“With Michigan’s new focus on becoming a more prosperous state, one that attracts and retains young talent, we looked to the report we issued in 2004 to see how our analysis held up over time, which we found it did – and with severe implications,” said Lou Glazer, president of Michigan Future, Inc. “Michigan needs to change how it approaches economic development if it wants to be a  prosperous state again.”

The 2004 report outlined a paradigm-altering analysis of what mattered most for state and regional prosperity. The report found that manufacturing –– although still an important and valuable component of the Michigan labor market –– was no longer a driver of growth or prosperity. The path to prosperity had become the knowledge economy. Michigan needed to concentrate more on knowledge-based industries and to do that it needed to attract and retain more young, college-educated adults.

Unfortunately, 20 years later, that shift has not occurred. Instead, if each state’s personal income per capita grew over the next 23 years at the same rate that it did between 1999 and 2022, Michigan would end up as the 48th poorest state in the country by 2045, just above Alabama and Mississippi.

“When we first compiled the data in 2004, we feared that without a recognition of the new drivers of prosperity, we risked falling behind,” said Donald Grimes, an economist at the Research Seminar in Quantitative Economics, part of the Department of Economics in the College of Literature, Science, and the Arts at the University of Michigan. “Nothing really changed and Michigan is now one of the nation’s poorest states.”

Michigan’s per capita income in 2022 was 13 percent below the national average, the lowest Michigan has been compared to the nation since the data was first compiled in 1929. This is the opposite of where Michigan was in the 20th Century when the state was structurally a relatively high prosperity state. In 1999, Michigan ranked 16th in per capita income, slightly below the national average.

The report, both the first and second editions, compares low-education attainment manufacturing as an engine of economic growth with high-paying, knowledge-based industries, such as information, financial activities, professional and technical services, and management of companies.

The researchers say that knowledge-based industries and young professionals will be the most important drivers of future economic growth and communities with high concentrations of both are quite likely to be most prosperous.

“I said this when the report was issued in 2004 and I’ll say it again: the best use of policymakers’ time and attention with respect to the economy would come from developing a new agenda on how best to grow a knowledge-based economy in Michigan,” Glazer added. “If Michigan doesn’t become competitive in the knowledge economy, it will be one of the poorest states. Michigan policymakers must change their approach to the knowledge economy if they want to turn our economic decline around.”

To view the updated second edition of ‘A New Path to Prosperity? Manufacturing and Knowledge-Based Industries As Drivers of Economic Growth’, click here. For more information about Michigan Future, Inc., visit www.michiganfuture.org.

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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..

Median household income in the Twin Cities of $73,231 was the seventh highest among the 53 metro areas with a population of 1 million or more in 2016, according to American Community Survey figures. (Detroit ranked 38th and Grand Rapids 29th.)

Unemployment hasn’t reached double-digit levels in at least the past three decades. The highest annual jobless rate since 1990 in metro Minneapolis was 7.7 percent in 2009 at the depth of the national Great Recession. Just 2.7 percent of the Twin Cities’ workforce was unemployed in April 2018, the fifth-lowest jobless rate among the 50 largest metro areas in the country. (Metro Detroit, with a jobless rate of 3.6 percent, ranked 31st.)

Economists attribute much of the metro area’s economic vitality to its diverse mix of industries, including food processing, health care, medical device manufacturing and financial services, and to its highly educated workforce.

“It’s very clear that the quality of our workforce is a key element in our success,” said Art Rolnick, a senior fellow at the University of Minnesota’s Humphrey School of Public Affairs and a former economist at the Minneapolis Federal Reserve. “It’s been a big payoff in this economy.”

A roster of highly educated, mostly home-grown workers and managers is a major reason why Minnesota hosts the largest number of Fortune 500 companies per capita in the country, said Myles Shaver, a management professor in the University of Minnesota’s Carlson School of Management. And most don’t leave.

“Metro Minneapolis doesn’t attract people well,” he said, citing a climate he says many equate with the Arctic. “But it’s been able to build a strong workforce because it retains so many talented people. Retention rates here are extreme.”

