This, of course, is the exact opposite of Michigan in the 20th Century when the state was structurally a high-prosperity state. In 1999 we ranked 16th in per capita income, just a smidge below the nation. In this post I want to focus on the reasons for Michigans decades-long economic well-being decline by comparing the components of Michigan per capita income in 1999 and 2022.

As readers of this blog know the core MFI description of the reason Michigan has been getting poorer compared to the nation is that we are over concentrated in manufacturing which is declining in both employment and wages and we are under concentrated in knowledge economy industries––information; finance and insurance; professional and business services; and corporate HQs––which are both growing and high wage.

And that is exactly what has happened between 1999 and 2022. U.S. per capita income in $2022 grew by $19,389. Michigan grew by $11,095. Knowledge economy industries share of per capita income in the U.S. has grown from 16.0 percent to 17.4 percent. In Michigan it has declined from 14.7 percent to 14.1 percent. Manufacturing share of per capita income in the U.S. has fallen from 10.9 percent to 6.1 percent. In Michigan it has declined from 18.9 percent to 10.3 percent.

Massachusetts, which is the economic well-being gold standard state, by comparison gets about 26 percent of its per capita income from knowledge economy industries and about 5 per cent from manufacturing.

Knowledge economy earnings (both wages and employer paid benefits) per capita in the U.S. went from $7,379 to $11,364. Manufacturing earnings went from $5,029 to $4,008. In Michigan, knowledge economy earnings went from $6,742 to $8,024; manufacturing earnings went from $8,689 to $5,888. A very big proportion of Michigan’s manufacturing earnings decline is in motor vehicles and motor vehicle body parts manufacturing where earnings declined by $2,026 out of a total decline in Michigan manufacturing earnings per capita of $2,801.

32.6 percent of Michigan’s decline compared to the nation is attributable to slower growth in knowledge economy earnings. Another 26.4 percent is attributable to our much steeper decline in motor vehicles, fabricated metals, and machinery manufacturing earnings. The two other big contributors to Michigan’s growing gap with the nation are slower growth in government earnings which explains 12.5 percent of the gap (so much for the Michigan is big government myth) and capital income which explains 18.6 percent of our decline.

Capital income, which is investment earnings not including capital gains, are almost certainly highly aligned with knowledge-economy employment and four-year degree attainment rates.

One item that does not explain our growing gap is transfer payments which grew in Michigan by $6,143 compared to $6,081 nationally.

For us the basic lesson of this data is what matters most to Michigan reversing its decades-long economic well-being decline is growing the knowledge economy. The knowledge economy is the high- wage and high-growth sector of the 21st Century American economy.

You can find our recommendations for how the state can best grow the knowledge economy here.

The post Explaining Michigan’s economic well-being decline appeared first on Michigan Future Inc..

In our last post we detailed that states with employment most concentrated in production––front-line factory––jobs are all structurally low-prosperity states, with per capita income substantially below the nation’s. Those states include Michigan and Tennessee, both with per capita income twelve percent below the nation’s

Tennessee matters particularly because when it was chosen by Ford for its Blue Oval City electric vehicle automotive manufacturing ecosystem, it became the state that many Michigan political and business leaders put forward as the state Michigan should want to be like economically.

Which raises the question what state economy should Michigan want to be like? Is Tennessee the correct answer to that question?

In the table below we look at economic outcomes for the nation, Michigan, Massachusetts, Minnesota and Tennessee. The first three columns are the economic outcomes we all should want for Michigan: high per capita income, high average hourly wages for private sector employees and a high proportion of adults who are working (employment-population ratio).

If those are the outcomes we want for Michigan, it is clear that Tennessee is the wrong choice as a model for Michigan. Minnesota (chosen by us as a model because it is a non-coastal, cold-weather state) and, even more so, Massachusetts have far better economic well being outcomes. Both are far better choices for the state economy Michigan should want to be like.

As we explored in our last post it was clear to us in 2004 that “knowledge-based industries and young
knowledge workers will be the most important driver of future economic growth. Communities with high concentrations of both will become more prosperous, and communities with low concentrations will become poorer compared with their neighbors.”

