Report: Michigan Continues to Track Downward Toward Lowest Performing State

Michigan’s entrepreneurial economy has seen improvements since the 2020 COVID recession, but it has not fully rebounded, according to the new Small Business Association of Michigan Foundation’s Entrepreneurship Score Card.
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Michigan’s entrepreneurial economy has not fully rebounded from the COVID recession, according to a new report. // Stock photo

Michigan’s entrepreneurial economy has seen improvements since the 2020 COVID recession, but it has not fully rebounded, according to the new Small Business Association of Michigan Foundation’s Entrepreneurship Score Card.

The annual Entrepreneurship Score Card, now in its 20th year of publication, is a comprehensive assessment of how Michigan’s entrepreneurial economy is performing and how it compares to other states. The 20th edition reviews, analyzes, and measures how Michigan and its entrepreneurial economy has changed over the last two decades.

“The Score Card consistently shows that small businesses play an indispensable role in our economy in both good and bad economic times,” says Brian Calley, president and CEO of SBAM. “While there has been impressive rebound in some areas, Michigan’s economy has not shown its typical exuberance and is now lagging behind neighboring states.”  

Key takeaways from this year’s report include:

  • The business cycle dominates the ebbs and flows of Michigan’s small business activity and vitality.
  • In the last 20 years, Michigan gained, then lost, a leadership position in net new jobs from business expansions. Between 2011-2019, Michigan job growth skyrocketed, becoming one of the best performing states in this area. Since the 2020 Recession, Michigan continues to track downward toward the lowest performing state.
  • The success and struggles of the entrepreneurial economy are closely tied to the broader state economy.
  • The per capita income gap between Michigan and the rest of the nation has gotten worse in the last 20 years.
  • Michigan saw impressive gains in small business growth and vitality between 2012 and 2018, but that progress has faded since the pandemic.
  • New business formations continue to drive job growth and diversify Michigan’s economy.
  • Since the mid 2010s, Michigan’s small business survival rate has improved and moved closer to Massachusetts, the best performing state.
  • Michigan continues to rank in the Top 10 for R&D and high-tech workforce jobs. The state is also strong in physical science and engineering workers, as well as skilled trades, technicians and technologists.
  • In the last 20 years, Michigan’s labor force participation has continued to decline, a trend that will likely persist and worsen in the coming decades.

In the last 20 years, small businesses have made substantial productivity gains and job growth as well. The small business value proposition to Michigan is impressive, showing that:

  • The fastest growing business by size category has been the smallest businesses (1-9 employees), which increased by 30 percent in the past 20 years.
  • Sole proprietors have become more prevalent and job growth in the smaller employee categories has increased faster than the largest businesses.
  • Payroll growth among the smallest businesses has grown by 103 percent in the last 20 years, nearly double the increases of larger businesses.
  • Income growth of Michigan sole proprietors has improved in the past 10 years and is now outpacing the U.S.
  • Michigan business ownership by women (regardless of size) now surpasses the US rate.

Looking forward, focusing on growth areas will be essential to Michigan’s economic success. This includes:

  • Investing in key areas that are critical to economic growth including research and development, innovation, STEM education and credentialing programs, and high-tech employment.
  • Capitalizing on the technology workforce to grow Michigan companies.
  • Investing in digitization and broadband to bolster innovation and technology-based economic development.
  • Investing in energy reliability, which has become increasingly important for business attraction and retention.
  • Focusing on foreign direct investments which are an important source of well-paying jobs.

The full Score Card report is available to download at sbam.org/scorecard.

The SBAM Foundation is a 501(c)(3) Tax Exempt Organization as determined by the IRS, established to provide training and education on entrepreneurship, including for disadvantaged individuals and economically challenged communities. The SBAM Foundation also annually provides an in-depth analysis of the entrepreneurial environment in Michigan via the Michigan Entrepreneurship Score Card, currently in its 20th year of publication.