Minnesota was home to 18 Fortune 500 companies in 2017, the most per capita of any state. All but one are located in metro Minneapolis. Paced by metro Minneapolis, the state’s largest metro area, Minnesota also has long ranked as one of the top knowledge economies in the country.

The Washington, D.C.-based Information Technology and Innovation Foundation ranked Minnesota 12th in its 2017 State New Economy Index, which uses 25 indicators to measure how well state economies are “knowledge-based, globalized, entrepreneurial, IT-driven, and innovation-oriented.” Michigan ranked 15th, up from 34th in 1999.

Its broadly educated workforce also has helped metro Minneapolis grow new industries as old ones fell away.

The Twin Cities became a center of supercomputing in the late 1950s. (The CDC 6600, introduced in 1964 by Control Data Corp. in suburban Minneapolis, is considered the world’s first supercomputer.) But as the computer industry gradually moved to west to Silicon Valley, local computing engineers, scientists and others shifted to the expanding medical device industry.

While the conventional wisdom is that low taxes are key to economic growth, metro Minneapolis—and the rest of the state—has taken the opposite approach.

Twin Cities’ residents and businesses pay some of the highest taxes in the country. Minnesota regularly ranks as among the worst states in the Tax Foundation’s Business Tax Climate Index, which includes corporate, personal income, sales, unemployment insurance and property taxes.

Minnesota ranks 46th in the Tax Foundation’s 2018 study in which a lower number indicates a better rank.

Gov. Mark Dayton and the then-Democratic controlled Legislature raised taxes on the wealthy in 2013, boosting the top individual rate in its progressive income tax system from 7.85 percent to 9.85 percent.

On top of high state taxes, Twin Cities’ residents pay additional special levies to support regional government (the Metropolitan Council), public transit and other amenities, such as parks.

Rolnick said he doesn’t think economic growth is necessarily predicated on low or high taxes. It’s how the money is spent.

“If you’re investing well, you get great infrastructure and great education,” he said. “That’s what you need for a thriving economy.”

The Twin Cities’ diverse economy is somewhat serendipitous. Companies in different industry sectors, such as General Mills, Target and United Healthcare, were born there. But none dominated the economy in the way the auto industry, which is subject to wild cyclical swings, did in Detroit.

Local experts say the key to maintaining that healthy diversity and the wealth it engenders is a continued focus on education and infrastructure.

Metro Detroit and the rest of Michigan could copy that formula for success if policymakers can muster the political will to do it.

Check our new report, Regional Collaboration Matters, How Metro Minneapolis has forged one of the wealthiest and most livable metropolitan regions in the United States, for more stories and lessons from the most successful state in the Great Lakes.

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“A particular kind of human being”

The post by Patel, the founder and president of Interfaith Youth Core, about the increasing value of liberal arts degrees, is based on an understanding that Michigan Future shares about the new realities of our economy. Increasing globalization and automation mean that the greatest job security comes from being highly skilled in capacities that computers will not be able to replicate. Right now those uniquely human capacities include empathy and listening, creativity and innovation, and the ability to apply expertise in decision-making. Managing people and connecting knowledge to social interaction are not things computers will do. Drawing from a number of articles, Patel writes:

A computer can undoubtedly give you the right pill for pain, and a robot can provide electrical-stimulation treatment, but for the interaction, creativity, and judgment that a therapeutic conversation requires, a particular kind of human being is needed. Where are we going to get these knowledgeable and caring “relationship workers”?

The value of liberal arts degrees

Not only are these the jobs that are least susceptible to automation, they are also the jobs that are growing. A McKinsey report cited by Patel shows that between 2001 and 2009, jobs requiring human interaction grew by 4.8 million. Fortunately, liberal arts degrees, formerly the bogeyman of practically-minded parents, are already designed to prepare students for this impending economy. Patel goes on,

The hallmarks of a liberal education — building an ethical foundation that values the well-being of others, strengthening the mental muscles that allow you to acquire new knowledge quickly, and developing the skills to apply it effectively in rapidly shifting contexts — are not luxuries but necessities for preparing professionals for the coming transformation of knowledge work to relationship work.

