Report: Michigan needs more entrepreneurs as it loses ground to other states

Michigan’s entrepreneurial economy continues to grow, “but with less ‘gusto’ than during the post-recession, and losing a bit more steam each year. (Shutterstock)

Michigan continues to grow businesses, but the pace isn’t fast enough to prevent it from losing ground to other states, according to an annual scorecard tracking the state’s climate for entrepreneurship released Tuesday.

 

In any other year, those results could provide policy direction for incremental gains. But amid COVID-19, the urgency to act on shortcomings in Michigan’s new-business economy is heightened, experts say.

“We really feel the mission of having a strong entrepreneurial economy has never been as important as it is right now," said Brian Calley, president of the Small Business Association of Michigan. “Pre-COVID-19, we really came a long way in creating a good, but not great, entrepreneurial environment.”

The 16th annual Entrepreneurship Score Card produced by the nonprofit Michigan Celebrates Small Business “gives good insight into our strengths and weaknesses as we look to rebuild,” Calley said.

The annual report normally is released in the spring, Calley said, but it took longer to complete due to the pandemic. There’s already a time lag due to the wait for final audited numbers for the reporting, he added, which means that coronavirus issues won’t be reflected in the scorecard for some time. 

Metrics used for the scorecard track performance in three key areas with more than 200 factors considered: 

  • Entrepreneurial climate, including factors that support the entrepreneurial economy, Michigan is ranked 22nd (down from 17th  last year).
  • Entrepreneurial change, measuring the direction and momentum of growth in the entrepreneurial economy, Michigan ranks 26th (down from 23rd last year).
  • Entrepreneurial vitality, comparing the level of entrepreneurial activity compared to other states, Michigan ranks 36th (down from 35th last year).

“While we have seen some progress in Michigan, we know that if you’re standing still, you’re falling behind and the risks of complacency have never been greater for entrepreneurs,” Calley said.

According to the report, Michigan’s entrepreneurial economy continues to grow, “but with less ‘gusto’ than during the post-recession 2009-13 period, and losing a bit more steam each year. 

“Michigan remained a top entrepreneurial performer among its Industrial Midwest neighbors, and near-term trend indicators for Michigan’s entrepreneurial economy were broadly positive, before these recent, unprecedented times. Even so, each year the relative pace of Michigan’s entrepreneurial economy overall continued to fall behind relative to more states nationally. “

Michigan ranks in the top 10 among states for physical science and engineering workers (1), workers’ compensation premium and business tax burden (2), home ownership rate and foreign business employment growth (3) and both patents per innovation work and industry research and development (4).

But low rankings still plague Michigan: access to next-generation internet (43); residents of prime working age (45);  manufacturing capital investment growth (46); unemployment insurance costs (47) and unemployment insurance tax structure (49). 

Education rankings also show weaknesses, Calley said.

Michigan students preparing for college perform well on the ACT standardized test (sixth compared to other states), but a glimpse into the SAT scores from all high school students in the state places the state at 39th. And the state ranks 42nd for public high school graduation rates.

The graduation rate and the age of Michigan’s workforce are “some real obstacles,” to future business growth, Calley said. “This tells me that our education system prepares students who are going to college exceptionally well. However, our students who are not going to college do a lot worse.”

That is one area where the report can influence public policy, Calley said. 

Michigan fell further behind than other states during the Great Recession, and started to work its way out of that, he said. Not utilizing young adults in an educated workforce — as older workers plan for retirement — could set the state backward in the next recovery, he said. 

“We can’t afford to lose any more ground there,” he said.  “Our demographics are very, very challenging right now.”

A look at five states that moved from the bottom to the Top 15 for entrepreneurial change shows more than one possible path for Michigan to take, instead of a single “silver bullet” solution.

Colorado, Maryland and Utah showed significant growth in workforce, education and productivity measurements. North Carolina and Tennessee grew more due to favorable cost and legal requirements, Calley said. 

“It could be feasible that either pathway could be pursued in Michigan,” Calley said.

A lot is about to change because of COVID-19, Calley said. One area will be the cost of unemployment insurance, which is in flux as the state — previously with among the highest reserves — continues to deplete those resources amid job losses.

The unemployment rate and number of people leaving the workforce also are moving targets amid the pandemic. 

At the time the report was compiled, year-over-year job growth showed it was subdued in late 2019, at about 0.4 percent. Forecasts from early in the year suggested that job growth this year could keep the state’s unemployment rate very low, averaging 3.7 percent. Instead, the most recent data from the Bureau of Labor Statistics put Michigan unemployment at 14.8 percent in June, the most recent month available. It had started the year at 3.8 percent in January.

All of the data gathered by SBAM can help fuel economic recovery, Calley said, as policymakers consider what steps are most important to righting the tilted economy. At the same time, the state is working on a series of grants to aid the state’s small businesses, which could in turn cultivate an encouraging environment for entrepreneurs in coming years. 

