gay laws don’t cost the state? Think again” Susan Demas describes the costs of being unwelcoming. As she describes her uncles have left Michigan because they can’t marry here. Not to mention can legally be discriminated against by employers. She writes: “How many other LGBT people are making the same decision? And how can you blame them?”

For many the way to create jobs that are suppose to retain and attract talent is to adopt business friendly policies. But those business friendly policies mainly means cutting taxes––particularly for businesses––which in terms starves public investments in what really matters to retaining and attracting talent: an abundance of cultural opportunities and offering great parks, safe streets and extensive mass transit.

Without places where people want to live and work and without being welcoming to all it is almost certain Michigan will not be a magnet for talent. End of story!

The post Young talent still leaving Michigan appeared first on Michigan Future Inc..

Both of us have noted that Minnesota disproves the all too conventional wisdom that a generours safety net discourages people from working. Minnesota spends nearly $500 more per capita on health and human service programming compared to Michigan, has a far more expansive earned income tax credit and far more generous unemployment insurance benefits. And as Rick writes:

That protective net has not trapped Minnesotans and turned them into a bunch of government-dependent slackers. Far from it. Minnesota’s employment-to-population ratio of 67.2 percent in April was the fourth highest in the country, according to the latest data of the Brookings Institution’s Hamilton Project. In Michigan, which has trimmed welfare and unemployment benefits, 56 percent of the adult population was working in April. Michigan ranked 41st in that measure.

So much for the safety nets discouraging work.

The other all too conventional wisdom reason for a miserly safety net is that it hurts economic growth. Its the topic of a terrific Paul Krugman New York Times column entitled “Inequality Is a Drag”. Krugman writes:

For more than three decades, almost everyone who matters in American politics has agreed that higher taxes on the rich and increased aid to the poor have hurt economic growth. … But there’s now growing evidence for a new view — namely, that the whole premise of this debate is wrong, that there isn’t actually any trade-off between equity and inefficiency. … But how is that possible? Doesn’t taxing the rich and helping the poor reduce the incentive to make money? Well, yes, but incentives aren’t the only thing that matters for economic growth. Opportunity is also crucial. And extreme inequality deprives many people of the opportunity to fulfill their potential.”

Krugman uses food stamps as an example of how safety net programs can expand opportunity and long term expand the economy. He admits that the evidence is that food stamps does somewhat reduce work effort, but that is more than counter balanced by research that shows that  “Americans who had access to food stamps when they were children grew up to be healthier and more productive than those who didn’t, which means that they made a bigger economic contribution.”

He concludes: “Being nice to the wealthy and cruel to the poor is not, it turns out, the key to economic growth. On the contrary, making our economy fairer would also make it richer. Goodbye, trickle-down; hello, trickle-up.”

Its a path Minnesota has been following for decades. The results have been more employment and higher incomes for Minnesotans. Seems like its time for Michigan to get on that path.

The post A generous safety net helping economic growth appeared first on Michigan Future Inc..

Rick Haglund in a MLive column entitled Michigan’s economy is running rough and the ‘check engine’ light is flashing details the current reality of  the Michigan economy when he writes: “A monthly state labor market study based on October jobs numbers shows that Michigan ranks in the bottom tier of states in important areas such as employment, the labor force participation rate, per capita income and economic output per capita. Forget about Michigan’s unemployment rate, which at 9 percent in October was the third-highest state jobless rate in the country. The real jobless figure in the third quarter of this year ending Sept. 30 was 15.8 percent, according to the state’s Bureau of Labor Market Information and Strategic Initiatives. … But the most worrisome concern is for those who will eventually become the heart of Michigan’s work force—its children. Nearly 560,000 Michigan children—about one in four—were living in poverty in 2011, according to the annual Kids Count report from the Michigan League for Public Policy.” (Emphasis added.)

2014, of course, is an election year. We will be inundated from both sides on how well the Michigan economy has performed since the last election. But if you care about whether Michiganders have a job that enables them to pay the bills and save for their retirement and their kids college, the best way to measure economic progress is over an entire economic cycle. Normally from peak to peak. The best year in the previous expansion to the best year in the current expansion. The peak of the last cycle was 2007, not 2010 (the last election for Governor). Peak to peak comparisons allows you to focus on structural, rather than cyclical, trends. How well positioned is a state (or any geography) to compete economically over the long term.

The Hamilton Project of the Brookings Institution does a monthly calculation of the job gap by state from the inception of the Great Recession until today. It measures the number of jobs each state needs to create to get back to the same share of the adult population working as in November 2007, the month before the onset of the Great Recession. Its one of––if not the best––measure of how well Michigan has performed from 2007-2013.

The answer: not well at all. Michigan’s job gap in October 2013 is 384,000. That is the number of jobs Michigan would need to add just to have the same proportion of adults working today as in November 2007. The employment to population ratio in Michigan has declined from 59.8 percent to 54.9 percent. We rank 43rd in the proportion of adults employed. The only states worse than us: Alabama, Arizona, Arkansas, Mississippi, New Mexico, South Carolina and West Virginia. If your goal is a prosperous economy this is not a list states you want to be grouped with.

By contrast, Minnesota, the Great Lakes states with the best economy, has seen its employment to population ratio decline from 68.7 percent to 66.7 percent and has a job gap of 85,000. That is the kind of economy you want: a place with a high proportion of adults working in both good times and bad. For Michigan to have the same proportion of adults working as Minnesota, 925,000 more Michiganders would need to working today. You read that right: to be competitive with the best Great Lakes state Michigan needs to have nearly a million more jobs.

Add to that current economic reality the job growth projections for the next decade we explored in our last post––Michigan projected to be 49th in job growth for another decade––its clearly not time for either victory laps or a celebration.

The post Not time for a celebration appeared first on Michigan Future Inc..