Michigan’s education system, from pre-K to college and beyond, needs to be reflective of this reality. At every level, we need to be growing the skills in our people that our robots cannot replace.

The post Job Security: Or How To Prepare For Jobs That Can’t Be Automated appeared first on Michigan Future Inc..

But the notion that states such as Ohio are dependent on manufacturing jobs returning is one with which he vehemently disagrees.

“Manufacturing is still very important to us, but we are much more diversified state,” he said. “And furthermore, anybody that says the steel mills are coming back to Youngstown is not telling the truth. They’re not coming back. You could have some aspects of advanced manufacturing appear. But if you look even at Pittsburgh, where I grew up, you’ve now replaced steel jobs with technology jobs, and they pay better.”

“So, I know that, you know, leaders have to lead,” Kasich continued. “I don’t read polls to decide what I’m going to do. But for the best interest of the people of our state, having a big mix of technology, healthcare, IT, financial services, and manufacturing is the ticket. To put all of your eggs in one basket is silly. We did that for a long time and I don’t think it’s very smart.”

Exactly! Yes it would be better for lots of workers if we could recreate the high paid factory-based economy of decades ago. But we can’t. In part because of globalization, but increasingly due to smart machines doing the work that workers used to. And smarter and smarter machines are going to continuously do more and more of the work required to make products.

So as Kasich states the middle class jobs of today, and even more so tomorrow, are going to be in knowledge-based industries. One can add education and professional services to his list of technology, healthcare, IT, and financial services.

The lesson we need to  learn, and align with, is that what made us prosperous in the past, won’t in the future. But learning and acting on that lesson is made harder when politicians, of both parties, campaign on bringing back the old factory-based economy. No matter what they promise and no matter what their agenda is manufacturing as a proportion of the American workforce will continue to structurally decline as it has for a half century.

Michigan needs politicians from both parties to have the courage to deliver a message similar to Kasich. Clearly denying the reality that lots of high-paid factory jobs that anchored Michigan’s 20th Century prosperity are not coming back is what many want to hear. But its what we need to hear. So that Michiganders and the state can get on with the difficult transition to a knowledge-driven economy. Its the only path back to a high-prosperity Michigan.

The post Kasich on economic realities appeared first on Michigan Future Inc..

(Edward McClelland explores this topic specifically about Michigan in a recent New York Times op ed. He cites our “The New Path to Prosperity: Lessons for Michigan From Two Decades of Economic Change” report as evidence that manufacturing jobs are not coming back to Michigan.)

This, of course, is the core finding of Michigan Future’s more than two decades research into how globalization and technology are changing the economy. The reality is that we have transitioned from a factory-based to a knowledge-based economy. There is no going back no matter which party is in control in either DC or Lansing. And no matter what the policy agenda.

The Times writes: Manufacturing retains its powerful hold on the American imagination for good reason. In the years after World War II, factory work created a broadly shared prosperity that helped make the American middle class. People without college degrees could buy a home, raise a family, buy a station wagon, take some nice vacations. It makes perfect sense that voters would want to return to those times.

From an economic perspective, however, there can be no revival of American manufacturing, because there has been no collapse. Because of automation, there are far fewer jobs in factories. But the value of stuff made in America reached a record high in the first quarter of 2016, even after adjusting for inflation. The present moment, in other words, is the most productive in the nation’s history.

Politicians of all persuasions have tried to turn back time through a wide range of programs best summarized as “throwing money at factory owners.” They offer tax credits and other incentives; some towns even build whole industrial parks, at taxpayer expense, so they can offer free space for manufacturers. By and large, those strategies haven’t helped. One of Trump’s keynote proposals is to encourage domestic production by taxing imports — an idea more likely to cause a recession than a manufacturing revival. Clinton is promising to basically extend the efforts of the Obama administration, which said it would create a million factory jobs. With just a few months left, the president is still more than 600,000 jobs short.

As we have write frequently it would be better if we could recreate a high wage, high employment manufacturing sector. Its what made Michigan one of the most prosperous places on the planet for most of the 20th Century. But those day are gone––largely because manufacturing is increasingly done by machines not workers.

