City and state leaders, in partnership with regional business coalitions, put forth a remarkable effort in their bids to woo Amazon’s second headquarters to Detroit or Grand Rapids. Their commitment to lure the global online giant is absolutely commendable.
Nevertheless, the news this week that neither city made the top 20 cut for the new headquarters and its 50,000 jobs paying an average of about $100,000 should be a wake-up call for Michigan, and particularly for those shaping state policies.
Detroit’s extraordinary proposal, prepared largely by entrepreneur Dan Gilbert’s team with help from Detroit Mayor Mike Duggan and the state of Michigan among others, and that of Grand Rapids, represented the best our communities can offer with the assets they have. They pointed out the many strengths of Michigan’s largest metropolitan areas.
But no matter how many boxes were checked, they could not mark the first and most important box — the one that says Michigan has the talent Amazon needs now and the attributes to attract more talent in the future. As Amazon has said, talent means college-educated workers of all types, not just computer coders or engineers.
This is not a surprise. For 15 years, groups such as Michigan Future and state task forces such as Lt. Gov. John Cherry’s Commission on Higher Education have pointed out that college graduates are the driving force of the knowledge economy, which has replaced factory work as the source of more and better paying jobs in America.
Gov. Rick Snyder has said talent had surpassed other resources as the driver of economic growth.
Don’t be confused. The talent they are talking about is college graduates. If we don’t have college graduates, we won’t need to be building new apartments, new office buildings, and new stadiums with skilled construction labor. College graduates drive the knowledge economy. And on that measure, based on 2014 Census Bureau data, Detroit ranked 39th among the top 100 metropolitan areas in the nation with populations greater than one million.
Every city that made the cut ranked higher in the percentage of its residents with college degrees. The metro region with the second highest concentration of college graduates, Washington, D.C., has three sites in the running.
Why does Michigan rank so low? Because despite all the warning signs and reports, for 20 years we have focused our attention on retaining and attracting capital with a strategy of cutting taxes, rather than preparing, attracting and retaining college graduates, which requires investment by the state.
We have a great group of public universities, but we have slashed investment and limited their ability to grow new graduates. New graduates, and those from other states, often look to vibrant, safe, fun, walkable, and interesting cities to live in, with mass transit systems — like those that made the Amazon cut. But our cities today operate on shoestring budgets that makes it hard to provide the basics to citizens, let alone the amenities young college graduates demand.
Since 1999, thanks to governors and Legislatures from both parties, our state and local tax burden has dropped significantly. State and local taxes took 7.9 percent of state personal income in 1999, under Gov. John Engler. Cuts in income and business taxes and limits on state property taxes dropped that burden to 6.8 percent by the end of Gov. Jennifer Granholm’s term. And today, under Gov. Rick Snyder, it stands at 6.4 percent. Michigan is not a high tax state by any measure.
Over that same time period. Our per capita income fell from near the national average to about 10 percent below the national average. Despite the remarkable resurgence in the state’s auto industry, Michigan is in the bottom 20 in per capita income. So it’s clear, tax cuts may create more jobs, but certainly not better jobs.
Tax cuts force cuts in state spending. Michigan’s elected leaders have focused spending cuts on those two drivers of college attainment: Higher education and our cities.
Lawmakers have cut a collective $1 billion from universities and the hundreds of thousands of students they serve, forcing tuition increases (to avoid reduced quality) and slashed financial need-based scholarships, leading some prospective students to abandon their ambitions.
The state has cut more than $9 billion from 1999 levels in state support for cities. They are struggling to survive, let alone provide the high level of public safety and amenities (a robust public transit system, for example) that Amazon and young college graduates require when making location decisions.
The low-tax strategy has made Michigan more attractive to those with low-paying jobs. Amazon has located warehouse facilities here, full of $12 to $15 an hour jobs. But we don’t have what Amazon and other companies need for the good paying, knowledge economy jobs.
Tax cut fever continues to sweep Lansing. More cuts will mean a “better business climate,” in the old-fashioned way, perhaps winning relatively low-paying jobs that are easily automated. But those tax cuts will not create a “better talent climate” that wins high-paying jobs that benefit all residents.
The alarm is ringing. Will state leaders sleep through it, or wake up and start to invest to create, attract and retain the college graduates that attract high-paying jobs?
Daniel Gilmartin is executive director and CEO of the Michigan Municipal League. Daniel J. Hurley is CEO of Michigan Association of State Universities.