Michigan’s Transition to a Knowledge-Based Economy – Annual Progress Report

Michigan Future has completed the second annual report on Michigan’s transition to a knowledge-based economy and what we found is stunning – the trends we have written about in our previous reports have accelerated in the downturn.

From when the recession began in December 2007 through January 2009, low education attainment industries (primarily manufacturing,
construction, retail and hospitality) have suffered job losses of 3,735,000, while the high education attainment industries have added 163,000 jobs. (High education attainment industries didn’t peak until August 2008 and have since lost 247,000 jobs.)

What made Michigan prosperous in the past is no longer a path to prosperity. The
knowledge-based economy is now the path to prosperity for Michigan.

Click here for the Full Report
Click here for Executive Summary
Click here for Presentation
Click here for Appendix A
Click here for Appendix B

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Lou Glazer

Lou Glazer is President and co-founder of Michigan Future, Inc., a non-partisan, non-profit organization. Michigan Future’s mission is to be a source of new ideas on how Michigan can succeed as a world class community in a knowledge-driven economy. Its work is funded by Michigan foundations.

This Post Has 11 Comments

  1. The auto industry is a knowledge based industry. Manufacturing is knowledge based and requires knowledge for continuous improvement. Michigan’s auto industry has lost market share and as such has lost jobs as well. Labor unions have maintained inefficient manufacturing practices and non competitive wage demands. Your article does not address this.

    1. We use knowledge-based economy as a technical term, not as a value statement. We understand that manufacturing workers need higher skills than ever before. As you know from the report, we define the knowledge-based economy as those industries where at least thirty percent of employees have a four-year degree or more. We use it because it is predictive of those areas that are doing the best across the country. Knowledge-based industries had employment growth during the last national expansion twice the rest of the economy. And during the severe recession have held up much better. And the wages in the knowledge based economy are far higher.

      In terms of the auto industry, parts are in our knowledge-based economy (pre and post production), parts aren’t (mainly factory work). There is a chance that the knowledge parts (mainly engineering, design, research) of the motor vehicle industry will provide job growth in the future and it will be high paid. There is little chance that factory work in the motor vehicle industry will grow and it is now at best mid pay work. $28 an hour factory jobs are gone forever.

      We wish it were possible to go back to an economy with a broad middle class based on high paid factory work.But the world has changed and that economy is gone forever. Motor vehicles will continue to be an important part of the Michigan economy. And we should support it. But never again will it be an industry – nor more broadly manufacturing – to make us one of the most prosperous places on the planet. The only reliable path to prosperity is in the knowledge-based economy.

  2. Lou, your report makes brief mention of entrepreneurialism. I wonder what role you feel it plays in revitalization of the Michigan economy and, if important, what we could do to further stimulate more of it. Do we just focus on expanding the knowledge-based workforce and let entrpreneurs arise from that group? Or are there specific things we might do to encourage individuals to support the rise of new business start-ups?

    1. Dave, Good question. We argue that an entrepreneurial spirit is an essential ingredient of the culture of successful regions. This is starting business, but much more. The opposite of an entitlement mentality. Clearly this is an area where Michigan lags. We went from being the Silicon Valley at the turn of the last century, to one of the places where working for a big employer and getting a good wage became the norm. That has to change.

      What is less clear to me is how you develop this kind of culture. And more specifically how do you teach the desire and skill of starting businesses. Some of it is increasing the pool of talent – who tend to be more entrepreneurial. Where talent chooses to live and work, some will start businesses. That is particularly true for immigrants and Millennial college grads. So that is the reason for our emphasis on quality of place. Creating the amenities that will retain and attract talent.

      The Kauffman Foundation which is working with the New Economy Initiative in metro Detroit and Dan Gilbert’s Bizdom U are two efforts I know of in Michigan that are designed to prepare successful entrepreneurs. Both are worth checking out. And I’m sure there are lots of other initiatives around the state that are worth investigating. With all of them the question is are they successful in creating businesses and at what scale. My instinct continues to be to focus on quality of place. The pool of talent that results will create companies without new programs.

