Guest Column

Employment earnings are engine of sustainable growth

September 18, 2015
| By Lou Glazer |
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We continue working on our next report: an assessment of the national, Michigan, Metro Detroit and Metro Grand Rapids economies in the fifth year of a national expansion.

We continue to believe per capita income is the best single measure of a state’s or region’s economic well being. In the report we focus on the portion of per capita income that comes from employment earnings (the sum of proprietors’ income, wages and employer-paid benefits minus social insurance taxes).

We do so because employment earnings are the predominant engine of long-term sustainable growth in the standard of living. Net employment earnings account for about two-thirds of per capita income. The other two components are interest, dividends and rents; and government transfer payments.

Employment earnings are what states and regions focus their economic development policy on — creating an environment for employers to provide jobs (more jobs), ideally with high wages and benefits (better jobs).

It is a metric that allows us to assess how well a state or region is doing in creating more and better jobs — Gov. Snyder’s economic development goal for Michigan.

So what are the top 10 regions in the country that are meeting the governor’s more and better jobs goal?

They are San Jose (Silicon Valley), San Francisco, Washington, Boston, Houston, New York, Seattle, Baltimore, Denver and Hartford.

How does a region make this top 10 list?

1. Over-concentrated, compared with the nation, in the proportion of wages coming from knowledge-based services (primarily education; health care and social services; finance and insurance; information; professional services; and management of companies).

2. A high proportion of adults with a four-year degree or more.

3. The central city has a high proportion of its residents with a four-year degree or more, particularly 25- to 34-year-olds.

With the exception of energy-driven Houston, all of the top 10 metro areas are high in college attainment and proportion of wages in knowledge-based services. Hartford is the exception to the national pattern of high college attainment for 25- to 34-year-olds in the central city anchoring high college attainment regions.

In the report, we use Minneapolis, Pittsburgh and Milwaukee as comparison regions beyond the top 10.

Minneapolis — the Great Lakes’ most prosperous region — ranks 11th in net employment earnings per capita. Pittsburgh (18th) and Milwaukee (21st) are models of regions that have moved from factory-based to increasingly knowledge-based and are reaping the benefits of that transition.

All three are high in college attainment and even higher in college attainment of 25- to 34-year-olds. All have a high proportion of wages from knowledge-based services. Minneapolis, St. Paul and Pittsburgh are cities with very high 25- to 34-year-olds college attainment rates.

These are the kind of places that Metro Grand Rapid should want to be: the kind of place with lots of jobs that pay well; the kind of place that has a broad middle class.

How is Metro Grand Rapids (Barry, Kent, Montcalm and Ottawa counties) faring?

Out of 52 regions with populations of one million or more, Metro Grand Rapids is 48th in net employment earnings per capita, 52nd in proportion of wages from high education industries and 34th in the proportion of adults with a four-year degree.

It’s worth noting that Metro Grand Rapids is a better 27th in the proportion of 25- to 34-year-olds with a four-year degree or more. The improvement is led by the growing concentration of young professionals living in the city.

But, that said, it’s clear this is not time for celebration. The region and state have a long way to go to achieve high prosperity.

 Lou Glazer is president of Michigan Future Inc. 

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