This is the same path that agriculture followed a century earlier. And no matter how many promises candidates have made or how much public money policy makers have thrown at farming over that century farming now accounts for less than two percent of American jobs.

The Times article points us in the right policy direction. Working on raising the incomes of those who are in the jobs that people without college degrees actually hold in today’s and tomorrow’s economy. They ask:

According to the Bureau of Labor Statistics, there were 64,000 steelworkers in America last year, and 820,000 home health aides — more than double the population of Pittsburgh. Next year, there will be fewer steelworkers and still more home health aides, as baby boomers fade into old age. Soon, we will be living in the United States of Home Health Aides, yet the candidates keep talking about steelworkers. Many home health aides live close to the poverty line: Average annual wages were just $22,870 last year. If both parties are willing to meddle with the marketplace in order to help one sector, why not do the same for jobs that currently exist? 

Exactly! The American economy is now predominantly service providing. And will be even more so in the future. Knowledge-based services are high wage industries. But industries that predominantly employ those with low education attainment are low wage. If we are serious about raising the living standards of non college educated Americans we need policies that will raise employment earnings for those in those service occupations.

That means as the Times writes: “This myopic focus on factory jobs distracts from another, simpler way to help working Americans: Improve the conditions of the work they actually do. Fast-food servers scrape by on minimum wage; contract workers are denied benefits; child-care providers have no paid leave to spend with their own children.”

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My friend’s anxiety over her daughter’s decision to pursue a liberal arts degree should come as no surprise. It has become conventional wisdom among many politicians and pundits that a liberal arts degree is a costly folly. Leaders like President Barack Obama and Florida Governor Rick Scott have disparaged liberal arts degrees as useless – despite the fact that they have provided pricey liberal educations for their own children.

THE SECOND MACHINE AGE

In fact, while opinion leaders pitch the idea that only STEM degrees are a certain path to career stability, futurists have noted that digital technologies will likely make even high-paying STEM careers like computer programming and anesthesiology obsolete. American workers who are best trained for 21^st century career success will be those who know how to adapt to an evolving career landscape by possessing broad, transferable skills.

I’m not arguing that STEM careers are a bad choice. But the skills that make all workers  – even those who choose STEM careers – valuable are boosted, not diminished, by a liberal education. In fact, in their groundbreaking book The Second Machine Age: Work, Progress and Prosperity in a Time of Brilliant Technologies, authors Erik Brynjolfsson and Andrew McAfee argue that in order to outpace the machines that will replace workers in the future, workers need to gain skills that are uniquely human.  While it has become sport to denigrate a liberal education, futurists and employers have signaled that the skills 21^st job creators cherish most in workers are the very ones that a liberal education provides:  The ability to communicate, think critically, be creative and collaborate.

LESSONS FROM SILICON VALLEY

One need only look to Silicon Valley, where employers are increasingly recruiting liberal arts majors for top jobs. A 2015 Forbes magazine article recounts the career trajectories of the CEO and editorial director for tech juggernaut Slack Technologies, holders of bachelor’s degrees in philosophy and theater, respectively. Far from anomalies, these tech leaders represent the sector’s increasing reliance on leaders who possess the ability to add a human touch to their data-based world.

Knowing this, I gave my friend a 21^st century career pep talk that she could share with friends and family members who disapprove of her daughter’s college ambitions.

“Your daughter is learning how to do a job that can’t be replaced by robots and computers,” I told her.  “You should be proud! Do you think Lin-Manuel Miranda’s parents are embarrassed by his college and career choices?”

My friend felt better after our conversation, and I felt better knowing that I had helped to bolster the support network for a young woman who is using her college experiences to pursue her passion and learn skills that will help her thrive no matter where her career takes her.

The post Why a liberal arts degree holds value in the second machine age appeared first on Michigan Future Inc..

