Michigan still has a long climb back to prosperity

Governor Rick Snyder’s Michigan Dashboard and the Business Leaders for Michigan’s Economic Competitiveness Benchmarking Report both look at a wide range of factors to measure progress in our state. I want to look at the two big ‘elephants in the room” – income and educational attainment.

We’re hurting in both respects. The climb back to prosperity is long and steep – and too many state residents still lack the muscles for the slog up the hill.

First, let’s look at the income trends of Michigan residents.

The first two charts below track personal income in 2000 and 2012. In both charts, I’ve placed Michigan in the middle, between the top five and bottom five states in the nation. In 2000, Michigan’s personal income of $39,200 ranked 19th, but slightly below the national average.

Figure 1. Ranking of States by 2000 Per Capita Personal Income (in $2012)

By 2012, Michigan had suffered a significant setback. The east coast, with the new oil-driven entry of North Dakota, took top honors, greatly extending their distance from Michigan. Michigan’s rank is now 37th and well below the national average. Michigan’s distance from the top 5 has more than doubled (a $16,580 gap) while its distance from the bottom 5 has been cut in half ($2,861 gap).

Figure 2. Ranking of States by 2012 Per Capita Personal Income (in $2012)

The next chart offers another glimpse of the change over the past decade or so. Michigan has experienced personal income increases in the last two years – that’s why the governor’s Dashboard currently gives a thumbs up on the measure of personal income. However, Michigan remains one of only three states that have lost ground on the personal income measure over the past dozen years.

Figure 3. Ranking of States by 2000 – 2012 Change in Per Capita Personal Income (in $2012)

Finally, here’s one more look at the income trends. Figure 4 looks at median household income rather than personal income since Michigan’s high-flying economy at the end of the 20th century. In 1999, Michigan ranked 16th in the nation in median household income. In 2012, we ranked 34th. The buying power of Michigan households shrank 24 percent over that 13-year period – a worst-in-the-nation status.

Figure 4. Ranking of States by 1999 – 2012 Change in Median Household Income (in $2012)

While we know that the Great Recession hit the manufacturing states hardest, particularly those with the least industry diversification, we also have become aware that income follows closely with educational attainment – another indicator followed closely by both the governor’s Dashboard and Business Leaders for Michigan.

One of the major points made by the BLM Economic Competitiveness Benchmarking Report is that “Michigan’s talent production is good, but college attainment is low.” It goes on to say that “Michigan’s colleges confer a large number of degrees and award more “critical skills” degrees than most peer states.” However, “The percentage of the population with an associate’s degree or above is lower than “Top Ten” states,” and “Michigan’s talent deficit can be attributed, in part, to low numbers of degreed individuals migrating to the state.”

Back in 2000, when Michigan’s rankings on income were relatively good, we ranked poorly - 36th – in our number of college graduates. That disconnect was clearly the result of high-paying manufacturing jobs, particularly in the auto industry, that had minimal education requirements. The Michigan story clearly flew in the face of the notion of education driving income. The fact that many Michigan adults, when surveyed, did not see college education as critical for their children should have served as a clarion call for intervention.

Figure 5. Ranking of States by Percent of Population with at Least a Bachelor’s Degree in 2012

The Great Recession’s impact on the manufacturing sector is clear. Overall employment took a huge hit and high wage/low education jobs disappeared. The return of the manufacturing sector, particularly automotive, has been marked by lower wage structures and increased requirements for education and technical skills. State government began to tout the importance of post-secondary education, but support for its public universities did not keep pace with states across the country. Many Michigan parents and students finally saw the writing on the wall but were faced with less than stellar public school systems and increasing college costs. Michigan’s college graduation rate rose from 23.9 to 27.7 percent between 2000 and 2012. We’ve moved up in the rankings, but only slightly, from 36th to 33rd place among the states.

