When $14 million is worth more than $1.3 billion
Two important recent announcements of auto industry investment in the U.S. One from Toyota that they are investing $1.3 billion dollars in updating their Georgetown Kentucky assembly plant. The other from General Motors that they are investing $14 million in a new research and development facility for its San Francisco-based self-driving technology company.
Seems like the Toyota investment is far more important to economic well being than the General Motors investment. Think again! As the New York Times reports, “the investment will not add jobs at Toyota’s plant in Georgetown, Ky.” On the other hand, the Detroit Free Press reports “General Motors said today it will add 1,100 jobs over the next five years and invest more than $14 million in a new research and development facility for its San Francisco-based self-driving technology company.”
Let’s be clear both investments are good news for the American economy. You want companies investing in plants and equipment here to stay globally competitive even if the investment doesn’t yield any new jobs or, in some cases, leads to replacing workers with machines. But what the American economy needs more than anything else is more good-paying jobs. And that is what the far smaller General Motors investment will yield. 1,100 new jobs––largely high-paid professional and managerial jobs.
There are two important lessons to learn about improving the economic well being of Americans from these two announcements. First the way to improve the economic well being of Americans is with more good-paying jobs. Other measures of economic progress––such, as in this case, the size of the investment in facilities––that don’t produce more good-paying jobs at best maintain, rather than improve, the well being of Americans.
The second lesson is that new good-paying jobs are going to be concentrated in knowledge-based services, not goods-producing industries like motor vehicle manufacturing. The places likely to get those new good-paying job are going to be places like metro San Fransisco that have large concentrations of college-educated workers.
Which reinforces the basic Michigan Future message: that the key to returning Michigan to high prosperity is preparing, retaining and attracting college-educated talent. It is the asset that matters most to high-wage employers. College-educated talent also are those most likely to start new high-wage businesses. (For those interested in learning more about the essential role of talent concentration to prosperity see our Michigan’s Transition to a Knowledge-Based Economy report.)