I started a presentation at the West Michigan Policy Forum with a thought experiment. Which of two state economies would you prefer for Michigan? State A per capita income $43,000, unemployment rate of 6.8%, poverty rate of 9.6% or State B per capita income $34,000, unemployment rate of 9.7%, poverty rate of 15.7%? Pretty easy. But now add that State A is a reasonably high tax state and not right to work and State B is the lowest tax state in the country and a right to work state. Change your mind? What matters? Far better economic results or the “right ” policy regime?
State A is Minnesota and state B is Alabama. Far too many – of all political persuasions – start with a preconceived agenda of policies that make a strong economy. And never test their assumptions against the reality. Or worse don’t care about the results as long as the polices are aligned with their ideology.
Its not the way we develop our recommendations. We start with “if we could choose, what kind of Michigan economy would we want?” And then identify the states that come closest to that outcome and see what are their common characteristics. To us the answer to both questions in the thought experiment is a no brainer. Michigan should want to be more like Minnesota and less like Alabama. No matter what the policy regime!
Minnesota and Alabama are not outliers. Their experience is the basic pattern. Higher tax states and non right to work states more times than not have higher income than lower tax and right to work states. But more importantly, the basic pattern is that prosperous states have a high proportion of their residents with a four year degree. Minnesota ranks 10th, Alabama 45th. In an increasingly knowledge-based economy, it’s human capital that is driving state economic results.
Michigan’s fundamental problem is that we are 34th in college attainment. Almost end of story. So we are 36th in per capita income. And unlikely to go up much unless we get better educated. If you look at the facts first the policies we should be focused on are preparing, retaining and attracting talent. That is the new path to prosperity.