Michigan’s fundamental challenge to regaining its status as a high prosperity state is that it consistently ranks in the mid thirties in college attainment. A major reason for that is that the states’ two big metros are not talent magnets. In an economy where those with a four year degree are increasingly concentrating in big metropolitan areas.

Joe Cortright in a blog for City Observatory entitled Why Talent Matters to Cities (cities meaning regions) provides an update on the alignment of college attainment with a region’s per capita income. Cortright writes:

… there’s a strong, positive correlation between educational attainment and per capita income. The metro areas with the highest levels of education have the highest levels of per capita personal income. … The coefficient of determination of the two variables–a statistical measure of the strength of the relationship–is .67, which suggests we can explain two-thirds of the variation in per capita personal income among metropolitan areas, simply by knowing what fraction of their adult population has a four-year degree.

 … Over time, the strength of this relationship, and the size of the talent dividend effect has been increasing. When we computed the relationship using 2010 data, the correlation coefficient was .60  … These data suggest that educational attainment has become even more important in determining economic success than just a few years ago.

This data, Cortright continues, “tells you the most important thing you need to know about urban economic development in the 21st century: if you want a successful economy, you have to have a talented population. Cities with low levels of educational attainment will find it difficult to enjoy higher incomes; cities with higher levels of educational attainment can expect greater prosperity.”

End of story! It still is a lesson Michigan policymakers and those who most influence them are having a hard time learning. Michigan and its metropolitan areas need to make preparing, retaining and attracting talent their top economic priority. If they don’t Michigan will continue to be a low-prosperity state anchored by two low-prosperity metropolitan areas: both Detroit and Grand Rapids.

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The widespread belief among far too many Michiganders that central cities are part of the past and are now liabilities where “they” live is part of the reason Michigan has fallen from one of the most prosperous states in the country to one of the poorest.

We have explored in these posts frequently the new reality that vibrant central city neighborhoods are increasingly where young professionals are concentrating. (See this Wall Street Journal article entitled “Young Drive an Urban Rebound” for an overview of the trend.)

A new report by Joe Cortright of City Observatory provides compelling evidence that central cities are now where businesses––particularly those in knowledge-based sectors––are increasingly locating. Cortright writes:

For over half a century, American cities were decentralizing, with suburban areas surpassing city centers in both population and job growth. It appears that these economic and demographic tides are now changing. Over the past few years, urban populations in America’s cities have grown faster than outlying areas, and our research shows that jobs are coming with them. Our analysis of census data shows that downtown employment centers of the nation’s largest metropolitan areas are recording faster job growth than areas located further from the city center. 

Cortright found that the average annual job growth from 2002-2007 was 1.2 percent in the periphery in the 41 largest metropolitan areas compared to 0.1 percent in the city center (defined as the area within 3 miles of the center of each region’s central business district). From 2007-2011 that has completely reversed; with job declines of 0.1 percent annually in the periphery compared to job gains of 0.5 percent in the center city.

The City Observatory report is worth reading. For those who want a summary the New York Times wrote an analysis of the report that is also worth checking out.

The Times article tries to answer the question “why is this happening?” They write:

The recession accelerated the recent decline in urban sprawl. Industries based outside cities, like construction and manufacturing, were hit much harder than urban ones like business services. Jobs disappeared everywhere, but more rapidly outside cities.

But the data indicate that more lasting forces are at work. People increasingly desire to live, work, shop and play in the same place, and to commute shorter distances — particularly the young and educated, who are the most coveted employees. So in many cities, both policy makers and employers have been trying to make living and working there more attractive.

In a knowledge-based economy employers increasingly are following talent rather than talent moving to where the jobs are. Talent is the asset that matters most and is in the shortest supply. Young talent particularly are concentrating in vibrant central cities. Knowledge-based businesses need talent most so they are increasingly locating in central cities to access that talent.

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