Getting Poorer Quick

In each of our annual progress reports Don Grimes and I have predicted that Michigan’s per capita income would fall to the mid thirties because per capita income is increasingly correlated with a state’s ranking in college attainment. Michigan is 34th in the proportion of adults with a four year degree. We first made the prediction when the state was still in the mid twenties in per capita income.

Our prediction turned out to be right real quick. In 2009 we fell to 37th. If that isn’t bad enough we are now almost 19% below the national average. By far are our worst since the feds started keeping statistics in 1929. That’s right: we are at our low compared to the nation since the Great Depression. In 2000 we were 18th in per capita income about 4% below the national average. In nine years 19 states passed us and compared to the country we are 15% poorer. An unprecedented collapse!

When we made our prediction hardly anyone believed us. In essence they asked: “what does college attainment have to do with income?” Their belief: it didn’t matter in the 20th Century when we were one of the most prosperous places on the planet, no way is it predictive now. They hadn’t learned the lesson then – and most still haven’t – that what made us prosperous in the past, won’t in the future. There is no turning the clock back to the mass middle class Michigan invented, anchored by high wage, low education attainment jobs. Those jobs are gone forever.

The middle class jobs of today and tomorrow are overwhelmingly knowledge-based. That is because the growing and high wage part of the American economy is in knowledge-based sectors. And the asset that matters most and is in shortest supply to knowledge-based employers is talent. We end each of our presentations with the line: Either we get younger and better educated or we get poorer. So far we aren’t making progress on either. So we are getting poorer compared to the nation.

If we are right the challenge for Michigan is that we have little room to go up as long as our college attainment is in the mid thirties. Quite simply as long as we are a low education attainment state we are going to be a low income state. One of the poorest in the country. We can do something about it. But that something requires aligning with – rather than resisting – the irreversible transition to a knowledge-based economy.

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