  3. Everyone should go to college? Well, maybe not… look over this iist of the “occupations with the largest job growth 2006-2016” (there’s 30 by the way) and notice in the far right hand column, how many require 4-year degrees… I think …you’ll come to the same conclusion I did… as a former educator, I can say we do our young people a disservice by not providing better data on the huge number of jobs available which require only on the job training. http://www.bls.gov/emp/emptab3.htm

  4. “A decline in tool use would seem to betoken a shift in our mode of inhabiting the world: more passive and more dependent. And indeed, there are fewer occasions for the kind of spiritedness that is called forth when we take things in hand for ourselves, whether to fix them or to make them. What ordinary people once made, they buy; and what they once fixed for themselves, they replace entirely or hire an expert to repair, whose expert fix often involves installing a pre-made replacement part.

    So perhaps the time is ripe for reconsideration of an ideal that has fallen out of favor: manual competence, and the stance it entails toward the built, material world. Neither as workers nor as consumers are we much called upon to exercise such competence, most of us anyway, and merely to recommend its cultivation is to risk the scorn of those who take themselves to be the most hard-headed: the hard-headed economist will point out the opportunity costs of making what can be bought, and the hard-headed educator will say that it is irresponsible to educate the young for the trades, which are somehow identified as the jobs of the past. But we might pause to consider just how hard-headed these presumptions are, and whether they don’t, on the contrary, issue from a peculiar sort of idealism, one that insistently steers young people toward the most ghostly kinds of work.”

  5. The parents in the state of Michigan need educational choice. And by choice I mean we need to be able to take our tax dollars to whatever school is the best fit for our child. Unfortunately, the labor unions have managed to keep it out…up to this point. I think now is the time to ask for school choice…leave out the term “voucher” since it seems to turn off too many people.

    1. Vouchers by any name aren’t going to happen in Michigan any time soon. It will take a vote of the people statewide to permit it. The two times it has been on the ballot it has been defeated by big margins. So we need to find other ways to give parents choices in choosing what schools their children attend.

      Michigan has a pretty good framework in place: charters and public school choice (kids can attend schools in districts other than the one they live in). But more can be done to open up the system and to better inform parents on how to shop for a good school. The state should work on both.

      We also have learned from a decade or so of choice that we also need a better accountability system. Not all shoppers for schools value high student achievement. So you end up with low quality schools that are financially successful, even though they are not providing a quality education. The formula we need to design going forward is one that provides parents with more choice, but also closes school with low student achievement, no matter how success they are in attracting students.

  6. I think that their is a reasonable chance that significant parts of manufacturing industries will evolve into knowledge-based high education industries. However this will not mean lots of highpaying jobs for inadequately educated factory workers. The way we will be able to compete in manufacturing is to become much more productive. There is a posibility that manufacturing will change just agriculture did a hundred or so years ago. America produces more agricultural goods than we ever have before. But agriculture employees far fewer workers than it did 100 years ago. The reason is that the knowledge-based part of the industry has enabled it to become much more productive. Many farmers have college degrees and MBAs. Farmers can trade agricultural futures and options with the best Wall Street traders. Highly scientific methods are routinely used in American agriculture. Sure, agriculture does still employ some workers without education, bur uneducated farm workers do not earn a living wage. Manufacturing will move in the same direction. Factories will become more productive. We may produce more goods than ever before, but to compete, our factories may be staffed with small numbers of highly educated workers who may be programming computers, overseeing robotic production machines, making engineering decisions. Relatively small numbers of highly educated workers may replace much larger numbers of less educated workers. This will not happen overnite, but will happen.

  7. Every survey I see rates University of Michigan as one of the top universities in the country, and Michigan State ranks pretty good too. In addition we have several highly regarded smaller colleges. With these institutions in our state, why is our rate of education still so low?

    1. Unfortunately having a terrific higher ed system–and we do–has little to do with how many Michiganians get four-year degrees. That is a function of how many kids who grow up here go to and get degrees from college and where they decide to live and work after college. That is why we argue that preparing, retaining and attracting talent is the state’s #1 economic growth priority. At the moment we are having trouble with all three.

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