Michigan metros don’t stack up
Michigan’s two big metros not being selected as a finalist for the Amazon’s HQ2 should not surprise anyone. Amazon made clear that it wanted — really needed — to locate in a community with high talent concentrations today and tomorrow. Neither metro Detroit nor metro Grand Rapids is a competitive talent magnet.
The reality is that in the growing high-wage knowledge-based sectors of the global economy talent, those with a four-year degree or more is the asset that matters most and is in the shortest supply. This reality has been clear for more than a decade.
In 2006, Michigan Future, Inc. — the think tank I lead — published “A New Agenda for a New Michigan.” It was clear to us then if Michigan did not change fundamentally, we would not be competitive in attracting and growing the high-wage jobs that are the key to prosperity. We wrote: “So in a flat world, economic development priority 1 is to prepare, retain and attract talent. Our agenda to help better position Michigan and its regions to succeed in a knowledge-driven economy is centered on (1) developing a culture and (2) making key public investments that are aimed at preparing, retaining and attracting talent.”
This was the right approach to creating a high-prosperity Michigan in 2006. It is the right approach to creating a high-prosperity Michigan in 2018. Unfortunately, by and large, we have not acted on those recommendations and our conclusion would be the same today: Unless we change course, we are going to be one the nation’s poorest states.
At both the state and regional levels, Michigan’s policymakers, by and large, supported by the business community have chosen to ignore this reality. Rather, they have focused on trying to revive Michigan’s 20th-century economy and sectors largely through lowering taxes and organizing an education system to prepare most Michigan kids — but not theirs — to work in the declining factory-based economy rather than the growing knowledge-based economy.
So, it shouldn’t be a surprise that when looking most for concentrated talent, Amazon looked elsewhere. Only Miami of the 20 regions on the finalist list has a lower proportion of adults with a four-year degree or more than Michigan’s two big metros.
Amazon HQ2 has been described as the “Super Bowl of economic development competitions.” Fifty thousand high-paying jobs in one location basically is never on the table. But not making the top 20 list has consequences far beyond Amazon. Because it means Michigan’s two big metros are not in the top tier of competitors for all knowledge-based enterprise growth. And this is the only part of the American economy that is both growing and high wage.
Joe Cortright of Impresa, Inc. has been researching for decades the common characteristics of prosperous metropolitan areas. He has found the single best predictor of regional prosperity is the proportion of adults with a four-year degree or more.
He recently updated the data. He writes: “The data presented here imply that a 1 percentage point increase in the four-year college attainment rate is associated with about a $1,250 per year increase in average incomes in a metropolitan area, an increment we refer to as the Talent Dividend. … Over time, the strength of this relationship, and the size of the talent dividend effect has been increasing.”
The most prosperous region in the Great Lakes is Minneapolis. Its college attainment rate is 40.5 percent with a per capita income of $56,723. By contrast, metro Grand Rapids has a college attainment rate of 31.7 percent and a per capita income of $46,519. Metro Detroit has a college attainment rate of 30.4 percent and a per capita income of $48,692.
Cortright describes the bottom line this way:
“… The most important thing you need to know about urban economic development in the 21st century: if you want a successful economy, you have to have a talented population. Cities with low levels of educational attainment will find it difficult to enjoy higher incomes; cities with higher levels of educational attainment can expect greater prosperity. As Ed Glaeser succinctly puts it: ‘At the local level fundamentally, the most important economic development strategy is to attract and train smart people.’ And critically, because smart people are the most mobile, building the kind of city that people want to live in is a key for anchoring talent in place. And, importantly, the economic research shows that the benefits of higher educational attainment don’t just accrue to those with a better education: people with modest education levels have higher incomes and lower unemployment rates if they live in metro areas with higher average levels of education.”
Exactly! No, Michigan does not have too many residents with a B.A. No, metro Detroit does not have too many residents with a B.A. No, metro Grand Rapids does not have too many residents with a B.A. The exact opposite is the case. The state and its two biggest regions need to get more college educated to be high prosperity. End of story!
Lou Glazer is president of Michigan Future Inc.