While we are going in the right direction other states continue to outpace us - 31 states had a faster rate of college graduation growth than Michigan. I do need to mention that our community colleges continue to be one of our great strengths. In fact, Michigan ranks 17th in percentage of persons with an Associate’s degree (up slightly from 2000). It has been clearly demonstrated that a large share of the higher paying jobs of the future will require technical degrees. Our community colleges are working closely with employers to develop the programs that will meet their skill requirements.

Using a universe of persons 25 years and over for measuring college graduation rates is often thought to penalize Michigan, due to its large base of residents who arrived here with minimal levels of education and worked in the booming manufacturing sector during and after World War II. The other side of the coin is that, while our colleges and universities are educating large numbers of individuals, Michigan does not do a good job in retention or attraction of educated “youth.” One way of dealing with these issues is to look at a subset of the 25 years and over population – specifically those 25 to 34 years of age. This is the group that has heard the education message – they signify the presence of a “talent” message that states need to be sending to attract and grow employment. In addition, this is an important component of the entrepreneurial class.

Figure 6 allows us to look at how well Michigan is doing with this younger group of adults. Michigan ranks 31st, tied with South Dakota. We continue to be 11.0 percentage points behind the top 5.

Figure 6. Ranking of States by Percent of Population, 25-34 Years, with at Least a Bachelor’s Degree in 2012

While dashboards show Michigan increasing in the critical areas of educational attainment and income, we appear to be doing no more than treading water in the national context. While education has been identified as key to Michigan’s future, I am not sure that we are all rowing together in this boat. This should be Job 1, driven by a coordinated, all out statewide effort from birth to college graduation and beyond. While we keep saying the right things (Talking the Talk), we don’t appear to be quite ready for concerted action (Walking the Walk).

Finally, this effort must be grounded in equity. Michigan’s recent declines in income and buying power fell hardest on communities of color. African Americans saw their household income drop by 34.6 percent to just $27,986, while Latinos lost 30.1 percent of their buying power. Asian households fared best, followed by whites. This can be attributed to their higher levels of college completion and the higher average number of workers in their households.

Figure 7. Median Household Income by Race/Ethnicity of Householder, 1999 – 2012 (in $2012)