The report analyzes changes in employment by education attainment from just before the onset of the Great Recession (December 2007) to today (January 2016) overall, by industry, and by occupation. The bottom line: a preponderance of net new jobs have gone to those with a four year degree or more. The specifics:

• For those with a high school degree or less employment has declined by 5,531,000
• For those with some college or an associates degree employment has increased by 1,337,000
• For those with a bachelors degree employment has increased by 4,590,000
• For those with a masters degree or higher employment has increased by 4,021,000

The economy has added 4,417,000 jobs since December 2007. Employment for those with a four year degree or more increased by 8,611,000. Despite all the rhetoric to the contrary, the demand for those with a four year degree or more far exceeds that of those with some college or an associates degree. With employment increases about 6.5 times higher since the onset of the Great Recession.

Some believe that the post Great Recession economy has changed fundamentally. It hasn’t. The trends were the same during the decline as during the expansion. With those with a four year degree or more doing far better than those without.

From December to 2007 to January 2010 the economy lost 7.7 million jobs. But for those with a four year degree or more employment actually increased by nearly 200,000. From January 2010 to January 2016 the economy has added 11.6 million jobs. Of those 8.4 million (72 percent) went to those with a four year degree or more.

As the report makes clear these trends go back at least to the early 1980s.The reason for this powerful trend––as Michigan Future has been chronicling for more than two decades––is that the American economy is becoming more knowledge based. We are moving from a factory-based to a knowledge-based economy. As the report states:

Since the 1980s, the shift in employment has favored professional service industries, which have relatively higher concentrations of workers with postsecondary education and training, at the expense of traditional factory jobs. With the advent of the postindustrial service economy, job losses were no longer temporary, especially for high school educated production workers. These structural changes were turbocharged in the increasingly Darwinian world of recessions and recoveries, especially since the early 1990s. Those who lost jobs were less likely to be re-hired by the same employer, the same industry, or even in the same occupation. Overall job security declined, especially for high school-educated production workers.

If you check out the report, you will see the changes both by occupation and by industry since 2007 of an economy that is undergoing big structural changes. With professional and managerial occupations and knowledge-based services growing. While manufacturing, construction, and office and administrative support occupations suffering precipitous job losses since the onset of the Great Recession. Those three occupational clusters lost 4.8 million jobs since the onset of the Great Recession while overall the economy was adding 4.4 million jobs. The manufacturing and construction industries since the onset of the Great Recession saw employment declines of 2.6 million.

These structural changes have led to an economy where for the first time ever those with a four year degree or more comprise a larger share of those employed than those with a high school degree or less. 36 percent (up four percentage points from 2007) compared to 34 percent (down five percentage points from 2007). Also noteworthy is that workers with a four year degree or more now earn 57 percent of all wages.

The new reality is that the core of the American middle class is now––and almost certainly will be even more so in the future––those with a four year degree or more. The professional and managerial jobs (both STEM and non STEM) where most of them work are the only occupational clusters which are both growing and pay higher wages.

The post Employment growth by education attainment appeared first on Michigan Future Inc..

The new stamping plant will join another GM stamping plant and two assembly plants in the region. Lansing is among the national leaders in auto manufacturing. So the region becomes a good test case for whether being a manufacturing center is still a path to prosperity.

It clearly was the case in the 20th Century, particularly in Michigan. Michigan was one of the most prosperous places on the planet last century largely because we were where high-paid factory work was concentrated. Those workers were the core of America’s mass middle class.

But that is no longer the case. Why? Lets start with the new stamping plant announcement.  Big investment in capital ($162 million) but few jobs (65). Manufacturing is increasingly a capital, not labor, intensive activity. Manufacturing is now primarily done by machines, not humans. Add to that, as we explored in a recent post, auto manufacturing jobs are no longer high paid work.

Today, and almost certainly more so in the future, good-paying job growth is coming in the American economy in knowledge-based work. This trend holds true in the auto industry. Ford recently announced its largest capital investments in decades. Of the 5,000 new job that go with those investments, 3,300 are in salaried positions. As Crain’s Detroit Business reported:  “More than 80 percent of the new salaried jobs will be technical professionals who work in product development, manufacturing, quality and IT, a company statement said.”

