Key takeaways
- In Michigan, just 3 in 10 jobs pay $65,000 or more. In Massachusetts, nearly half do. If Michigan’s economy had the same share of middle-class jobs as Massachusetts, we would have an additional 800,000 middle-class jobs.
- Over the past half century, Michigan has gone from one of the richest states in the country to one of the poorest.
- In 1980, Michigan and Massachusetts had roughly the same per-capita income. Today, Massachusetts ranks first in per-capita income, while Michigan ranks 39th.
- The reason why is because Michigan is a low BA attainment state, and Massachusetts is a high BA attainment state. In today’s economy, low educational attainment states are low prosperity states, and high educational attainment states are high prosperity states.
- To reverse this decline, we need to advance policies that dramatically increase the share of Michigan adults with a bachelor’s degree.
Since the turn of the century, our state has experienced a precipitous decline in economic prosperity relative to the rest of the country. In 1999, Michigan ranked 16th in per-capita income. In 2023, we ranked 39th. And the slide shows no signs of slowing.
What we have been doing over the past 25 years isn’t working. We need a new approach. And that approach centers on increasing the share of Michigan adults who have a bachelor’s degree or more.
The cause of Michigan’s decline in economic prosperity is simple – Michigan has too few high wage jobs. And to get more of them, we need to dramatically increase BA attainment here in Michigan. This is because in today’s knowledge-driven economy, it is those places with high talent concentrations where high-wage firms locate, expand, or are created.
What would a Michigan economy with much higher rates of BA attainment look like? How would Michigan’s economy look different from what it looks like today if we had more high wage jobs?
For an answer, we can look to Massachusetts, the nation’s leader in both BA attainment and, not coincidentally, per capita income.
BA attainment in Michigan and Massachusetts
Let’s first look at BA attainment in both states. In Massachusetts, 47.8% of adults over the age of 25 have a bachelor’s degree or higher. In Michigan, this figure is 32.7%. This is a massive difference. If Michigan had the same level of BA attainment as Massachusetts, more than 1 million additional Michigan adults would have a bachelor’s degree.
This picture gets worse when you look at young people. 57.2% of 25-to-34-year-olds in Massachusetts have a bachelor’s degree or higher. In Michigan, this figure is 37%. The BA attainment gap between the two states is widening, not shrinking.
This large BA attainment gap leads to a large prosperity gap. In Massachusetts, a high BA attainment, high-wage economy, the per-capita income is $90,600 – the highest in the nation (green line below). Here in Michigan (blue line below), a low BA attainment state, the per-capita income is $61,100 – a full $30,000 lower than Massachusetts.
In 1980, the two states had roughly the same per-capita income. But a large prosperity gap grew over time, both because the BA attainment gap between the two states grew, and because the BA wage premium (the average wage of BA holders compared to those with no education beyond high school) has grown over time.
How increasing BA attainment changes the economy
Becoming a high BA attainment state alters the shape of the economy – the kind of work people do, and what they get paid. In Michigan, roughly 31% of all jobs pay at least $65,000 annually, a rough threshold for a “middle-class” income. This means that nearly seventy percent of jobs in the Michigan economy do not pay middle class wages. This is what we mean when we say Michigan does not have a high-wage economy.
The picture in Massachusetts is much different. There, nearly half (48.3%) of all jobs pay middle-class wages. If Michigan had the same share of middle-class jobs as Massachusetts, it would be the equivalent of adding nearly 800,000 middle-class jobs to the state economy.
How does a more educated populace lead to more high wage jobs? The first, and most mechanical explanation is simply that those jobs that require a BA or more are the highest paying jobs in the economy. The higher the proportion of adults in your state with a BA or more, the more high-wage jobs there will be.
But in addition, high concentrations of highly educated individuals also lead to the development of more high wage jobs in a virtuous cycle. In today’s economy, capital follows talent, not the other way around.
High talent concentrations also yield the birth of new high-wage firms, owing to the knowledge spillovers that occur when you get a lot of smart people together. Not to mention the fact that where high wage jobs go more high wage jobs follow in the form of professional services industries – law, finance, accounting, consulting – that provide high-wage services to high-earning individuals and companies.
The bottom line is, increasing BA attainment changes the shape of the economy – you become far more concentrated in high wage work, far less concentrated in lower wage work.
For example, as a share of total jobs, Massachusetts has nearly three times the number of “marketing managers” (median income $134,000) Michigan has, two and a half times the number of “management analysts” (median income $85,000) Michigan has, and double the number of “computer and information systems managers” (median income $151,000) that Michigan has. These are all high volume, high wage knowledge economy jobs, and Massachusetts, as a result of their high BA attainment, has a far greater concentration of this kind of work than Michigan does.
Where are Michigan jobs overconcentrated? In low-wage manufacturing work. Michigan has nearly 7 times the number of “assemblers and fabricators” (median income $38,000) that Massachusetts does; more than 7 times the number of “machine operators” (median income ($41,000); and 21 times the number of “engine and other machine assemblers” (median income $49,000).
Two different economies
In the early 2000s, the economist Ed Glaeser wrote a paper about the way in which Boston, in the 1980s, was able to break away from its industrial past and reinvent itself as a knowledge economy hub. They were able to do this, he wrote, because they had a high concentration of highly educated workers. He wrote that there was nothing certain about Boston’s, and therefore Massachusetts’s, economic rise after 1980 – that the city very well could have gone the way of Syracuse or Detroit. But the city’s high concentration of highly educated individuals allowed it to adapt to the coming knowledge economy, where Detroit, and Michigan, did not.
This carries on to today. Today, Michigan continues to identify itself with manufacturing work, through rhetoric and economic policy, and this shows up in the data: Over 10% of Michigan jobs are production jobs, paying an average median wage of $47,300. In Massachusetts, production jobs make up just 4% of all jobs in the economy. Where Massachusetts is overconcentrated is in the knowledge-economy – defined here as occupations in which most jobs within that occupation require a BA or more. In Massachusetts, 43% of jobs are in the knowledge economy, versus just 34% in Michigan.
This is the essential difference between the two economies. Both economies have roughly the same share of workers employed as HVAC technicians and auto mechanics, electricians and carpenters, retail sales workers and fast-food workers. The difference is simply that one economy is overconcentrated in production, one is overconcentrated in knowledge work. And the difference ends up being that Massachusetts is the most prosperous state in the nation, with a per-capita income of $90,600, and Michigan is 39th, with a per capita income $30,000 less than that of Massachusetts.
The question is which economy do we want to have? The answer has profound ramifications for how we view economic development policy here in Michigan, and the kinds of policies we pursue in the years ahead.