You can see how that has played out in the B.A. attainment and high B.A. occupation job share columns in the table below. Unlike Tennessee, Minnesota and, far more so, Massachusetts have excelled at concentrating knowledge-based industries and young knowledge workers. The fact that they are less concentrated in factory jobs has not prevented them from structurally being high-prosperity states.

The reason why Minnesota and, far more so, Massachusetts are high-prosperity states and Michigan and Tennessee are not is that their economies are over concentrated in knowledge-based enterprises and adults with a B.A. or more. The two are inextricably linked. Because the asset that matters most to high-wage, high-growth. knowledge-based enterprises is talent. For Michigan to have the economic well being outcomes of Minnesota and Massachusetts we must make preparing, retaining and attracting talent economic development priority one.

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Terrific op ed in Crain’s Detroit Business by Glenn Stevens Jr., executive director of MICHauto and Britany Affolter-Caine, executive director of Michigan’s University Research Corridor. They write:

The most successful strategy to ensure Michigan’s long-term competitiveness and economic prosperity is to increase the number of workers with college degrees and with digital skills in professions at all levels and across all industries in Michigan, while making our communities attractive places to live and work.

… Michigan won’t be the prosperous state we envision together without these deeper and more long-term investments. Short-term incentives, while important in the moment, are not going to be enough to get us to where we need to be. Pursuing manufacturing jobs is important, but Michigan also must compete for knowledge-based jobs, which are the ones that are growing in today’s economy. To win knowledge-based jobs, we need to re-invest in higher education, move more university discoveries to market, increase people trained in high-tech at all levels, retain them, and invest in our communities so they are attractive places to live, work and play.

Exactly! As we have detailed, incentives to retain and attract manufacturing jobs cannot be the core strategy to return Michigan to high-prosperity. Big incentives are the icing on the cake, not the foundation of recreating a Michigan economy with a broad middle class. That is because, as Glenn and Britany note, knowledge-based occupations are now the growing, high-wage occupations.

As we have documented Michigan has a two-tier labor market: one tier of occupations where fewer than 10 percent of the jobs require a B.A. and a preponderance of jobs pay below what it takes to be middle class; and a second tier for occupations where more than 65 percent of the jobs require a B.A. and a preponderance of jobs pay more than what is required to be middle class.

The high-wage occupations are: • Architecture and Engineering • Arts, Design, Entertainment, Sports, and Media • Business and Financial Operations • Community and Social Service • Computer and Mathematical • Educational Instruction and Library • Healthcare Practitioners and Technical • Legal; • Life, Physical, and Social Science and • Management.

Combined these knowledge-based occupations account for 33.7 percent of the nation’s payroll jobs in 2020. Up from 28.1 percent in 2000. By contrast production (blue collar factory) jobs have declined from 9.6 percent of the nation’s payroll jobs in 2000 to 6.1 percent in 2020.

The high education attainment/high-wage occupations are 32.8 percent of Michigan’s payroll jobs. By comparison they are 42.3 percent of Massachusetts’ payroll jobs. Massachusetts is the prototypical high-prosperity/high knowledge-based economy state: second in per capita income and first in the proportion of adults with a B.A. or more.

The table at the bottom of this post details the annual average wage for the ten high education attainment major occupations plus production for the U.S., Michigan and Massachusetts. And the location quotient for those occupations for Michigan and Massachusetts.

(The location quotient is the ratio of the area concentration of occupational employment to the national average concentration. A location quotient greater than one indicates the occupation has a higher share of employment than average, and a location quotient less than one indicates the occupation is less prevalent in the area than average.)

Nationally the ten knowledge-based major occupations, with the exception of Community and Social Services, have average wages above the average for all jobs. Most substantially above. Production has an average wage 25.9 percent below the average for all jobs.

As you can see in the table, the knowledge-based occupations are also high-wage in Michigan, although lower than the nation and even farther behind Massachusetts. That is particularly true for Computer and Mathematical jobs where the average wage in Michigan is $15,000 lower than the nation and more than $24,000 lower than in Massachusetts.

Just like the nation, production jobs in Michigan are below average wage jobs: more than $10,000 lower than the state average for all jobs and more than $13,000 below the national average for all jobs.