Metro Lansing has been and continues to be a successful auto manufacturing center. But the results in terms of regional prosperity is very different today than in past. In 1970 metro Lansing had a per capita income one percent above the nation’s. In 1990 it had fallen to 10 percent below the nation. In 2000 it had fallen to 12 percent below. And in 2012 it is 17 percent below the nation. Clearly the 65 new stamping plant jobs won’t change that trend.

Contrast metro Lansing with metro Madison, Wisconsin. Also a state capital and home to a major research university. It historically has been more prosperous than metro Lansing. But what is stark is how much better it has done since the turn of the century. In 2000 it had a per capita income nine percent about the nation’s (compared to metro Lansing at 12 below). Today it is 35 percent above the national average (metro Lansing have fallen further to 17 percent below.) Per capita income in Madison since 2000 has risen about $15,000 compared to about $12,000 nationally and nearly $9,000 in Lansing.

The reason for Madison’s superior performance is its economy is a leader (particularly for a smaller metropolitan area) in the growing knowledge-based economy. Its knowledge-based concentration leads to far greater prosperity than metro Lansing’s auto factory concentration.

This is the lesson metro Lansing and the state of Michigan need to learn. Of course, Michigan should continue to seek to be a global center of auto manufacturing. But the economic development priority for the region and state, if we want to be prosperous, is in the knowledge-based economy,  including the knowledge-based portions of the auto industry.

The post Lansing and General Motors appeared first on Michigan Future Inc..

Policy should be about what levers get you to where you are trying to go. And what the report says is that if your goal, as Governor Snyder has stated, is more and better jobs, the only realistic path to that goal is through being concentrated in knowledge-based services, not manufacturing. Or for that matter any other sectors. (Always with the oil and natural gas exception.)

The report doesn’t mention policy at all. It is exclusively about how the American economy has been transformed from 1990-2011–largely, we believe, due to globalization and technology. And how Michigan and Minnesota (the Great Lakes most prosperous state) have fared compared to the nation over those two decades. The facts are:

• Over the two decades manufacturing employment in the U.S. fell by nearly 5.8 million jobs, a decline of 32 percent. The share of workers in manufacturing fell from 13 to 7 percent.
• In contrast employment in knowledge-based services grew by nearly 16.5 million an increase of 55 percent. Knowledge-based services share of American employment grew from 21 to 26 percent.
• The change in employment earnings (wages and employer paid benefits) was even more pronounced. U.S. employment earnings per capita from manufacturing, adjusted for inflation, declined 29 percent over the two decades. The share of private sector employment earnings per capita from manufacturing fell from 21 percent to 12 percent.
• U.S. employment earnings per capita in knowledge-based service grew by 52 percent. The share of private sector employment earnings per capita from knowledge-based services grew from 33 percent to 41 percent, almost completely offsetting the decline in manufacturing’s share.

So the lesson we need to learn first and foremost is: The places that are doing best today and almost certainly will do the best in the future are those states and regions that are concentrated in knowledge-based services (private health care and social services; finance and insurance; information; professional services; and management of companies), not factories.

Minnesota has done substantially better than the country  since 1990 primarily because of their concentration in knowledge-based services. Michigan worse than the country because of our under concentration in those industries. Employment grew in knowledge-based services by 60 percent in Minnesota compared to 30 percent in Michigan. Private sector employment earnings corrected for inflation growth in the sector in Minnesota was 74 percent compared to 33 percent in Michigan.

Despite all the evidence to the contrary, on a bi-partisan basis, most Michigan political and economic leaders have made a revival of manufacturing the key to more and better jobs. We don’t think that is possible no matter what policy regime you implement. Bad policy is not the reason manufacturing employment and wages and benefits have fallen in both absolute and, even more, relative terms over the past two decades. No policy can overcome machines doing more and more of the work in factories or manufacturing jobs being done across the planet rather than primarily in the U.S.

The first lesson Michigan needs to learn is one about vision.Where do we want to go from here. If the goal is more and better jobs/a place with a broad middle class our vision needs to be becoming knowledge-based. Once we are on that path then it will be time to debate what are the policies that can help get us there.

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