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..

My remarks and the conversation was mainly about retaining and attracting college educated Millennials. But we also had a chance to discuss Ann Arbor being part of the Detroit metropolitan area. To me these are the two keys to whether Ann Arbor really is an economic engine for the region and state that many believe it can and will be.

You need Ann Arbor to be a talent magnet plus the ability to draw talent from the much larger Detroit metro to have the human capital base that  is needed to be an economic engine. The centerpiece of my talk to the City Council is that human capital now is the asset that matters most to economic growth. Companies–particularly private sector knowledge-based enterprises–are moving to where the talent is, rather than people moving to where the jobs are. And at the moment Ann Arbor does not have a large enough pool of talent to draw from to grow at scale a robust private sector.

As I have written previously Ann Arbor has for years pursued policies that are anti both population growth and particularly residential density. Of course, that is exactly the wrong approach if you want to attract young professionals. Who are increasingly choosing, after college and before kids, to live in high density, mixed used, walkable urban neighborhoods.

The result is that Ann Arbor is not doing particularly well at retaining and attracting young talent. From 2005-2012 the number of 25-34 year olds with a four year degree or more living in Ann Arbor stayed constant at about 16,000. This compares to a 17 percent increase in the cohort nationally. By contrast Madison, the most successful university-driven economy in the Great Lakes–has seen its young talent population grow since 2005 from 22,400 to 29,700. An increase of nearly 33 percent. To be an economic engine Ann Arbor needs to be as competitive as Madison in retaining and attracting young professionals.

An advantage that Ann Arbor has that Madison doesn’t is that it is part of a metropolitan area of about five million. Economies are regional, not state or local. This is an economy where big metros are winning largely because they are where talent is concentrating. You want and need access to the largest possible pool of human capital to recruit workers from to grow at scale private sector knowledge-based employers.

Unfortunately too many people–and leaders–in Ann Arbor want the city (and county) to not be considered part of metro Detroit. Big mistake! And to make matters worse the State of Michigan has just announced their take on regions and it separates Ann Arbor from metro Detroit. Even bigger mistake!

The State has put Ann Arbor in a region of Washtenaw, Livingston, Monroe, Lenawee, Jackson and Hillsdale counties. If this really were the region Ann Arbor/Washtenaw County employers were drawing workers from, its economy would be much smaller today and would experience slow growth going forward. Regions this small cannot take advantage of a major research university. Which, of course, is Ann  Arbor’s main asset. (Think Champaign-Urbana.)

As I said to the City Council the most important ingredients to the future prosperity of Ann Arbor is if both Detroit and Ann Arbor become talent magnets. The two cities because of the preference college educated Millennials have for central city living. If they aren’t attracting young talent Ann Arbor and metro Detroit (including Ann Arbor) are going to have a hard time developing the talent pool necessary to participate at scale in the growing, high wage knowledge economy.

The post Growing Ann Arbor appeared first on Michigan Future Inc..

I believe that the University of Michigan is a better asset than UW Madison. By creating a quality of place that is more attractive place to live they have leveraged their assets better than Ann Arbor.

We use Madison as a comparison for both Ann Arbor and Lansing/East Lansing both because of the major research university and to take cold weather off the table. Lots of folks think Michigan can’t compete for talent because of the weather, don’t believe it. But in terms of development policy a better model is Portland, Oregon. They have developed the playbook for land use.

Their four decade long strategy has three anchors: a greenbelt to control sprawl, a high density/walkable central city (particularly in their downtown and near downtown neighborhoods) and transit. The result: a city that is both regularly rated one of the “greenest” in the country and a talent magnet. (See this Wall Street Journal article on Portland still attracting young talent even in a down economy. It’s not just jobs that attract mobile talent!)

In environmentally conscious Portland you see high density (yes even tall buildings) development everywhere in and around the downtown. They understand if you want both to be kind to the environment and economic growth the recipe is to limit low density suburban/exurban growth and encourage a high density central city. It’s the way to get folks out of cars and to make transit (particularly rail) financially feasible.

Ann Arbor seems to have convinced itself that it’s good for the environment to restrict growth both outside the city and in the city. But then the only way you can grow is if new workers demanded by new and growing enterprises live further and further away from the city. Which means longer commutes all by car. So much for being kind to the environment.

That assumes that new workers want (or will accept to get the job) to live further and further away from the city. The evidence is an increasing proportion of college educated adults – the workers most needed by the knowledge-based enterprises that Ann Arbor wants to attract – don’t want/won’t accept that kind of low density/long commute living. The trend nationally – that Brookings has labeled bright flight – is a preference for central city living, particularly in high density, mixed use, walkable neighborhoods with transit. That is why vibrant, dense central central city neighborhoods is central to economic growth. Without a larger pool of talent Ann Arbor won’t get the economic growth it wants.

The post Ann Arbor II appeared first on Michigan Future Inc..

But the notion that Ann Arbor is best positioned to drive Michigan’s transition to a knowledge-based economy is widely held across the state. Unfortunately Ann Arbor’s politics make it unlikely to happen. Yes, Ann Arbor is home to the University of Michigan – a world class research university – which is a terrific asset. But to leverage the asset there has to be a large pool of talent that both will attract knowledge-based enterprises and commercialize the ideas coming out of the university. That talent pool won’t concentrate in Ann Arbor as long as it’s politics are anti-growth, particularly anti-density.

The City Council just turned down another development designed primarily for young professionals. It’s a regular occurrence. Is it easier  in Ann Arbor to do higher density development today than five years ago? Yes, but it still is real hard.

The result: Ann Arbor has about one third the young professional households as Madison (see our Young Talent in the Great Lakes report). A chief reason, Madison offers the kind of high density, mixed use, walkable neighborhoods that Millennials are looking for, Ann Arbor doesn’t. Ann Arbor may be an interesting place for Boomers to visit with its downtown restaurants, shopping and entertainment, but it’s not a very appealing place for Millennials to live.  So Madison is an engine for the Wisconsin economy, Ann Arbor isn’t for Michigan.  Unless Ann Arbor becomes much more development friendly and much more responsive to the changing demands for housing and density don’t count on Ann Arbor being an engine for the Michigan economy.

The post Why Ann Arbor Won’t Be an Economic Engine appeared first on Michigan Future Inc..