Michigan is under concentrated in employment compared to the nation in all the knowledge-base occupations except for Architecture and Engineering and Healthcare Practitioners and Technical. By contrast, Massachusetts is over concentrated in employment compared to the nation in all the knowledge-base occupations.

Michigan’s under concentration and lower average wage in these knowledge-base major occupations are a major reason why Michigan’s employment earnings (wages and employer paid benefits) per capita are 16.8 percent below the nation. In 2000 Michigan’s employment earnings per capita were one percent above the nation’s. By contrast Massachusetts’s employment earnings per capita are 37.8 percent above the nation’s.

As Glenn and Britany wrote, the data are clear: the path to recreating a high-prosperity Michigan is an economic development strategy focused on competing for high-wage/high-growth knowledge-based jobs.

The post Michigan’s lack of jobs in high-wage occupations appeared first on Michigan Future Inc..

When its comes to wages and benefits Michigan used to be among the top states. No more. The state has fallen from 8th in 1990 to 21st in 2018. Michigan has gone from $3,743 above the nation on average compensation to $4,416 below in inflation adjusted dollars.

The table at the end of this post displays average compensation for the nation, Michigan, Minnesota and Massachusetts. As well as for the counties with the principal city in each of those state. The data analysis was done by Don Grimes.

The data comes from the BEA count of wage and salary employment, which includes military and farm wage and salary employment. The data also include information on average compensation per wage and salary worker. Compensation is the sum of wages and salaries and benefits paid by employers. Benefits paid by employers include government social insurance payments, like social security and unemployment insurance, and payments by employers into health and retirement funds. Neither measure includes data on proprietor’s (self-employment) employment or earnings.

Minnesota and metro Minneapolis are the comparisons we have been using for decades because they have the best economic outcomes in the Great Lakes taking both weather and we can’t be like the coasts off the table. But if you want to compare Michigan to the best in the nation, Massachusetts and metro Boston are really the better comparison.

Minnesota in 1990 had average compensation $5,419 below Michigan. In 2018 it is $3,229 above Michigan. The story is even more dramatic for Massachusetts: from $1,543 above Michigan’s in 1990 to $19,986 above in 2018.

The Michigan Future explanation of the path to prosperity in an economy being transformed by globalization and technology was first laid out in our 2004 report A New Path To Prosperity? Manufacturing and Knowledge-based Industries as Drivers of Economic Growth. We identified that the most prosperous non-energy driven states had four characteristics in common:

• A high-proportion of adults with a four-year degree or more
• An over concentration in knowledge-based services: health care; education; professional and business services; finance and insurance; information; and corporate headquarters
• A even higher concentration of both in the state’s big metro(s)
• A high proportion of adults with a four-year degree or more in those metros principal city

Minnesota and, even more so, Massachusetts share these characteristics. Michigan does not. The same is true for metro Minneapolis and, even more so, metro Boston. As you can see in the table at the end of this post a lot of Minnesota’s and Massachusetts out performance compared to the U.S. and Michigan can be explained by the robust gains in the counties that include Minneapolis and Boston.

The same basic story of wages and benefits falling behind holds true for Wayne and Kent counties. Wayne County, which includes the city of Detroit, had average compensation in 1990 $10,333 above the national average, in 2018 it was $4,417 above. Kent County, which includes the city of Grand Rapids, had average compensation in 1990 $658 below the national average, in 2018 it was $9,612 below.

All of these data are consistent with the story Eduardo Porter tells in his New York Times story Tech is splitting the U.S. work force in two. Porter details how the American economy is dividing into those who work in low-wage services and those who work in high-wage services. What distinguishes Massachusetts and Minnesota and their big metros from Michigan and its big metros is Massachusetts and Minnesota, largely because of high concentrations of college graduates in their big metros, has more of the fast-growing and high-wage knowledge-based services than does Michigan.

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It should be noted that King is no opponent of charter schools. Prior to serving as New York’s education commissioner and U.S. Secretary of Education, he founded one of Boston’s most successful charters, Roxbury Prep, and was then a leader at Uncommon Schools, one of the highest performing charter networks on the east coast.