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Comments

David Waymire
Wed, 11/20/2013 - 9:47am
Let's put Indiana -- the state we are copying in policies right now -- and Minnesota -- the state in the Midwest with the lowest unemployment rate and the highest per capita incomes -- on these charts. You will see that if we keep following Indiana's prescriptions, we will get Indiana's results...low incomes, little talent, and we will still high unemployment rates.
Duane
Thu, 11/21/2013 - 12:10pm
David, It is more than just the public policies, it is the culture they are built on. Michigan's was built on others creativity and the culture became one of dependence espcially in the Detroit community, Minnesota is built more on individual responsibility/accountability, Indiana is spit between the two. Rather then trusting to the policies we need to look at the cultures locally and see what is working and work on changing those that aren't. As an example, education K-12 is driven by local culture in the neighborhood so how do we change it. My experience is we identify was the successful habits look like and develop those which will drive the culture to follow.
***
Wed, 11/20/2013 - 11:10am
What kind of sales pitch can you make to an educated young person to stay in Michigan and build their career here? Too often I hear stuff like we have the great lakes and many wonderful things to do outdoors but that just comes off some kind of a patronizing appeal to their upbringing or whatever you want to call it.
Duane
Thu, 11/21/2013 - 12:02pm
I have to agree that the 'sales pitch' is at best weak, it is the easy path taking less work trying to improve on an old message. Maybe we should look at the places in Michigan that do draw people from elsewhere and have vibrant communities, ask the people there why they are there. Rather than focus in Detroit why not go to Ann Arbor and ask what is there that draws people? If it is about education then go to districts that are seen as successful and ask why and how they are successful? Why don;t we start by looking for success in our state and figure why and how those successes happen and then try to replicate them elsewhere? Even as you downplay the Great Lakes those are a resource/a success (for the future) to build on whether it is drawing in businesses or individuals and their families. With that and other successes we implement then we create a whole new message.
***
Thu, 11/21/2013 - 2:33pm
There are pockets of success in Michigan but can they be replicated elsewhere in the state? Traverse City is one of the biggest draws on the Great Lakes but there is nothing really close to it for Lake Huron or Superior (well maybe Mackinaw Island). Ann Arbor probably has the best overall economy (the UM influence is a major factor), Grand Rapids economy is better than most of the state but has the good fortune of someone willing and able to pour millions into turning it around.
Duane
Thu, 11/21/2013 - 10:04pm
***, I agree with your examples, now we need to findout why. U/M is an influence in Ann Arbor, what is it? We have univeristies in other cities and how can they have a similar influence? IN Grand Rapids there are those who (not tax dollars) are investing in the community in ways that are building a base which should benefit GR now and in the future. Why are they and how are they selecting their investments? Why aren't we seeing that in other areas, why not Detroit, Lansing, Flint? We need to findout why. As for Traverse City, is it just the water or is there more to it? Could it have to do with they're have had to create it locally rather then rely on the creativity of others? The Detroit community has been living off those who created the auto industry so long do they know how to create something new? It comes back to why are people willing to invest in their community and risk themselves by creating something new?
Jon Blakey
Thu, 11/21/2013 - 9:50am
I am still waiting to see all the new jobs generated by the transfer of taxes from business to pensioners. And if education is so important, why has education funding fallen by 9% (inflation adjusted) over the last ten years or so?
Duane
Thu, 11/21/2013 - 12:13pm
Do you really think taxes are the only thing that drives business decisions? At best taxes are a reflection of the public/government attitude toward business. I choose to live where I am comfortable and even a little bit appreciated. I wonder where businesses choose to live.
***
Thu, 11/21/2013 - 2:47pm
I remember the hype coming out of Lansing about how tax reform in favor of business was going to turn the state around and lead to a lot of hiring (of course nobody was going to be pinned down to even a range on that). There probably has been some hiring related to tax reform but I doubt it was very much otherwise the politicians would be crowing about it.
Duane
Thu, 11/21/2013 - 7:54pm
***, Anytime someone is selling a 'silver bullet' that will cure a broad problem, they are selling to themselves and to those who aren't willing to invest themselves in working to solve the problem. In the case of businesses money is important because it is the life blood of for profit businesses (for non-profits/charities/governments). Taxes are only the most visible, cultural acceptance and support also have a dollar value. A good example is the lack of foreign car manufacturers in Michigan, back when Balnchard was governor and UAW was 'king' they came to look and were so put off they won't even take tax incentives to move here.
Pete
Thu, 11/21/2013 - 11:16am
It is nice to see a rare article here that presents some factual income info. w/o the ideological mess from the right. Look at the comments, however...Overwhelmingly on the liberal side. Your publication is still HEAVILY weighted to the far right and definitely polarized. Both sides of issues can be intelligently discussed. Show us you understand that if you are serious about the non-partisan label you give yourself. If you truly were, you wouldn't have to print it at the bottom of every article. e.g. Fox News: Fair and Balanced That has to have even them rolling in the aisles.
