Now is the time to make fundamental change in the state’s economic development playbook. What we have been doing has not worked. Michigan’s per capita income has fallen from around the national average at the turn of the century to a record low thirteen percent below: falling from 18th in 2000 to 38th in 2022. Mid-course adjustment in what we have been doing is not the path to returning Michigan to high-prosperity: a place with a broad middle class.

More than anything else Michigan needs more high-wage jobs. Six in ten Michigan jobs pay less than what it takes to be a middle class household of three. Our research has taught us two fundamental lesson: (1) Talent is the most important asset to high-wage enterprises and (2) creating places where mobile talent wants to live is an economic development imperative.

So we are proposing that Michigan create, fund, and implement a Neighborhood Talent Concentration Initiative. Explicitly designed to generate more high-wage jobs by creating places where young talent wants to live and work.

The most consistent predictor of a state’s economic success is the share of its adults – particularly young adults – with a four-year degree. Where young talent goes, high-wage, knowledge-based enterprises follow, expand, and are created. The new path to prosperity is concentrated talent.

And 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. The data show that highly educated young people are increasingly concentrating in big metros with vibrant central cities that feature high-density, high-amenity, walkable, active street life neighborhoods. Every high-prosperity state that is not fossil fuels extraction driven has at least one big metropolitan area anchored by a vibrant central city where both the metro and the city have a high proportion of young adults with a BA or more.

Michigan is losing the competition for young talent, endangering the long-term health of our state economy and the economic well being of Michigan households. There are 14 percent fewer recent college graduates living in Michigan than graduated from Michigan institutions. California, Washington, Colorado, Texas, Minnesota, Illinois, Georgia, New York, and Massachusetts ––which all have large central cities filled with vibrant, dense neighborhoods–– are the only states with more recent college graduates living in the state compared to those who recently graduated from a state college.

Attracting and retaining highly-educated young people is the state’s primary economic
imperative. First and foremost retaining young talent that grow up here and then attracting
young talent from anyplace on the planet. The new economic reality is if we remain anywhere near minus 14 percent in the proportion of recent college graduates who choose to live here compared to those that graduated from here Michigan will be one of America’s low-prosperity states permanently.

To change this picture, we need to create more of the kinds of neighborhoods in our central cities that attract and retain young talent. These neighborhoods – our country’s talent magnets – vary in many ways, but all share common characteristics: they are dense, walkable, high-amenity neighborhoods, with parks, retail, and public arts woven into residents’ daily lives. The Neighborhood Talent Concentration Initiative will provide large grants to support the development of talent-magnet neighborhoods in Michigan’s central cities, at scale.

The overarching goals of the Neighborhood Talent Concentration Initiative is to:

• Address the economic development imperative of increasing Michigan’s population of young professionals and young skilled workers by creating high-density, high-amenity, walkable, vibrant street life neighborhoods or districts
• Create business ownership opportunities for local residents

The $500 million initiative will fund no more than twenty transformational public space development projects in central city neighborhoods or geographically concentrated districts. Priority will be given to cities with high potential of concentrating young professionals and young skilled workers at a large scale.

Projects supported by this initiative would be comprehensive neighborhood/district-wide plans, rather than discrete initiatives centered on a particular building or parcel, designed for walkability, density, vibrant street life and business opportunities for local residents. Eligible projects will assist and support existing businesses and to the extent possible protect existing local business investment and provide assistance for local resident business opportunities. Eligible projects will contain and support facilities that house or present cultural arts programs, performances, and exhibitions and on the streets presentations of cultural arts programs, performances, and exhibitions 

Grantees will be community based not-for-profit organizations, though applicants would be required to partner with local government, philanthropy, relevant corporate and civic partners, and relevant community-based and not for profit organizations. Active involvement in the project planning by Generation Z is strongly encouraged.

Elements of a qualified neighborhood/district plan might include:

• Projects that alter the design and use of roads away from cars and towards pedestrian-friendly uses like walking, biking, shuttles/communal transit, and last mile options;
• Public art and cultural spaces;
• Parks, outdoor recreation, open spaces, and greenways;
• Commercial corridor activation, including innovative plans to fill vacant retail spaces with locally owned businesses and improve streetscapes;
• Transit projects, including rail and bus-rapid transit;
• Mixed-income housing

Simply funding the Neighborhood Talent Concentration Initiative is not enough. In addition to create these talent-magnet neighborhoods the Department of Transportation, MSHDA, MEDC, the Department of Natural Resources and the Michigan Arts and Culture Council must create and implement Neighborhood Talent Concentration Initiative Support Funds to provide funding for the relevant components of the selected projects.