Instead, King is a proponent of good charters, and was calling for greater quality control in Michigan’s charter sector, citing Massachusetts as an example of a state with the proper checks in place.

CHARTER SCHOOL LAWS: MASSACHUSETTS VS. MICHIGAN

The charter school laws in Massachusetts couldn’t be more different than Michigan’s. Massachusetts places a cap on the number of charter schools that can exist in a district, such that charter spending doesn’t exceed a certain percentage of overall district funding. This type of cap prevents the type of over-penetration of charter schools we’ve seen in cities like Detroit (Michigan has no cap), that has contributed to the financial decline of DPS and created a school system with far more school seats than children to fill them. Having a cap ensures that the rapid growth of charters won’t negatively impact district finances such that existing public schools (not to mention existing, quality charters), and all the students that remain in them, are shortchanged.

Massachusetts has allowances to their cap, particularly in the state’s lowest performing districts, but only proven providers are allowed to open the schools that push charter penetration over the legislative cap. A proven provider could be a current charter network with a track record of success looking to expand, or a separate school set up by someone who’s worked in a management or leadership role in a successful school.

This type of quality control means that while Detroit charters have mostly earned a lousy reputation, charters in urban areas of Massachusetts like Boston have a great reputation. University of Michigan economics professor Susan Dynarski recently wrote a post for Brookings advocating for raising the charter cap in struggling urban districts in Massachusetts. In the post, she summarizes a series of rigorous studies (several done by her) showing that Boston charters deliver better outcomes for students than comparable traditional public schools, as measured by test scores, AP course participation, and college attendance. These studies utilize the “natural experiments” presented by charter school lotteries in which some students receive the treatment (charter school attendance) and others the control (traditional public school attendance), allowing researchers to account for both observable and unobservable student characteristics.

Confident in these results, and the fact that new schools must come from a “proven provider,” Massachusetts voters can be reasonably sure that raising the cap won’t lead to a drop in quality.

Despite all that, Massachusetts is still in the midst of an acrimonious battle on whether or not to raise the cap. As they should! Because the expansion of charter schools surely has costs. The district will lose students, and it’s likely these students will, on average, come from more educationally motivated families. So both financially, and in the composition of their student body, district schools are sure to be made at least somewhat worse off by charter expansion. Voters need to decide if the benefits to more charters outweigh those costs.

But at least one can make a strong case that Boston charter schools have produced great outcomes for their students. And while there are certainly good charter schools in Detroit, no one could or should make the claim that Detroit students would be better off with more charter schools. We should listen to the Secretary King’s advice, and craft charter school laws that ensure each new school brought into our cities will produce success, rather than replicate failure.

The post Michigan charter schools: Ensuring success or replicating failure? appeared first on Michigan Future Inc..

As we have explored previously the cause for us now being low prosperity is predominantly that the state has been a laggard in aligning with the transition that is occurring in the national economy from a factory-based to a knowlege-based economy. Michigan is still too much the former and too little the later.

In pulling together the data for the last post, we looked at state per capita income in 1969. In many ways the peak of the dominance of the domestic automotive industry. Michigan’s per capita income then was eight percent above the national average in large part because of lots of high paying, factory jobs. No more. Despite a resurgent domestic auto industry, Michigan today is eleven percent below the national average in per capita income.

We have frequently suggested both Massachusetts and Minnesota provide models for high prosperity states in the 21st Century. They both have aligned with the move towards a knowledge-based economy. Massachusetts as consistently one of the nation’s most prosperous states. And Minnesota, the most prosperous state in the Great Lakes.

In 1969 Minnesota had a per capita income seven percent below the national average, in 2015 they are six percent above the national average. Minnesota has gone from fourteen percent poorer than Michigan in 1969 to nineteen percent more prosperous today.

Massachusetts was nine percent above the national average in 1969, in 2015 they are twenty eight percent above. Massachusetts has gone from one percent more prosperous than Michigan in 1969 to forty four percent more prosperous today.

