Report: Michigan tumbling toward Mississippi territory in per capita income
Photo credit: iStock photo by espiegle.
by Paula Gardner (Bridge Michigan)
Michigan will become among the least prosperous states in the nation if it doesn’t shift its emphasis from manufacturing jobs, according to a new report.
Michigan now ranks 39th in personal income per capita — down from 16th in 1999 — and is poised to tumble further if it doesn’t change course.
That’s the conclusion of two prominent researchers in their report, “A New Path to Prosperity?.” They argue the state must do more to prioritize high-wage, knowledge-based jobs that require at least a bachelor’s degree to boost Michigan’s economy.
“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,” write authors Lou Glazer, president of Ann Arbor-based think tank Michigan Future Inc., and Donald Grimes, an economist at the University of Michigan.
Their findings, released Monday, update, and underscore, their arguments from a report they wrote in 2004.
“We predicted that if Michigan didn’t make the transition (to higher-wage, college-credentialed jobs), Michigan was going to become one of the nation’s poorest states,” Glazer said in an interview.
That is exactly what has happened, he said.
Two decades ago, Michigan’s per capita income was $45,943 per year — about equal to the national average. In 2022, it was $57,038, 13% below the U.S. average of $65,470.
Glazer predicted Idaho and Georgia will pass Michigan by next year, making it likely Michigan officially “become a bottom-10 state.”
The research
The researchers analyzed the state’s per capita income from 1999 — a peak year for Michigan — through 2022, defining income as a combination of earnings, passive income from investments and transfer payments, such as Social Security.
Grimes found that national net earnings increased by a little over $9,000 per capita — but in Michigan, the increase was about $2,500.
He then looked at earnings growth in key industries paying over $100,000 per year, including manufacturing of pharmaceuticals; computers, such as semiconductors; aerospace, and services like information technology and finance.
Non-manufacturing jobs requiring at least a bachelor’s degree showed the most income growth, while auto manufacturing and lower-skilled jobs lost ground over time.
Looking ahead, the report said, if personal income per capita grows in each state at the same rate over the next 23 years as it did between 1999 and 2022, Michigan would end up as the 48th poorest state, above only Alabama and Mississippi.
Even if growth proceeded at the same rate as in the past decade, from 2012-2022 (when Michigan performed better), Michigan still would only rank 34th.
In that most recent decade, auto manufacturing jobs leveled off after falling by half during the previous decade. Growth came in health care jobs and professional services, a category that includes higher-paying computer and financial jobs, though lower-paying service jobs and manufacturing jobs also increased.
What Michigan needs
Glazer said Michigan must make two significant changes to reverse its decline.
The first is encouraging more high school graduates to pursue a bachelor’s degree or higher, since high-growth, high-wage jobs are based on knowledge- (versus production) based skills.
Second, Michigan should more aggressively market vibrant places — namely, its cities — that are already attractive to young, more educated workers so the state can increase its share of higher-wage jobs.
“Those are the two things that we’ve had no success in selling either party of Michigan on,” Glazer said of Democrat and Republican leadership on related policies over the past 20 years.
Grimes expressed hope that Gov. Gretchen Whitmer’s population growth initiative will boost the state’s fortunes, adding that young people with bachelor’s degrees typically have lower unemployment rates and remain in the workforce longer.
They also save money at a higher rate, Grimes said. “Young people with a bachelor’s degree are the best predictor of future high earners,” he said.
The Whitmer administration has focused heavily on making it easier for high school graduates to pursue (and be able to afford) a college degree. But there are headwinds in Michigan, due to stagnant birth rates and the effects of the pandemic.
Michigan’s college enrollment decline from before the pandemic is among the worst in the U.S., according to the National Student Clearinghouse Research Center. As of last spring, college enrollment in Michigan remained at 85 percent of 2019 levels, ranking 48th among U.S. states.
The Whitmer administration is targeting economic development across the state, though much of it has focused on large-scale manufacturing projects. Grimes and Glazer say they’re concerned too many promised jobs are in manufacturing, which represents almost 13 percent of all of the state’s jobs.
Whitmer spokesperson Bobby Leddy defended the $2 billion Strategic Outreach and Attraction Reserve (SOAR) fund, saying the effort will “help Michiganders get ahead.”
And Leddy noted that high-tech companies looking to move to Michigan are also receiving subsidies, moves that will diversify and expand the state’s businesses.
Why Michigan should care
The new report argues that everyone who lives in Michigan has a stake in the state’s overall prosperity. “The reason you want to have money is because you want to be comparable to other states and live like people in other states,” Grimes said.
Business Leaders for Michigan, the state’s business roundtable, has raised similar concerns, particularly around the importance of education.
Among the strategies the business group suggested were, like Michigan Future, increasing the state’s high-wage, knowledge economy jobs. It also urged education reform, particularly in community colleges and job-training programs, to make more residents eligible for those jobs.
The fastest growing states focus on creating good jobs and increasing incomes, said Jeff Donofrio, president and CEO of BLM.
“They have worked for decades to build strong communities and overhaul K-12, college and economic development systems to become magnets for highly skilled talent and knowledge economy jobs,” Donofrio said. “If we hope to change our trajectory, we need to do the same.”
Grimes said Michigan can expect to see more income declines if trends don’t change, which will affect everyone. Lower incomes mean fewer taxes collected, so tax collections would need to increase for Michigan to be able to fund the same level of services.
Meanwhile, Michigan retirees will learn there are places across the country they can’t afford “because you haven’t made enough money throughout your life and saved enough money and have enough assets,” Grimes said.
The report also notes declines in the state’s auto manufacturing, which began decades ago, and then deepened from 2000 through the Great Recession.
The Michigan Chamber also advocates for diversifying the state’s economy with knowledge-based jobs, but its leadership cautions that the state cannot ignore the role of manufacturing to its economic base, particularly as the auto industry shifts to electrification.
“That transformation is inherently technology and knowledge-based,” Wendy Block, the chamber’s senior vice president of business advocacy, told Bridge. “We believe, rather than making this an ‘either or’ choice, it would make more sense to figure out how we can make this a win-win – one where we embrace our rich history with the need to grow and evolve.”
Indeed, the Michigan Future report acknowledges that the state’s challenges are not solely tied to auto factory jobs.
A bigger factor is Michigan’s inability to attract more high–paying jobs when compared with prosperous states. Making matters worse, wages for these more coveted jobs have grown more slowly in Michigan than elsewhere.
Nationally, the average wage for knowledge-based jobs increased 43% from 1999 to 2022. The growth was led by Massachusetts, where the increase was 53%, to $165,000.
In Michigan, wages for these jobs increased just 14%, to $101,000.
Looking to cities
The report contends that attracting high-wage workers depends on boosting the state’s metro areas, including Detroit, Grand Rapids, Ann Arbor and Lansing.
That approach could conflict with the state’s spending across both peninsulas to increase prosperity in all counties. But Glazer said the facts are clear.
“There’s nothing the state can do about the reality that the knowledge economy is over concentrated in big metros and some midsize metros with major universities,” he said.
One positive example is Grand Rapids, which saw technology jobs rise from just under 36,000 to 38,500 between 2020 and 2023.
“One of the reasons why Michigan as a state is still a couple places higher in the ranking with Georgia is because of Grand Rapids, Traverse City and Ann Arbor,” Grimes said.
Detroit was poised to improve as well, before COVID stalled momentum. More recent investment in the city, such as U-M’s innovation campus and Ford Motor Co.’s Corktown complex, will be important factors in the city’s income growth.
“How we fare in Southeast Michigan will be determined by the city of Detroit,” Grimes said.
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