What stands out in Michigan Future’s new report, “Michigan’s Transition to a Knowledge-Based Economy,” is that in the fifth year of a national expansion — and an even stronger domestic auto industry recovery — Michigan, on nearly all key 2014 economic and education attainment metrics, is a national laggard. Gone are the days when the auto industry — still the prime engine of the Michigan economy — could propel Michigan to being one of the most prosperous states as was true for most of the 20th century.
Despite a good stretch of job growth since the end of the Great Recession and near-record vehicle sales, Michigan is now structurally one of the nation’s low-prosperity states. Whether the nation’s economy has expanded or contracted since 2007 Michigan has been every year in the bottom third of states in per capita income and bottom quarter of states if you don’t include transfer payments.
Michigan also ranks near the bottom in the proportion of adults who work, ranking 42nd in 25- to 64-year-olds with a job.
The report — co-authored by me and University of Michigan researcher Donald Grime — finds that prosperous non energy-driven states are those with (1) a high proportion of jobs and wages in knowledge-based services and (2) a high proportion of adults with a four year degree or more.
What are the knowledge-based services? Finance and insurance; professional services; health care; education; information; and management of companies. They account for 42 percent of all of the jobs in America and 54 percent of the total wages nationally.
The data are clear: Knowledge-based services now are the center of mass middle class American jobs. Not factory work. Not tourism. Not agriculture.
Our research found two other common characteristic of prosperous states: (1) an even more prosperous big metropolitan area and (2) those big metros are anchored by a central city with a high proportion of its residents with four-year degrees or more.
Today metro Detroit (Lapeer, Livingston, Macomb, Oakland, St. Clair and Wayne counties) is a laggard on all the important economic and education metrics. Out of 52 regions with a population of one million or more the Detroit region ranks 38th in per capita income, 42nd in four-year degree attainment and 33rd in the proportion of wages from knowledge-based services.
Metro Minneapolis on all these metrics is the Great Lakes leader. And largely because of that, Minnesota is, by far, the most prosperous state in the Great Lakes.
The difference in per capita income between metro Minneapolis and metro Detroit is $51,183 to $42,887. Why the prosperity gap between the two regions?
The four major differences between metro Minneapolis and metro Detroit are: the proportion of the population working (514 out of 1,000 residents in Minneapolis vs. 421 in Detroit); the proportion working in knowledge-based services (232 vs. 176 out of 1,000 residents); higher average wage in knowledge-based services ($72,773 vs. $68,222) and four-year degree attainment both in the region (39.3 percent vs. 29 percent) and in the central city (43.9 percent vs. 13 percent).
Minneapolis has a higher proportion of its residents with a four-year degree than its suburbs, particularly among 25-34-year-olds, who across the county are concentrating in vibrant central cities. In Minneapolis, 49 percent of 25-34-year-olds have a four-year degree or more. In Detroit, it is 13.2 percent.
The lessons are clear: Michigan cannot return to prosperity unless metro Detroit is even more prosperous. And metro Detroit, almost certainly, will not be prosperous unless the city of Detroit is an attractive place to live and work for mobile young professionals.
The key to both is an economic growth strategy that makes preparing, retaining and attracting talent priority one. Well-educated adults are the asset that matters most to knowledge-based enterprises. Michigan has lagged in its support of the assets necessary to develop the knowledge-based economy at the needed scale. The choice we face is, do we do what is required to build the assets needed to compete in the knowledge-based economy or do we accept being a low prosperity state?
Lou Glazer is president and co-founder of Michigan Future Inc., a nonpartisan, nonprofit organization.