The post The Neighborhood Talent Concentration Initiative appeared first on Michigan Future Inc..

Recently Intel announced they are going to invest an initial $20 billion in a new chip fabrication plant in metro Columbus Ohio. Initial because Intel’s CEO Pat Gelsinger indicated that Columbus could become “the largest semiconductor manufacturing location on the planet.” With a total investment of $100 billion in eight fabrication plants. The first plant will employ 3,000 at an average annual salary of $125,000.

This clearly is an economic development home run for Ohio and more specifically for metro Columbus. Which raises the question “why did Intel choose Columbus?”

In a must-read Market Watch column Michael J. Hicks, professor of economics and the director of the Center for Business and Economic Research at Ball State University, provides an answer to the why Columbus question. The column is entitled Intel’s choice of Ohio for its $20 billion factory shows what matters at least as much as low taxes — and it costs money. The column’s subtitle is: A sobering lesson for states like Indiana that can compete – or even beat – Ohio on tax breaks, tax rates and regulatory environment.

Hicks compares Columbus to Indianapolis. What he writes about Indianapolis is equally applicable to metro Detroit and Grand Rapids. Hicks writes:

This factory is a 25-minute drive from the College of Engineering at Ohio State University and close to the fastest-growing parts of the Columbus metropolitan area. The entire metro area has absorbed some 130% of the state’s population growth since 2000 .

The salary levels also suggest that the workforce at this plant will be primarily comprised of college graduates.  Ohio workers in the semiconductor industry earned $65,490 per year in the last 12 months before the COVID downturn. To be profitable, this factory will be much more than the clean-room production facilities of a traditional semiconductor factory.  I suspect this site will involve considerable product development and testing.

This evidence points to the need for a large number of college graduates as a driving factor in Intel’s decision. Close to a dozen top engineering colleges are within a five-hour drive.  These include Purdue University, the University of Michigan, Michigan State University, Carnegie Mellon University, the University of Kentucky and of course Ohio State.

The only other Midwest location that could boast the same geographic concentration would be Indianapolis.  The fact that Indiana was not chosen in this case offers a harsh lesson for states that rely on incentives rather than an educated workforce as an economic development strategy.  It is the same lesson the Amazon HQ deal provided state policymakers around the nation.

The Indianapolis and Columbus metro areas are similarly size and have absorbed all their state’s population growth in this century. Both were finalists in the Amazon headquarters competition and were wooed by Foxconn as well. Purdue has an objectively better-ranked engineering college, and taxes in Indiana are lower than those in Ohio.  Indiana’s use of tax abatements and credits suggest it would have offered a similarly sized package. 

So why is Indiana going to Indiana and not Ohio?

The short story is the abundance of educated workers in Ohio. The Columbus metro area is already rich with college graduates, but it also has the local environment that can attract more.

Exactly! This is the core lesson Michigan Future has learned from decades of research on what defines the nation’s most prosperous places. Talent––particularly the proportion of adults with a four-year degree or more––not “tax breaks, tax rates and regulatory environment”––is what matters most to prosperity. That talent attracts capital, because talent is the asset that matters most to and is in the shortest supply for high-wage employers. As Hicks writes that is the lesson from Amazon HQ2 choosing New York City and Northern Virginia and from Intel choosing Columbus.

The places with the most prosperous economies are those that combine high quality education systems and high quality of place that retains and attracts mobile talent. Both education and placemaking require public investments. These types of public investments, paid for by our taxes, are the state policy playbook most likely to return Michigan to high prosperity, creating an economy with lots of good-paying jobs.

Imagine if we had spent the last two decades not cutting taxes, but investing in education from birth through college and creating places where young talent wants to live. It is far more likely that Michigan would have been a strong competitor for Amazon HQ2, the Intel fabrication plant and all the other high-wage job creation that comes from being an attractive place to locate a knowledge-based enterprise.

