Business Leaders for Michigan says state lagging in economic growth

Breana Noble
The Detroit News

Michigan's leaders need to put aside political differences to create a consistent economic development strategy as the state is projected to fall further behind others in economic growth, according to Business Leaders for Michigan.

The state's business roundtable on Thursday shared its annual benchmarking, which placed Michigan at 29th in economic growth of the 50 states after some revamped metrics that now include more measurements from education attainment to business climate perception to poverty.

The ranking is improvement from the Great Recession, but that standing could worsen in the coming years if the organization's projections are true. The gap in Michigan's economy compared with the nation's when indexed to 2008 levels widened 22% during the pandemic since 2019. The difference could increase another 73% by 2030, leaving the Great Lakes State further behind.

Jeff Donofrio, CEO of the Michigan Business Roundtable

"There needs to be a certainty and a consistency to how we approach economic development," Jeff Donofrio, the roundtable's CEO, told The Detroit News. "Many times not just n economic development, but particularly in economic development, our strategy seems to pivot every time an officeholder changes hands, so a new governor comes or new legislature.

"Sometimes we put things in place, and there's a big ribbon cutting or press release or splashy event, and then a couple years down the road, we pull funding from it."

The goal is to be a top 10 state. That group currently includes Utah, Washington, Colorado, Texas, Massachusetts, Virginia, California, Oregon, Florida and Arizona. All have strong showings in economic growth, education and talent.

The forecast comes as a critical time, especially for the state's automotive industry that is undergoing a historic transformation to electric vehicles with billions of dollars in investment and thousands of jobs at stake. Michigan is underperforming for battery plants with just two of 12 announced in North America and another six whose locations are pending, according to the roundtable. The state has roughly a quarter of U.S. internal combustion engine-related jobs, and EVs have fewer parts.

By 2025, 43% of Michigan's 14 assembly plants — that's six plants total — will produce EVs compared with 37% nationwide, according to the analysis. Almost 170,000 of 290,000 automotive jobs are potentially affected by the move from ICEs, including 46,110 directly touched across 310 companies.

General Motors Co. is looking to manufacture batteries on the property of its Lansing Delta Township plant, and LG Energy Solution plans to invest in its battery plant in Holland. Meanwhile, Ford Motor Co. last year announced an $11.4 billion investment to manufacture EVs and batteries in Tennessee and Kentucky, which created a public spat with Gov. Gretchen Whitmer. But the state of Tennessee was working for 20 years to ready the massive site Ford chose for investment.

"Let's look at Tennessee," Donofrio said, noting the state rose to 16th from 34th in the benchmark analysis over the past five years. "They have been persistent, but they've also had single-party control of the governor and the legislature, which makes it a little bit easier, right? They're not constantly battling with each other in every two-year cycle or so.

"We've got to put aside our political differences and do more of what we saw in December," Donofrio said, referring to the bipartisan effort in the state to pass $1.5 billion for economic development.

Also contributing to potential economic loss is the "Michigan talent crisis," according to the roundtable. Michigan is aging and could lose almost 120,000 working-age people between 2020 and 2030. The state also lost a greater percentage in workforce participation than the nation amid the pandemic — close to wiping away the gains it had made since the Great Recession.

"We're 41st in the nation around labor force participation," Donofrio said. "Our growth rate is 44th, so it means that we're going to struggle to maintain our position, not just grow."

Also a headwind for Michigan was innovation with respect to the number of entrepreneurs and startups here and their survival rate.

More positive was educational attainment, whose growth has kept pace with top 10 states. The state's three-year growth rate in the percentage of residents with a higher education degree or certification is the 20th fastest while Michigan is ranked 35th in the nation currently; state programs like Reconnect or Going Pro are meant to get the 1 million residents who don't have a degree to complete one at no cost at a community college or to get workers updated skills and certifications.

K-12 test scores, however, dropped 8% year-over-year, and that's likely with inflated results because not all districts were required to take the exams during the pandemic-struck 2020-21 school year, according to Business Leaders for Michigan.

The Wolverine State has the opportunity to invest for improved long-term results, Donofrio said. Top 10 states spend about $2,000 more per pupil than Michigan does. With available COVID-19 relief funds, Michigan has the opportunity to use that money to consolidate administrative and duplicate departments at school districts, install air conditioning in buildings to offer after-school and summer programs, and train teachers.

"If we come together, if we do more things like we did in December around economic development, that we've done around putting in places to reconnect and the Going Pro program, if we double down on those things, if we are persistent in a strategy toward helping us become a top 10 state, these investments that the legislature can make in the coming months," Donofrio said, "will help put us on that path that will help us leapfrog other states and really accelerate our growth."

Twitter: @BreanaCNoble