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Where private sector employers spend the most

To their credit both Governor Snyder and Business Leaders for Michigan have set high per capita income as one of the state’s economic goals. Far too many political and business leaders are fine with lots of low paying jobs as the goal.

I’m sure each would agree that the key to realizing that goal is increasing private sector employment earnings (both wages and employer paid benefits). The other categories of personal income are public sector employment earnings; interest, dividends and rent; and transfer payments. Michigan is 36th in private sector employment earnings per capita. Fifteen percent below the national average.

In our latest progress report for the first time we broke per capita income down into its component parts. The top 10 states in 2009 private sector employment earnings per capita are displayed in the table below.

State

Private Sector Employment Earnings Per Capita

% with four-year degrees or more

% of per capita income from government revenue

Connecticut

$33,201

35.6%

24.9%

Massachusetts

$33,100

38.2%

25.6%

New York

$29,640

32.4%

31.2%

New Jersey

$28,644

34.5%

26.1%

Colorado

$26,682

35.9%

23.5%

Minnesota

$26,668

34.9%

27.4%

Illinois

$26,353

30.6%

28.2%

Delaware

$26,012

28.7%

28.9%

New Hampshire

$25,682

32.0%

27.7%

California

$25,427

29.9%

30.8%

United States

$23,427

27.9%

31.2

Before we analyze the data, lets take cost of living off the table. Private sector employers don’t care about cost of living when they pay employees. They pay for productivity. If they can get the same work done cheaper in Bangladesh than Manhattan, the work is going to Bangladesh. End of story.

These are the states Michigan needs to model itself after if we want to achieve Governor Snyder’s and Business Leaders for Michigan’s goal of higher per capita income. They have an economy that everyone wants for Michigan: high income largely from the private sector, with a low reliance on government revenue (both public sector employment earnings and government transfer payments) for their personal income. They are not low cost/small government/right to work states that we are told over and over again are the model for Michigan. So if those are not the common characteristics of the states where private sector employers value state’s citizens the most, what is?

  • they are over-concentrated, compared with the nation, in the proportion of wages coming from knowledge-based sectors;
  • they have a high proportion of adults with a four-year degree
  • they have a big metropolitan area with even higher per capita income than the state; and
  • in that big metropolitan area, the largest city has a high proportion of its residents with a four-year degree or more.
What most distinguishes successful states from Michigan is their concentrations of talent, where talent is defined as a combination of knowledge, creativity, and entrepreneurship. Quite simply, in a flattening world where work can increasingly be done anyplace by anybody, the places with the greatest concentrations of talent win. That is the recipe for high per capita income and a broad middle class.
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