We will know that Michigan is serious about working on investing in education from birth through college and creating places where young talent wants to live when Michigan economic development officials and entities push to pay for increased public investments. Saying you want education and infrastructure is easy, paying for it is hard. Economic developers and policymakers across Michigan for decades have been part of the push for lower taxes and big incentives as the key to economic development. Amazon and Intel make clear that it is time for a fundamental change. Only time will tell if those in charge of economic policy and programming are ready to take the lead to make that change happen.

The post Why Intel’s chip plant is going to metro Columbus 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..

On Tuesday, Bridge published an essay I co-wrote with Ned Staebler, the vice president for economic development at Wayne State University and the president and CEO of TechTown. We hope to inspire an important conversation among those who work in economic development in Michigan. The evidence is clear that it’s time to stop a failed economic development strategy that invests state resources in businesses, and reorient towards investments in talent. The introduction is below, and you can read the rest of the essay over at Bridge.

Michigan faces the prime economic challenge of our times: creating an economy that provides enough household-supporting jobs so that all working households can raise a family and pass on a better opportunity to their children. A prosperous Michigan is a place with a broad middle class where wages and benefits allow everyone to pay the bills, save for retirement and the kids’ education, and pass on a better opportunity to the next generation.

Even in Michigan’s strong pre-pandemic economy, 43 percent of households – most with at least one working adult – could not pay for basic necessities. When more than four in 10 Michigan families are struggling, our state is not succeeding, and our economic developers are failing. As long-time economic developers ourselves (who very much implicate ourselves when we talk about failing), we believe the primary goal of state economic policy should be rising household income for all Michigan residents.

Meeting this challenge requires not only that the state make rising income for all its top economic priority, but that it reevaluate and redesign its economic development infrastructure accordingly. This mission change will also require us to think differently not just about state and regional economic development efforts, but how they coordinate with community development, housing and workforce development policies and programs as well.

Currently, Michigan’s economic development programs and incentives are designed to support companies either relocating or expanding in the state in the hopes that good, high-paying jobs will follow. This has been the model for more than 40 years. But this strategy is not working. In Michigan, 60 percent of all jobs today pay less than $20 an hour – a far cry from the more than $60,000 a family of two adults and two children need to pay for the basics.

While there is no magic bullet, both of us have come to believe economic developers in Michigan are looking at their task all wrong. For Michigan to be successful, we must flip traditional efforts on their head and adopt a bottom-up approach. Talent doesn’t follow companies, it’s the other way around. That means it’s time to invest in human capital – our people.

Click here to finish the essay at Bridge. Our thanks to both Ned for his collaboration and to Bridge for sharing our work.

The post Our op-ed in Bridge: it’s time for human capital-focused economic development appeared first on Michigan Future Inc..

This post is about what good-paying jobs focused economic development should look like. About what it takes to grow, retain and attract high-wage jobs. It draws lessons Michigan can learn about winning in the 21st Century from our posts on Austin, Denver and Northern Virginia.

Clearly economic development is just one component of state and regional economic policy and programming. It, almost certainly, is less important to economic well being than the quality of the human capital development system from birth through college. Having said that the design of economic development programming matters. So let’s look at, as Virginia puts it, what “a new model of economic development for the 21st century” should look like.

Winning in the 21st Century Lesson 1: The primary goal of economic policy should be rising income for all Michiganders. In Michigan’s strong pre-pandemic economy 43 percent of households––most with a working adult––could not pay for basic necessities. When more than four in ten Michigan families are not succeeding, our state is not succeeding.

Winning in the 21st Century Lesson 2: First and foremost Michigan needs to learn that place attracts talent and that talent=economic growth. So that placemaking––creating a place where people want to live and work––is key to economic well being.

In Triumph of the City Harvard’s Edward Glaeser writes: “The bottom-up nature of urban innovation suggests that the best economic development strategy may be to attract smart people and get out of their way.”

Attracting smart people and getting out of their way isn’t the way Michigan and its regions do economic development today. The focus, almost exclusively, is on attracting business investment through some combination of being a low-cost place, providing investment-specific incentives, and business assistance programming.

And yet the evidence is on Glaeser’s side. The fact is that the single best predictor of regional and state prosperity is the proportion of adults with a four-year degree or more. Concentrated talent is what attracts high-wage employers. Talent is also entrepreneurial, so where it is concentrated are the places with the most high-wage business start-ups. The new economic reality is that the path to prosperity for states and regions is human-capital driven. That the asset that matters most to employers––particularly high-wage employers––is talent.

