Get younger and better educated or get poorer

For years we ended our presentations with a slide that said Michigan must get younger and better educated or we will get poorer. Where younger meant a place where Michigan was retaining those who grew up here and attracting mobile young talent from any place on the planet. And better educated primarily meant increasing the proportion of adults––particularly young adults––who had a four-year degree or more.

We didn’t get younger or better educated and we did get poorer. Falling from 99 percent of the nation in per capita income in 2000 to 89 percent in 2020. Falling from 18th to 33rd. If Michigan had just stayed at 99 percent per capita income in Michigan in 2020 would have been higher by $5,656 in 2020.

Maybe more concerning is this from a 2020 Automotive News article: Rivian CEO RJ Scaringe “believes California is a cool place to be and Detroit has an old technology image,” a former Rivian executive told Automotive News. “He thinks California represents tomorrow and Detroit is all about yesterday.” Where Detroit means the region and the automotive industry, not just the city.

Another way of saying this is California is young, Michigan is old. Where yes old means the average age of its residents, but also our communities and our economy. Michigan is over concentrated in neighborhoods of drivable suburbanism and under concentrated in neighborhoods of walkable urbanism. The state’s economy is over concentrated in declining sectors and under concentrated in the growing, high-wage knowledge-based sectors.

Michigan’s fundamental economic problem is that we do not have enough young adults––new entrants into the labor market––to replace retiring Boomers. And that the young adults we do have, too few are high-skilled, particularly too few have a four-year degree.

Using the Rivian CEO’s framing that California represents tomorrow here is what the ratio of 20-29 year olds compared to 55-64 year olds looks like in the U.S., Michigan and California: US: +4.3 percent, California: +15.9 percent; MI: -2.0 percent

If Michigan had the same ratio as the U.S. there would be 85,000 more 20-29 year olds in Michigan today. If we had the same ratio as California there would be 243,000 more 20-29 year olds in Michigan today.

In terms of young adults with a four-year degree or more in 2019 37.1 percent of the nation’s 25-44 year olds had a B.A. or more; California was at 38.2 percent, Michigan at 34.4 percent. Michigan ranked 31st. (Massachusetts is the leader at 52.9 percent. Minnesota is the Great Lakes best at 43.5 percent.)

What is particularly worrisome is Michigan is doing worse on both measures in 2020 compared to 2010 at the end of the so-called lost decade. In 2010 Michigan’s 20-29 to 55-64 ratio was 100 percent vs 98 percent in 2020. In terms of 25-44 with a four-year degree or more Michigan trailed the nation in 2010 by 2.2 percentage points compared to 2.7 percentage points in 2019.

If the state doesn’t change these realities the state’s economy cannot grow much. Not having enough young adults is the path to slow growth. Not having enough young talent is the path to low prosperity.

Over two decades of research has taught us one fundamental lesson: Talent = economic growth. Then New York City Mayor Michael Bloomberg got it right when he wrote in a Financial Times column:

Many newly successful cities on the global stage – such as Shenzhen and Dubai – have sought to make themselves attractive to businesses based on price and infrastructure subsidies. Those competitive advantages can work in the short term, but they tend to be transitory. For cities to have sustained success, they must compete for the grand prize: intellectual capital and talent. I have long believed that talent attracts capital far more effectively and consistently than capital attracts talent.

Creating a place where people want to live and work becomes even more important as Michigan goes through at least a decade and a half where the number of older workers leaving the labor market will exceed younger workers entering the labor market. Regions without the quality of place that mobile talent is looking for will be at a substantial disadvantage.

To create those places––to get younger and better educated––will require five fundamental shifts in Michigan’s approach to economic policy:

  • Shift from an emphasis on being a low-cost state to a state that develops, retains and attracts human capital as its core strategy for economic success.
  • Shift from intolerance to welcoming all people from any place on the planet
  • Shift from an economic strategy based on low taxes to one that recognizes taxes must be balanced with the need for public investments in education from birth through college and in creating places where people want to live and work.
  • Shift from state limitations that prevent cities and regions from controlling their own destinies to giving them the flexibility to develop, finance and implement their own quality of place strategies.
  • Shift from accepting a crumbling 20th century infrastructure to providing a world-class 21st century infrastructure.
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