In our research we have found that the common characteristics of non energy-based high prosperity states are

• They are over-concentrated, compared with the nation, in the proportion of total wages coming from knowledge-based services
• They have a high proportion of adults with a four-year degree or more
• They have a big metropolitan area with even higher per capita income than the state
• In that big metropolitan area, the largest city has a high proportion of its residents with a four-year degree or more.

Massachusetts and Minnesota have all four. Michigan doesn’t. End of story.

The post Michigan: 1969 and today appeared first on Michigan Future Inc..

Lets leave aside for the moment the belief, by too many of our political and business leaders, that higher education is designed to meet the needs of today’s employers. At least for other people’s children. Rather in this post I want to focus on whether having lots of adults with certificates and fewer with four year degrees is a path to prosperity.

A soon to be released report pushing for higher post-secondary completion in Michigan provides the data. The report adopts the Lumina Foundation goal of sixty percent of adults with a “meaningful” post secondary credential. The proportion Lumina and many others believe is needed to fill the jobs of the future. The sixty percent, of course, includes those with associate degrees as well a bachelors degrees or more. The meaningful becomes relevant in calculating which occupational certificates to include.

The report lists the top ten states in 25-64 year olds with post-secondary educational credentials. At the top of the list is Georgia. Fourth is Massachusetts. Georgia has sixty percent of its adults with a post secondary credential, Massachusetts more than fifty eight percent. But there the similarity ends. Of the top ten states Georgia has by far the most with credentials (23.0 percent) and the second fewest with four year degrees of more (29.6%). Massachusetts the most with four year degrees or more (42.4 percent) and the third fewest with credentials (8.0 percent).

So if conventional wisdom is right Georgia should have a high proportion of its residents working and in high wage jobs. Massachusetts not so much. Conventional wisdom would have it that Massachusetts has too few adults with the skills employers are looking for in high wage mid skill/skilled trades jobs and too many with four year degrees that employers don’t want consigning degree holders to low wage/low skill jobs largely hospitality and retail jobs. Think again!

The July unemployment rate in Georgia is 6.0 percent, in Massachusetts its 4.7 percent. The proportion of those 16 and older in 2014 working in Georgia was 57.6 percent, in Massachusetts it was 61.6 percent. Even greater is the difference between the two states in wages and income. Massachusetts in 2013 was second in per capita income ($57,200), Georgia 40th ($37,800). In terms of net employment earnings (employer paid wages and benefits) per capita Massachusetts ranked second, Georgia 34th. Average wages in 2014 in Georgia were $44,700, in Massachusetts $57,600. Median wages: Massachusetts $44,700, Georgia $32,800.

So across the board in terms of employment, wages and income residents of Massachusetts are far better off than residents of Georgia. One of the major reasons is that Massachusetts residents are far better educated than Georgians. At both the state and metropolitan area level the most prosperous places––except those benefiting from high commodity prices––are those with the highest proportion of adults with a four year degree or more.

Clearly Michiganders would be better off having an economy like Massachusetts rather than Georgia. But we can’t get there unless we have more, not fewer, adults with four year degrees. Do we need more adults with mid skill/skilled trades occupational credentials? Of course. But not instead of more adults with four year degrees. We need even more of them. Michigan in 2013 was 33rd in the proportion of adults with a four year degree which is a major factor in our being 37th in per capita income. Unless the state improves on its ranking of 33rd Michigan is almost certain to remain one of the nation’s poorest states.

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The state which has the best student outcomes is Massachusetts. Massachusetts k-12 policy was put in place in the early 1990s on a bi-partisan basis and has been continued without much change since. At that time Massachusetts student achievement was middle of the pack, just like Michigan as Bridge Magazine reports:

But until the state began the hard work of reforming its education system, Massachusetts’ K-12 schools didn’t reflect those advantages. The state used to be, as Kati Haycock (President, The Education Trust) put it, middling ‒ not much different from Michigan in student achievement and education spending. In 1992, Michigan’s eighth graders scored at the national average scale score of 267 in math on the NAEP, with 19 percent considered proficient. In Massachusetts that year, eighth graders scored 273 on math, with 23 percent meeting proficiency standards.

