Hillegonds Talent top growth key

February 18, 2011
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Michigan’s public sector fiscal woes are only one symptom of the state’s inability to keep pace in creating “dynamic, high-wage sectors of the knowledge economy.”

That was the message delivered by Paul Hillegonds, senior vice president of corporate affairs for DTE Energy, in a lecture at Grand Valley State University last week — coincidentally on the eve of Gov. Rick Snyder’s introduction of his state budget proposal.

Hillegonds, a former GVSU trustee and a member of the state House of Representatives from 1979-96 — serving as House speaker from 1995-96 — drew heavily from his work with Michigan Future Inc. in assessing Michigan’s next 50 years.

While stressing he “is not discounting the contributions of our manufacturing sector,” he maintained that “the days when Michigan’s economy was dominated by high-wage, low-skill manufacturing jobs are ending.”

“The history of the region and our state has been all about people with vision, who innovate and take risks and build on assets,” he told the audience at GVSU’s Loosemore Auditorium at the Richard M. DeVos Center. “And our 50-year future will depend on today’s and tomorrow’s visionaries, innovators and risk takers.”

The presentation was the second lecture of a three-part Distinguished Academic Lecture Series marking GVSU’s 50th anniversary.

Hillegonds pointed to a report compiled by the nonprofit group Michigan Future, entitled “A New Agenda for a New Michigan.”

“What prompted it was and is our economic reality: a decade-long downturn that reflects structural, not cyclical change,” he said. “In other words, many of the 435,000 high-wage, low-skill manufacturing jobs lost in Michigan since the year 2000 have been eliminated or exported elsewhere and will not return.”

Hillegonds said the key question driving the Michigan Future study, found at michiganfuture.org, was: “What really matters as we work to position Michigan and its regions for success in a knowledge-based, global economy.”

The study’s premise, Hillegonds said, was that, “In a world where technology and globalization are driving fundamental structural change in the U.S. economy, Michigan’s slower job growth has not been caused by the loss of manufacturing jobs. The entire country is losing work done in factories. Michigan is lagging the nation because of our slow growth in the dynamic, high-wage sectors of the knowledge economy.”

He emphasized the “challenges are not a Detroit only problem.” In 2008, of the 55 U.S. metro areas with populations of one million or more, Detroit ranked 33rd in knowledge-based industries concentration, 36th in per capita income and 37th in college attainment. Metro Grand Rapids lagged even more, ranking 54th in knowledge-based industries concentration, 53rd in per capita income and 45th in college attainment.

Michigan Future identified six priorities it believes will expand Michigan’s talent base and, therefore, the vitality of the state’s regions. They focus on the preparation, retention and attraction of talent. They are:

**Build a Michigan culture aligned with the flat world. “In an age when economic growth is driven by knowledge and innovation, the most prosperous regions are those that highly value learning, an entrepreneurial spirit and being welcoming to all,” Hillegonds noted.

The evidence, he said, is that “Michigan is having trouble with all three. One measure of learning is our ranking of 34th of 50 states in the percentage of adults with a four-year degree. It is true that one of our state assets is the presence of more engineers per capita than anywhere else in the U.S. But over the past 15 years, Michigan has been one of the leading exporters of college-educated young adults.

**Empower new leadership. “Transforming Michigan’s culture will occur more rapidly if we invite into our regional leadership structures those who represent the change we are trying to achieve: the young, well-educated and entrepreneurial,” Hillegonds said.

“We need to seek the inclusion of new and younger leadership in quality of life and regional economic development initiatives — particularly entrepreneurs and those who are working in knowledge-based enterprises  that compete nationally and internationally for talent, those who know firsthand what we must do better as regions to attract talent.

**Align K-12 education with a knowledge-driven economy. “As a nation, we have expended so much effort to improve schools over the past decade,” Hillegonds said. “But no clear set of reforms with a high probability of success has emerged. Yet, if we are ever going to narrow the gap between rich and poor, between educated and uneducated families, we must insist on accessible, quality pre-K-12 schools throughout our regions.

Hillegonds said the Michigan Future report concluded that reform efforts must include the process of educating and rewarding educators. “We need to attract, develop and reward with merit pay teachers and administrators who have a passion for preparing students for the flat world, who instill in children a love of learning and the ability to be curious, adaptable lifelong learners.”

**Invest in higher education first and foremost. “There’s an almost perfect correlation between the number of jobs in a region and the strength of universities.

“Unfortunately, after decades of building a world-class (education) system, more recently Michigan has been under-investing in our universities and community colleges,” Hillegonds said. “Over the past 10 years, state funding for higher education has been cut by 27 percent. Michigan is now 42nd among the 50 states in per capita support, reflecting the fact that higher education has been a less important state priority than prisons and tax cuts.”

The Michigan Future report calls for “a restoration of our commitment to higher education institutions, but in a manner that reflects the number of students enrolled at each university and the research funds they attract.”

Hillegonds said Michigan universities bring in more than $1.5 billion of federal research dollars annually and employ thousands of knowledge workers

**Support export-based business investment. “Higher education graduates will not stay in Michigan if job opportunities are not available,” Hillegonds said. “To grow businesses that export goods and services to consumers from other states and the rest of the world, our report recommends a state business tax structure with a broad base and low rate. As Gov. Snyder describes the strategy, let’s focus on gardening — nurturing the businesses that are expanding here in our state rather than emphasize hunting, or trying to woo out-of-state businesses to Michigan by throwing expensive incentive packages at them.”

**Build regions that are attractive places to live. Hillegonds referred to author Richard Florida’s book, “The Rise of the Creative Class.” “In it, he credibly advances the theory that young professional, new economy workers seek first urban centers that are alive with diversity, culture and other quality of life amenities — and that knowledge businesses seek the places where talent settles.”

Hillegonds believes that is why business groups like Detroit Renaissance in Detroit, for which he served as its former president, Grand Action in Grand Rapids, and the West Michigan Strategic Alliance “have been so focused on school reform, loft housing, transit, arts and cultural amenities, attractive public gathering places and the commercial businesses that follow in our core cities. It is also why we need a renewed federal and state commitment to urban policy strategies designed to create more livable, sustainable cities.”

Hillegonds said achievement of the outlined priorities is hinged to the role of taxes and a public investment strategy.  “If we cannot legislate needed change from an entitlement culture to a learning, entrepreneurial, welcoming culture, neither can we simply tax-cut our path to prosperity. In the past dozen years, state and local taxes have been reduced by what is now over $6 billion annually, moving Michigan to a tax burden below the national average.

“Michigan Future’s analysis of extensive tax and economic data found that the most successful states are not characterized by low taxes,” Hillegonds reported. “If anything, they tend to be more high-tax states than low. On the other hand, states with the lowest taxes tend to have lower per capita incomes, lower concentrations in knowledge-based enterprises and lower proportions of adults with four-year degrees or more. Again, as Bill Gates said in a presentation to state legislators: ‘The industries that I think about the most, information technology and biological industries … are more sensitive to the quality of talent in a location than they are to the tax policies.’

“I believe that the successful reinvention of Michigan regions will depend not only on our personal values and innovative private and nonprofit sectors, but on public policy and the community investments we make.”

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