Unclear is how much will still change in the immediate future.

“It’s very difficult to get a sense of where we’re going to be [in regards to recovery],” said Gabe Erlich, economist at the University of Michigan. “Once the public health situation returns to normal, it’s clear that the economy is not going to return to normal immediately.”

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Comments

Anonymous
Tue, 08/11/2020 - 5:15pm

How does Calley manage to stay relevant?

middle of the mit
Tue, 08/11/2020 - 9:33pm

Does our former Lt Governor realize that business moves where employees want to be? Does he know that business moves to where employees are? Or does he think we can do what Kansas thought they could do........but...entered the Brownback debacle when they pursued that endevour?

When you attract talent to your area, you then attract business. Did Amazon vet any rural area run by Republicans? Or did they go to the filthy liberal cities where the talent and education is?

[[[“While we have seen some progress in Michigan, we know that if you’re standing still, you’re falling behind and the risks of complacency have never been greater for entrepreneurs,” Calley said.]]]

This IS Northern MI. And nothing is going to change that. It IS demographics. Sorry.

[[[Education rankings also show weaknesses, Calley said.]]]

But....but.......teachers don't teach our children.............until COVID happened. I am not old enough to not remember what you did when you enacted right to work!

I am also not too old to remember that George W Bush said that WE were entering a "service ecomony"!

I am sorry that the economy he imagined would require you to pay people a wage in America that allowed them to live in America where they are serving you. You obviously weren't a participant in said conversation, or didn't give your consent.

[[[Colorado, Maryland and Utah showed significant growth in workforce, education and productivity measurements. North Carolina and Tennessee grew more due to favorable cost and legal requirements, Calley said. ]]]]

Could you tell us what these States did that you and Gov One smart nerd didn't do?

Do we have to lower rules and regulations so that we end up with public works owners like......ohhh I don't know.......Boyce Hydro?

Tell us where your limits are, and then we can discern where Government needs to be.

Anonymous
Wed, 08/12/2020 - 2:20pm

Calley doesn't give a dam about regulations and pollution, until it personally affects his family, like getting special treatment for children with autism to help his child.

Anonymous
Thu, 08/13/2020 - 6:22am

What reality do you live in, businesses move where employee wants to be? What like China, India, Mexico those places? Businesses go where they think they can operate and make a profit . Then they hire people to work. Yes greed and the expense/difficultly of operating it in a particular state plays a part. Look at apple taking most of its production to China. Then selling there products to us for ?????. This is an uninformed comment.

Rationale
Wed, 08/12/2020 - 8:18am

Thanks to Whitmer, many hard working business owners are looking at other states, and we are one of them. Can't get away from democrats fast enough. Democrats are always bad for small businesses (and great for large corporations!)

All in for MI
Wed, 08/12/2020 - 1:10pm

Great. Goodbye. The sooner we can correct the drag created by the gop-gerrymandered legislature, the better.

Rationale
Thu, 08/13/2020 - 10:58am

Just to give you an idea of what you are supporting here:
Our business employs more than 30 people and between the company and our employees paid slightly more than one million dollars in taxes last year.
And you're saying good riddance to that tax money that pays for all of those things that your emotions care about.
Why do democrats always bite the hand that feeds them? Why do you distract with this non-issue of "gerrymanndering"? You need to stop letting polticians and the media think for you, and start doing it for yourself before it's too late.
No matter, though - We will gladly fund a state that appreciates it, and several of our key employees are very excited about the idea of moving with us ;)

Anonymous
Wed, 08/12/2020 - 2:21pm

Bye bye anonymous business seeking tax cuts and deregulation. Go mess with another state.

Anonymous
Thu, 08/13/2020 - 5:09am

Yeah, Rationale must be the business owner of the green ooze that the taxpayers can't afford to fully clean.

Nutty
Wed, 08/12/2020 - 10:34pm

What foolish comments that follow this guy's comment. Yeah, let's see all the businesses leave that haven't been destroyed, we don't need them!???? Those dirty greedy publicans trying earn money to live and enslaving people to work!???
Ugh, what a bunch of loons.

Separate Church...
Wed, 08/12/2020 - 2:25pm

Yep, that's what Calley did with the taxpayer money that was supposed to help small businesses survive. He gave millions of it to already rich churches, synagogues, and mosques that didn't need it.

Billupnorth
Thu, 08/13/2020 - 5:59pm

Of course Michigan is losing ground with small businesses. Property taxes on business property are burdensomely high, and local regulators forget they are public servants in their often overzealous interpretation of the rules. Labor costs and risks are very high. It is a difficult and expensive place to conduct business. Having owned two businesses here, and my wife having owned two others, we would never consider starting a fifth....in Michigan.