This post is about what good-paying jobs focused economic development should look like. About what it takes to grow, retain and attract high-wage jobs. It draws lessons Michigan can learn about winning in the 21st Century from our posts on Austin, Denver and Northern Virginia.
Clearly economic development is just one component of state and regional economic policy and programming. It, almost certainly, is less important to economic well being than the quality of the human capital development system from birth through college. Having said that the design of economic development programming matters. So let’s look at, as Virginia puts it, what “a new model of economic development for the 21st century” should look like.
Winning in the 21st Century Lesson 1: The primary goal of economic policy should be rising income for all Michiganders. In Michigan’s strong pre-pandemic economy 43 percent of households––most with a working adult––could not pay for basic necessities. When more than four in ten Michigan families are not succeeding, our state is not succeeding.
Winning in the 21st Century Lesson 2: First and foremost Michigan needs to learn that place attracts talent and that talent=economic growth. So that placemaking––creating a place where people want to live and work––is key to economic well being.
In Triumph of the City Harvard’s Edward Glaeser writes: “The bottom-up nature of urban innovation suggests that the best economic development strategy may be to attract smart people and get out of their way.”
Attracting smart people and getting out of their way isn’t the way Michigan and its regions do economic development today. The focus, almost exclusively, is on attracting business investment through some combination of being a low-cost place, providing investment-specific incentives, and business assistance programming.
And yet the evidence is on Glaeser’s side. The fact is that the single best predictor of regional and state prosperity is the proportion of adults with a four-year degree or more. Concentrated talent is what attracts high-wage employers. Talent is also entrepreneurial, so where it is concentrated are the places with the most high-wage business start-ups. The new economic reality is that the path to prosperity for states and regions is human-capital driven. That the asset that matters most to employers––particularly high-wage employers––is talent.
Winning in the 21st Century Lesson 3: The core of being an economic development competitive state and region is a region’s human capital based assets, not what is included in the offer for a specific business investment opportunity.
Northern Virginia’s winning Amazon HQ2 proposal offered cash incentives up to $800 million. Far less than the reported $2 billion offered by metro Grand Rapids and a reported $4 billion offered by metro Detroit, including Windsor.
What they did offer Amazon, which matters far more to high-wage employers, is a region with talent concentration; being welcoming to all, and a quality of place that is an attractive place for talent to live and work. Working on creating these characteristics, on an ongoing basis, is what matters most to growing, retaining and attracting good-paying jobs.
Winning in the 21st Century Lesson 4: Winning in the 21st century is public-investment led. Creating places where people want to live and work is driven by quality basic services, infrastructure and amenities.
Randy Thelen the new President and CEO of the Right Place, metro Grand Rapids’ economic development agency, understands the essential role placemaking plays in winning in the 21st Century. Thelen comes to the Right Place from the Downtown Denver Partnership. In a MiBiz interview he describes Denver’s success this way:
During previous recessions, Thelen said Denver “doubled down, invested in itself,” which allowed it to “accelerate out of recession and bypass that competition.” He’s leaving a “hyper growth market” in the Mile High City that’s attracted investments particularly from large tech firms such as Google, Twitter and Facebook.
“Virtually any tech company you can imagine has put up a sizable outpost in Denver,” Thelen said. “It’s a healthy reminder that the product of a region matters, and talent and placemaking drives business decisions.
Thelen’s “doubled down, invested in itself” is as true in Austin and Northern Virginia as it is in Denver. Yes, those public investments must be paid for which inevitably means higher taxes. But those taxes pay for services and amenities that are both important to improving the quality of life of current residents and are a vital to future economic growth, particularly growth of high-wage jobs.
Winning in the 21st Century Lesson 5: Welcoming to all is a core characteristic of high-prosperity regions. That is because talent is both diverse and mobile. If a place is not welcoming, it cannot retain and attract talent. People will not live and work in a community that isn’t welcoming. That means providing everyone with basic civil rights and treats everyone the same no matter where they are born, their sexual orientation, race, religion or ethnic background.
For Michigan and its regions to be competitive with leading-edge communities like Austin, Denver and Northern Virginia Michigan needs to completely redesign its economic development strategy and practice. What we think of as state and regional economic development now is the icing on the cake, not the foundation of building a high-wage economy. If Michigan is going to be competitive in retaining, attracting and creating high-paid 21st Century jobs it is going to require making public investments in creating places where talent wants to live and work. The economic policy priority for a high-prosperity Michigan is to prepare, retain and attract talent.
What Michigan needs, first and foremost, is a human capital centered economic strategy not a business creation, retention, attraction centered economic strategy. The economic development foundation now is high-quality education systems that prepares the next generation for the economy they are going to work in and communities where mobile talent wants to live and work. The latter being what economic development programming should be focused on.
We know how to create welcoming communities. We know how to pay for and provide high-quality basic services, infrastructure and amenities. We know how to create high-density, high-amenity, transit-rich neighborhoods. What is missing is an understanding that as then New York City Mayor Michael Bloomberg put it “talent attracts capital far more effectively and consistently than capital attracts talent”. That the path to prosperity for communities is human-capital driven.
It is also clear that the desirable mix of infrastructure, basic services and amenities differ from region to region. What makes small towns and rural communities attractive places to live and work are different than what makes big metros and their big cities attractive places to live and work. So Michigan’s diverse regions need the resources and flexibility to develop and implement their own strategies to retain and attract talent. It’s an essential ingredient to their future economic success.