So what’s happened to the six-point gap that separated Michigan and Massachusetts in eighth-grade math in 1992? It has widened fivefold. In 2013, Massachusetts eighth graders had an average scale score of 313 on the math NAEP test, while their Michigan peers stood at 280, 33 scale points behind. Michigan’s average eighth grader had a math scale score one point lower than Massachusetts’ average poor eighth grader.

(This trend of Massachusetts becoming the national leader and Michigan tumbling compared to other states is true in all NAEP tests, not just eight grade math.)

Rather than learning from what they have done to achieve the results we all want, Michigan policy makers in many ways have gone in the completely opposite direction. Not smart!

So how has Massachusetts achieved these nation leading student achievement results? Four recent articles provide an overview of the Massachusetts approach to education policy. All worth checking out:

• A NY Times article entitled “Expecting the Best Yields Results in Massachusetts“
• Two Bridge Magazine articles entitled “Smartest kids: Ignoring outcry, Massachusetts leaders chose excellence” and “Smartest kids: Massachusetts charter schools are few but mighty“
• An EdTrust-Midwest Massachusetts fact sheet.

So what did Massachusetts do? The NY Times article describes their approach this way:

The three core components were more money (mostly to the urban schools), ambitious academic standards and a high-stakes test that students had to pass before collecting their high school diplomas. All students were expected to learn algebra before high school. …  Also noteworthy was what the reforms did not include. Parents were not offered vouchers for private schools. The state did not close poorly performing schools, eliminate tenure for teachers or add merit pay. The reforms did allow for some charter schools, but not many. Then the state, by and large, stayed the course.

As EdTrust-Midwest describes in their Massachusetts fact sheet the state’s approach to charter schools is: “In the early 1990s, Massachusetts leaders decided to open the state’s first charter schools – on a hugely important condition: accountability for both opening and for expansion would be strong. This included intentional, regulated high-quality charter school creation with high standards, strong accountability, and a state-guided quality authorizing process.”

Another key feature of Massachusetts k-12 policy is taking teacher quality seriously. Raising standards for teachers combined with professional development of teachers on the state’s rigorous standards. As Ed Trust Midwest writes: “Accountability and high standards can only do so much; without support for teachers in the classroom, students are unlikely to learn at the high levels they need to be prepared for life after high school.”

So Massachusetts has achieved the nation’s best student achievement through:

• setting rigorous standards for all kids and not lowering those standards when kids had trouble meeting them
• testing aligned with those rigorous standards
• developing teachers prepared to teach all kids the standards
• state funding that provides more resources for poor kids
• a limited number of charters that must meet rigorous quality standards to be able to operate (open, stay open and replicate) in the state. 

Michigan, of course has gone in a completely different direction. We have been ambiguous at best about rigorous standards and aligned tests. Have not invested in developing educators to teach rigorous standards. Moved away from preferential state funding for low income students. Instead we have relied on parental choice as the prime lever to drive student achievement. Culminating in the elimination of the cap on charters without any quality standards.

The bottom line: the Massachusetts approach has worked, Michigan’s hasn’t. The United States Chamber of Commerce Foundation Leaders & Laggards: A State-by-State Report Card on Educational Effectiveness gives Michigan an overall grade of D. For academic achievement a D and for academic achievement low income/minority an F. Maybe more concerning, the report gives Michigan an F in both categories for progress since 2007. Massachusetts received an overall grade of A. For academic achievement an A and for academic achievement low income/minority an A. In terms of progress since 2007 the report gives Massachusetts a B for academic achievement and an A for academic achievement low income/minority.

Seems like its time for Michigan to move away from unregulated school choice and to learn from the state with the highest student achievement in the country.

The post Needed: new state education policy appeared first on Michigan Future Inc..

MSU economics professor Charles Ballard just gave a terrific presentation on the Michigan  economy. Highly recommended!

Ballard’s main themes are:

• Michigan’s population decline has followed its economic decline
• Michigan has moved from being a high to low prosperity state
• The main causes of the decline are both the decline in manufacturing employment and Michigan’s standing as  a low college attainment state in an economy where the premium for a college degree is rising
• Michigan policies have contributed to that decline by favoring tax cuts at the expense of higher education funding. Ballard writes: “At a time when education is so crucial to our future, Michigan has pursued a policy of systematic disinvestment in education.”
• The long run decline in Michigan  has been accompanied by growing income inequality particularly for men without college degrees and African Americans.

