Michigan’s demographic challenge
We close our presentations with “either Michigan gets younger and better educated or we will get poorer”. Both matter and for both the trends are not good.
Many of these posts are about the necessity of getting better educated. Michigan is 34th in the proportion of adults with a four year degree. In an increasingly knowledge-driven economy our low college attainment rate is a––probably the––major barrier to recreating a high prosperity Michigan.
In this post I want to deal with the getting younger challenge. It may be equally important to the future success of the Michigan economy. Michigan is one of the fastest aging states in the country. There is a real possibility that we are moving into an era of labor shortages. And that a smaller labor force will constrain businesses ability to expand here.
Don Grimes and George Fulton of the University of Michigan’s Institute for Research on Labor, Employment, and the Economy have done a must read economic and demographic projection through 2040 for the state as well as each county for the Michigan Department of Transportation. They also have written a similar 2040 projection for metro Detroit for SEMCOG. They both are worth checking out.
Aging is a national challenge. As they write: “The share of the population aged 65 and older is set to increase from 13 percent in 2010 to 19.6 percent in 2040. To put this in perspective, people 65 and older currently account for 17.3 percent of the population in Florida, the state known for its concentration of retirees.”
But it is an even bigger challenge here in Michigan. Grimes and Fulton write: “Michigan currently has a disproportionately large share of baby boomers. This cohort is about to move into senior citizen status. Along with the expected continuation of net out-migration of residents until the 2030s, this means that Michigan will age much more dramatically than the nation as a whole. By 2040, 23.3 percent of Michigan’s population will be 65 or older, compared with 19.6 percent nationwide.”
The biggest impact on the Michigan economy likely will come in the projected decline in the proportion of Michiganders in their prime working age––25-64 year old. From 52.6% in 2010 to 47.2%. Which as Grimes and Fulton point out imposes speed limits on Michigan employment in the long run.
Employers need workers to expand. Too small a labor force and employers will face an inability to find the workers they need. Add to that the increasing demand for college educated workers in a state with low college attainment, and it is quite likely that in the future Michigan employers will face labor shortages. Ultimately they will expand elsewhere, to where the workers are.
And as they note that speed limit would be even greater if it weren’t for immigration. Anyone who thinks immigration is bad for the Michigan economy should think again. They write: “The natural increase slows dramatically and consistently over the next three decades as the population ages, shrinking from 414,000 in the 2000–10 period to a mere 21,000 over the decade of the 2030s. Net domestic migration remains negative from 2010 to 2040, but at a slowing rate over the decades. Net international migration continues to show moderate growth over the forecast period, with some pickup in the post-2020 period. Without international migration, Michigan’s population would be shrinking at an accelerating pace over the next thirty years, which would lead to a weaker employment profile as well.”