Winning in the 21st Century Lesson 3: The core of being an economic development competitive state and region is a region’s human capital based assets, not what is included in the offer for a specific business investment opportunity.

Northern Virginia’s winning Amazon HQ2 proposal offered cash incentives up to $800 million. Far less than the reported $2 billion offered by metro Grand Rapids and a reported $4 billion offered by metro Detroit, including Windsor.

What they did offer Amazon, which matters far more to high-wage employers, is a region with talent concentration; being welcoming to all, and a quality of place that is an attractive place for talent to live and work. Working on creating these characteristics, on an ongoing basis, is what matters most to growing, retaining and attracting good-paying jobs.

Winning in the 21st Century Lesson 4: Winning in the 21st century is public-investment led. Creating places where people want to live and work is driven by quality basic services, infrastructure and amenities.

Randy Thelen the new President and CEO of the Right Place, metro Grand Rapids’ economic development agency, understands the essential role placemaking plays in winning in the 21st Century. Thelen comes to the Right Place from the Downtown Denver Partnership. In a MiBiz interview he describes Denver’s success this way:

During previous recessions, Thelen said Denver “doubled down, invested in itself,” which allowed it to “accelerate out of recession and bypass that competition.” He’s leaving a “hyper growth market” in the Mile High City that’s attracted investments particularly from large tech firms such as Google, Twitter and Facebook.

“Virtually any tech company you can imagine has put up a sizable outpost in Denver,” Thelen said. “It’s a healthy reminder that the product of a region matters, and talent and placemaking drives business decisions.

Thelen’s “doubled down, invested in itself” is as true in Austin and Northern Virginia as it is in Denver. Yes, those public investments must be paid for which inevitably means higher taxes. But those taxes pay for services and amenities that are both important to improving the quality of life of current residents and are a vital to future economic growth, particularly growth of high-wage jobs.

Winning in the 21st Century Lesson 5: Welcoming to all is a core characteristic of high-prosperity regions. That is because talent is both diverse and mobile. If a place is not welcoming, it cannot retain and attract talent. People will not live and work in a community that isn’t welcoming. That means providing everyone with basic civil rights and treats everyone the same no matter where they are born, their sexual orientation, race, religion or ethnic background.

For Michigan and its regions to be competitive with leading-edge communities like Austin, Denver and Northern Virginia Michigan needs 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. If Michigan is going to be competitive in retaining, attracting and creating high-paid 21st Century jobs it is going to require making public investments in creating places where talent wants to live and work. The economic policy priority for a high-prosperity Michigan is to prepare, retain and attract talent.

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 work in and communities where mobile talent wants to live and work. The latter being what economic development programming should be focused on.

We know how to create welcoming communities. We know how to pay for and provide high-quality basic services, infrastructure and amenities. We know how to create high-density, high-amenity, transit-rich neighborhoods. What is missing is an understanding that as then New York City Mayor Michael Bloomberg put it “talent attracts capital far more effectively and consistently than capital attracts talent”. That the path to prosperity for communities is human-capital driven.

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

The post Placemaking is essential to winning in the 21st Century appeared first on Michigan Future Inc..

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.

The post It’s time to invest on Main Street appeared first on Michigan Future Inc..

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.

The post The big picture: Michigan’s core economic challenges appeared first on Michigan Future Inc..

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

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

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

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

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

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

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

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

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

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

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

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

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

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Then-New York City Mayor Michael Bloomberg got it right when he wrote in a Financial Times column: “The most creative individuals want to live in places that protect personal freedoms, prize diversity and offer an abundance of cultural opportunities.”

Our research on the changing American economy has led us to conclude that the regions with the highest concentration of those with a four-year degree or more are going to be the places where high-wage, high-growth enterprises concentrate. Not low-tax, small government, so-called business-friendly regions.

When it comes to economic development strategy, Harvard economist Edward Glaeser, in Triumph of the City, concludes: “The bottom up nature of urban innovation suggests that the best economic development policy may be to attract smart people and get out of the way.” So the foundation of economic development should be creating regions, anchored by vibrant central cities, where smart people want to live and work.

