As we explored in my last post the American economy over the last two decades has transitioned from a factory-based to a knowledge-based economy. Manufacturing employment declined by 32 percent and employment earnings per capita fell by 29 percent. While knowledge-based services saw employment growth of 32 percent and employment earning growth per capita of 53 percent. In 2011 manufacturing was 7 percent of the American workforce, knowledge based services 26 percent. The gap is even greater for private employment earnings per capita: knowledge-based services share is 42 percent, compared to 16 percent for manufacturing.
So how has Michigan fared? Michigan manufacturing employment fell by 318,000 from 1990-2011. A decline of 37 percent, compared to 32 percent nationally. Manufacturing’s share of Michigan jobs fell from 18 to 10 percent. Nationally the fall was from 13 to 7 percent. Knowledge-based services (health care and social assistance; information; finance and insurance; professional services; and management of companies) saw Michigan employment growth of 314,000. An increase of 30 percent compared to 32 percent nationally. Knowledge-based services share of Michigan jobs grew from 22 to 26 percent, nearly identical the nation’s. When it comes to changes in employment by sector over the last two decades Michigan follows the national trends quite closely: big losses in manufacturing and big gains in knowledge-based services.
When it comes to private sector employment earnings per capita corrected for inflation you see more dramatically why Michigan is now lagging the nation on most economic well being metrics. As you can see in the table below, Michigan’s private sector employment earnings per capita were on par with the nation in 1990. We had a substantial competitive edge in manufacturing balanced by an under performance in all the other sectors.
But from 1990 to 2011 Michigan only grew by $982 compared to $4,259 for the nation. Almost all the under performance occurred in the two sectors we have focused on. Michigan’s real employment earnings per capita decline in manufacturing was $1,016 greater than the nation’s. And our real employment earnings per capita increase in knowledge-based services was $1,550 less than the nation’s. The two sectors account for 78% percent of Michigan’s two decade under performance in real employment earnings per capita change compared to the country.
It is almost certain that –– predominantly because of globalization and technology –– that the path back to a prosperous Michigan –– a place with a broad middle class –– depends on growth in knowledge-based services. Those sectors are now and are likely to be even more so in the future the core of realizing the more and better jobs Governor Snyder has identified as the state ‘s economic goal. Knowledge-based services now are the center of mass middle class American jobs due to a combination of strong job growth and those sectors are now the high wage sectors of the American economy.