When it comes to creating economic growth, Michigan is lagging behind other states and is headed down the wrong path.
To reverse the tide, Michigan should concentrate on attracting young people to work in a knowledge economy, according to a new study by Ann Arbor-based University of Michigan and Michigan Future Inc.
The most recent report comes 20 years after the two groups issued their first report on the future of Michigan’s economy. It also arrives a day before Gov. Gretchen Whitmer’s State of the State address.
Starting the sixth year of the Whitmer Administration, Michigan ranks in the middle or bottom of multiple categories, including public education, poverty, a lack of investment in infrastructure, overall population loss, falling income, and more. Under the previous administration of Gov. Rick Snyder, the state ranked in the top 20 of multiple categories.
Michigan Future is a nonprofit, nonpartisan group developing ideas on how the state can adapt to a knowledge-based economy — those states with a high percentage of residents with college and post graduate degrees.
“When we first compiled the data in 2004, we feared that without a recognition of the new drivers of prosperity, we risked falling behind, says economist Donald Grimes of U-M’s Research Seminar in Quantitative Economics. “Nothing really changed, and Michigan is now one of the nation’s poorest states.”
The first edition of the U-M/Michigan Future Inc. report, “A New Path to Prosperity? Manufacturing and Knowledge-Based Industries as Drivers of Economic Growth,” found manufacturing — although still an important and valuable component of the Michigan labor market — was no longer a driver of growth or prosperity.
The 2004 report stated that 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 younger, college-educated adults.
But Grimes and Lou Glazer, president of Michigan Future Inc., say unfortunately the shift has not occurred 20 years later.
Instead, Michigan’s economic standing has plummeted with the state now ranking 39th in personal income per capita among the 50 states. If each state’s personal income per capita grew over the next 23 years at the same rate 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.
“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,” says Glazer. “Michigan needs to change how it approaches economic development if it wants to be a prosperous state again.”
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 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,” says Glazer. “If Michigan doesn’t become competitive in the knowledge economy, it will be one of the poorest states.”
