ANN ARBOR, Mich. (Michigan News Source) – Two authors at the University of Michigan and Ann Arbor-based think tank Michigan Future Inc. recently published an updated version of their 2004 report on the path to prosperity for Michigan, which again had the same warnings to state leaders who have made manufacturing jobs a top economic priority.

Michigan Future Inc. President Lou Glazer and UM economist Donald Grims has some advice. Two decades after the first report, they are humming the same tune: high-wage knowledge workers, not factory jobs remain key to the state’s prosperity. And there needs to be more high school graduates pursuing a bachelor’s degree or higher to attain those knowledge-based skills.

Report shows Michigan at the bottom for personal income per capita.

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The updated edition of the Michigan Future Inc./U-M report titled “A New Path to Prosperity? Manufacturing and Knowledge-Based Industries as Drivers of Economic Growth” was released this month and it contains what they call a “startling” finding: Michigan’s economic standing has plummeted with Michigan now ranking 39th in personal income per capita among the 50 states.

Lou Glazer, president of Michigan Future, Inc., says, “With Michigan’s new focus on becoming a more prosperous state, one that attracts and retains young talent, we looked to the report we issued in 2004 to see how our analysis held up over time, which we found it did – and with severe implications. Michigan needs to change how it approaches economic development if it wants to be a  prosperous state again.”

The job focus in the state is wrong for income growth.

The report states, “There is still not enough focus on growing high-wage, high-educational attainment jobs and increasing wages in these industries, except that Michigan is starting from an even poorer position today than it was at the beginning of this century.”

Challenging conventional wisdom, the 2004 report outlined an analysis of what matters most for state and regional prosperity and found that manufacturing, although an important and valuable component of the Michigan labor market, was no longer a driver of growth or prosperity.

The knowledge economy is the key.

Instead, the report found the path to prosperity had become the knowledge economy and that Michigan needs to concentrate more on knowledge-based industries and in order to do that, it will need to attract and retain more young, college-educated adults.

Their updated report laments that in the last 20 years, that shift has not occurred. They say, instead, if each state’s personal income per capita grew over the next 23 years at the same rate that it did between 1999 and 2022, Michigan would end up as the 48th poorest state in the country by 2045, just above Alabama and Mississippi.

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Grimes says, “When we first compiled the data in 2004, we feared that without a recognition of the new drivers of prosperity, we risked falling behind.”

He goes on to say, “Nothing really changed and Michigan is now one of the nation’s poorest states.”

The report says that Michigan’s per capita income in 2022 was 13% below the national average, the lowest Michigan has been compared to the nation since the data was first compiled in 1929. This is the opposite of where Michigan was in the 20th Century when the state was structurally a relatively high prosperity state. In 1999, Michigan ranked 16th in per capita income, slightly below the national average.

What are knowledge-based industries?

In both the first and second editions of the report, it compares low-education attainment manufacturing as an engine of economic growth with high-paying, knowledge-based industries, such as information, financial activities, professional and technical services, and management of companies.

The researchers say that knowledge-based industries and young professionals will be the most important drivers of future economic growth and communities with high concentrations of both are quite likely to be most prosperous.

Glazer said, “I said this when the report was issued in 2004 and I’ll say it again: the best use of policymakers’ time and attention with respect to the economy would come from developing a new agenda on how best to grow a knowledge-based economy in Michigan.”

He added. “If Michigan doesn’t become competitive in the knowledge economy, it will be one of the poorest states. Michigan policymakers must change their approach to the knowledge economy if they want to turn our economic decline around.”