The slide above, from Ballard’s presentation, clearly depicts the Michigan decline. In the Industrial Age (through the 1970s) when manufacturing matter most, Michigan was at least as prosperous as Massachusetts. But in an  economy that is over the past three decades  or more increasingly knowledge based,  Massachusetts  has soared while Michigan declined sharply. The main reason: Massachusetts is first in college attainment, Michigan is 35th.

The post Ballard on the Michigan economy appeared first on Michigan Future Inc..

Among all the disappointing actions taken by Michigan policy makers the past two years––particularly in December––the most disturbing is explicitly positioning Michigan to compete with Indiana. As we and many others have pointed out incessantly Indiana is one of the poorest states in the country and is now and has been for decades the poorest of the Great Lakes states. Why would we want to be like them?

(For the details on Indiana’s economy see two recent posts here and here.)

What made Michigan special for folks across the planet––many of whom flocked here––for most of the 20th Century was we were one of the most prosperous places on the planet. The place that created the American mass middle class. Largely because of high paid, unionized factory jobs this was the place where if you worked hard you were most likely to realize the American Dream.

Obviously that was less and less true in the last decades of the 20th Century and collapsed in the first decade of the 21st Century. As factory jobs were eliminated here by the hundreds of thousands and nationally by the millions and high paid factory jobs––unionized or not––went extinct.

As the domestic auto industry––still the engine of the Michigan economy––collapsed Michigan suffered through what is now commonly described as a lost decade. The question for policy makers is “where do we want to go from here?”.

Basically there are two choices. One is to stay concentrated in the industries that made Michigan prosperous in the past, primary factories but also tourism and agriculture. But that is no longer a path to a mass middle class. Michigan’s traditional engines now are characterized by slow or no job growth and lower wages. This shrinking middle class economy is what you get if you choose to be competitive with Indiana. The other option involves positioning Michigan to once again be a place with a broad middle class.

To do that necessitates transitioning Michigan away from a factory-based economy towards one that is concentrated in the high education attainment sectors of the economy––primarily health care, education, finance and insurance, professional and technical services and information. These are the sectors where job growth has been the fastest for, at least, two decades and where wages are now the highest. (For details see our latest report on Michigan’s Transition to a Knowledge-based Economy.) This would mean competing with high prosperity states like Massachusetts and Minnesota.

The choice our state policy makers have made to compete with Indiana is like the Detroit Tigers during their lost decade (more like a decade and a half from 1989-2005 when arguably they were the worse team in baseball) choosing to compete with franchises who year in and year out don’t make the playoffs, rather than teams who compete for the championship year in and year out.

Like our state policy makers the Tigers had a choice to make: join the annual also-ran franchises or commit themselves to do what is necessary to build a championship contender every year. Tiger management chose the latter even though it is more expensive and more difficult. Far easier and cheaper to compete with the teams at the bottom than those at the top. Think how different the Tigers would be today if they were satisfied competing with teams like the Pittsburgh Pirates rather than the New York Yankees.

In terms of state economies Indiana is the Pirates. Actually worse. The Pirates have been terrible for two decades, Indiana has been the poorest Great Lakes state for more than four decades. In terms of state economies Massachusetts and Minnesota are the Yankees.

What distinguishes Massachusetts and Minnesota from Indiana (and Mississippi)? What would Michigan need to do compete with high prosperity rather than low prosperity states? The two defining characteristics of high prosperity states––other than those with large oil and natural gas deposits––is they are over concentrated in the high education attainment sectors of the economy listed above and the proportion of adults with a four year degree or more. Massachusetts and Minnesota are in the top 10 in each, Indiana is in the bottom 10 in each.

Giving up on a Michigan with a broad middle class should be unacceptable. (Just like giving up on competing for championships was unacceptable to Tiger management.) That requires state policy makers who are committed to positioning Michigan to compete with high prosperity, not low prosperity, states.

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