Area Economy

Like it or not, Metro Detroit and GR are comparable

October 18, 2013
| By Lou Glazer |
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University of Michigan economist Don Grimes and I are working on our annual progress report on the Michigan economy. Every time I work on these reports, I am struck by how similar the seven-county Grand Rapids region (including Grand Rapids, Holland and Muskegon) is to the seven-county Detroit region.

Certainly that is not the conventional wisdom across the state, particularly in West Michigan. But when it comes to per capita income — the best measure of the economic well-being of a community’s residents — the similarities far outweigh the differences.

There are 54 regions in the country with populations of 1 million or more. Of those, Metro Detroit ranks 39th in per capita income and Metro Grand Rapids is 52nd.

From 2001-2011 — which is the latest available data — Metro Detroit ranked 50th and Metro Grand Rapids ranked 49th in change in per capita income.

The two characteristics that best predict per capita income are concentration in the knowledge-based sectors of the economy and, even more so, the proportion of adults with a four-year college degree or more. West Michigan is 54th in knowledge-based concentration and 42nd in college attainment. Metro Detroit ranked 35th and 37th.

Which metro regions are doing best? The 10 most prosperous metros in the country are:

  • San Jose/San Francisco
  • New York
  • Washington, D.C.
  • Boston
  • Hartford
  • Seattle
  • Philadelphia
  • Denver
  • Minneapolis
  • Houston

Chicago ranks 12th, while Pittsburgh and Milwaukee — both considered Rust Belt regions — rank 13th and 14th, respectively.

Basically, Metro Detroit and Metro Grand Rapids are facing the same deficits. In an economy where the most successful big metros are anchored in the growing and higher-wage knowledge-based sectors of the economy, Michigan’s two largest metros are lagging in the transition to a knowledge-based economy. Both have low college attainment rates and are under-concentrated in the high education attainment industries.

How prosperous Metro Detroit and Grand Rapids are matters not just to residents of the two regions but to all of Michigan. The pattern across the country — except for a few states with oil- and natural-gas-driven economies — is that the most prosperous states have a big metro that is even more prosperous. So metropolitan Detroit and, to a lesser degree, metropolitan Grand Rapids must be the main drivers of a prosperous Michigan.

Economies are regional. States and municipalities are political jurisdictions; they are not economic units. State economies can best be understood as the sum of their regional economies.

This is illustrated when you look at the wide variation in economic success of metropolitan areas within the same state (some that actually spill over into surrounding states).

As an example, of the regions with populations of 1 million or more, San Jose, Calif., has the highest per capita income. Another California city, Fresno, is last. Almost all states have some regions that are doing well economically and some that aren’t.

Regions within states also tend to have widely different industrial compositions, which is a major driver of economic well-being.

We focus on metropolitan areas of 1 million or more because this is where the knowledge-based economy and adults with a bachelor’s degree or more are concentrating. Many futurists expected the opposite. In a flat world where more and more work can be done anyplace, many predicted an economic resurgence in smaller metropolitan and even rural areas. The pattern is the opposite: Big metropolitan areas are where knowledge-based industries and college-educated adults have concentrated.

So it is hard to imagine a high-prosperity Michigan without an even higher-prosperity metropolitan Detroit and Grand Rapids. And it’s hard to imagine a prosperous Metro Detroit and Grand Rapids unless they make the transition to knowledge-based economies.

Lou Glazer is president of Michigan Future Inc.

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