Duane
Thu, 11/21/2013 - 12:25pm
As best I can tell this data is decades in the making. It would seem it reflects the wants of the majority of the public a generation ago. That would suggest it is an indication of their desired success. At best this data can provide us with ideas about what can be achieved and even where we might go to see how they are achieving. The reality is we need to decide for ourselves what we want our data to be to achieve our desired success. We have a diverse state, why don't we look around in see what we see as desirable and use that to create a state model of success. We don;t need to make ourselves look like other states we can make ourselves into what we want, we could look everywhere their is success to learn how and why it can achieved. This data can be misused if we see it as a score card for who and what we are or it is seen as the purpose of all our efforts.
Charles Richards
Thu, 11/21/2013 - 12:51pm
Mr. Metzger says, " Michigan does not do a good job in retention or attraction of educated 'youth.' " Precisely. Unfortunately, he doesn't offer any insight into why, or how we should address the problem. I have read that from 35% to 50% of Michigan's college graduates leave the state. Why? Lack of suitable opportunities and a critical mass of similar people whose lifestyles they find attractive. Thus, if we had a lot of young, educated people with the appropriate culture, we could retain our college graduates and attract talented people from other states. Obviously, the possession of such a group of people and the ability to attract them to Michigan are mutually causative. One depends on the other. It is the classic chicken and egg problem. So, what does Mr. Metzger suggest we do? He says, " One way of dealing with these issues is to look at a subset of the 25 years and over population – specifically those 25 to 34 years of age. This is the group that has heard the education message – they signify the presence of a “talent” message that states need to be sending to attract and grow employment." But that doesn't address the problem. Will increasing the number of college graduates increase our retention rate? Why? The creation and evolution of a culture that is attractive to young, talented people is a phenomenon that occurs naturally in different locales. It is doubtful they can be created by government fiat.
***
Thu, 11/21/2013 - 2:03pm
Factory jobs in Michigan pay considerably less than they used to and with fewer benefits (this is not unique to Michigan of course) which means they have less money to spend and that effects the economy in this state. Too many high tech jobs in Michigan pay considerably less than other states with qualifications too high for the amount of money offered which is a major problem in attracting college grads to Michigan, why come here when you can make more money somewhere else? Michigan employers have got to stop being cheapskates in this area if they are serious about attracting people to these kinds of jobs.
Duane
Thu, 11/21/2013 - 8:01pm
***, It would help if you could give some idea of what you call high tech jobs. If it is something that is needed across the country then I would say pay would have to be competetive. My best guess engineers would be able to get competetive pay, similarly, programmers, and others that are limited to Michigan for demand. I would say that quality welders would be in demand in North Dakota so they would have to get comprable pay to stay here or the businesses will have to sacrifice customers to keep their payrolls low.
Matt
Thu, 11/21/2013 - 2:39pm
Correct me if Im wrong but it appears your stats completely leave out income vs. cost of living factor. And the areas we particularly struggle - gasoline and utilities - are results of very high total taxes and mandates! In general I don't believe we really sit that bad when cost of living is taken it. Second question I have for you Kurt, If we quadruple the number of college grads, and they are all or predominently are Art history, English, Social work, Poly Sci, Sports managment, Elementary Ed and various other softy bs degrees, do you really think it will be an improvement or just a bunch more unemployed millenials living in their parents basements? How do you make sure this doesn't happen?
Yooperine
Thu, 11/21/2013 - 7:57pm
It seems to work for Boston, Brooklyn, etc. etc. Maybe if the legislature spent less time obsessing about keeping its campaign donations secret, stigmatizing gays, and privatizing education, we could attract some smart people to stay here
Matt
Fri, 11/22/2013 - 11:43am
Well you as a yooper have to wonder why with all the kids busily getting their college degrees at your three major UP universities, why does the UP's economy continue to stink? If it only matters that you shove a bunch of kids into your colleges the UP should be an economic dynamo. Oh I forgot they don't treat gays nice enough, thats the problem!
Duane
Thu, 11/21/2013 - 8:12pm
I am surprised no one is questioning the value of those charts/data, Mr. Metzger interpratation of them, how to use them or what data is lacking. Mr. Metzger like to play on the clichés, 'walking the talk' and 'Job1', but he fails to understand what it means. Job1 implies that it is more important than anything else, it is a layer on everything else. All that means is it can be pushed off anytime it is convinient. 'walking the talk' about education only counts when you know what you are striving for (is success) and when you know how to get there (knowing what makes success happen). What I have found is that those who rely on clichés seldom understand where they want to go and what it takes to get their.