Since the publication of our report, “A Path to Good-paying Careers for all Michiganders,” two high-profile corporate location decisions have made even clearer the importance of quality of place to future economic well-being. First, Amazon decided that neither metro Detroit or metro Grand Rapids had the talent or the transit to make the list of the 20 finalists for their 50,000 high-paid jobs HQ2. Michigan’s two big metros weren’t not worthy of consideration because neither Detroit or Grand Rapids has the talent concentrations needed by knowledge-based service companies.

On the positive side, Ford decided to center their transition to mobility in downtown Detroit. Ford has learned the lesson that far too many Michigan business leaders and policymakers have not: that creating places where young talent wants to live and work is essential to economic success. They have learned that what matters most to their economic survival is talent, and that their biggest competitive threats are located where young professionals are concentrating.

This also is a prime lesson to be learned from our recently published metro Minneapolis case study “Regional Collaboration Matters.” Metro Minneapolis is doing a far better job than metro Detroit and metro Grand Rapids in retaining and attracting young professionals. They have, for decades, made creating a place where people want to live and work an economic development priority, and placed an emphasis on the cities of Minneapolis and St. Paul. The payoff is that on every measure of economic well-being––including the proportion of adults who work and household income––they are a national leader, while metro Detroit––even being the North American home of one of the world’s great industries––is now a national laggard as is metro Grand Rapids.

And largely because of the success of metro Minneapolis, Minnesota is the Great Lakes region’s best performer, by far, on every measure of individual and household economic well-being.

One might ask, “But what does quality of place have to do with good-paying careers for all?” The answer is that talent is mobile, and increasingly, where they go, high-wage knowledge-based enterprises follow. Where you have concentrations of high-wage workers you get increased demand for local services. Their spending power ripples through the region’s economy via increased demand for retail, hospitality, construction and other locally provided goods and services. In the past, that regional demand in Michigan was driven by high-wage manufacturing workers; today, it’s driven by high-wage professionals and managers.

Michigan lags the nation in having communities that are powerful talent attractors. We are in desperate need of a placemaking vision that allows all of its regions to develop and implement their own strategies to be places where people want to live, work and play. And it needs to make sure that metro Detroit and metro Grand Rapids are able to compete with talent magnets like Chicago and Minneapolis.

In our new report, “A path to good-paying careers for all Michiganders: Creating places across Michigan where people want to live and work,” available now, we spell out why placemaking is so critical, and what we believe are the most impactful state policies to improve the attractiveness of communities across the state.

When The New York Times wrote about Ford’s purchase of the long-abandoned Detroit train station, the article’s subtitle jumped out at us: “By renovating a symbol of the city’s decline, the company hopes to create a magnet for the talent needed to prevail in the next automotive era.” Ford gets that talented people are concentrating in vibrant, dense communities. We need to foster those communities to succeed in the global era. It’s time the rest of Michigan’s business, community, and political leaders start acting on that same lesson.

Photo credit: Susan Montgomery/Shutterstock.com.

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That said, there is a long way to go. Primarily breaking through the decades long resistance to rail transit for the region. There are two prime reasons given for no rail transit in metro Detroit. (Lets hope we are beyond race which was the major reason we didn’t get a regional rail transit system in the Seventies despite big funding commitments from President Ford and Governor Milliken.)

1. There isn’t enough density for rail. Give me a break! Phoenix had density? Most of the regions that have made big investments in rail transit have done so to get density, not to serve density. (For example read this Atlantic Cities article on how rail transit is creating density in Denver.) Buses –– even bus rapid transit –– are primarily to move people. Rail is to stimulate development. High density development. It is the single most powerful lever available to create the kind of high density, mixed use, walkable neighborhoods that every region in American wants because it is where young mobile talent is increasingly concentrating.
2. We can’t afford it. Of course we can, if we choose to do so. No region which has embarked on rail transit the last several decades –– and that includes nearly every big metro in the country that didn’t already have a rail transit system –– could afford it with current public revenues. But because their business and political leadership understood that rail transit was an important –– if not an essential ingredient ––  to future economic growth, they sold the public, their state and the federal government on the wisdom of new revenue.

What is missing here is widespread regional business and political leadership that understands and is willing to fight for the need for a regional rail transit system. As I asked in my last post the relevant question to ask metro Detroit’s regional and political leadership as well as those state leaders who tell us that the state can’t work unless Detroit works is “how can metro Detroit compete for talent and businesses without a regional rail transit system when their counterparts across the country think rail transit is a central ingredient to regional competitiveness?”

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