20 years later, report finds knowledge workers, not factory jobs, still key to prosperity

LANSING—Twenty years after the first edition of Michigan Future Inc. and the University of Michigan’s report titled A New Path to Prosperity? Manufacturing and Knowledge-Based Industries As Drivers of Economic Growth was released, the two organizations are releasing a second edition which contains a startling finding: Michigan’s economic standing has plummeted, with Michigan now ranking 39th in personal income per capita among the 50 states.

“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,” said Lou Glazer, president of Michigan Future Inc. “Michigan needs to change how it approaches economic development if it wants to be a  prosperous state again.”

The 2004 report analyzed what mattered most for state and regional prosperity. The report found that manufacturing—although still an important and valuable component of the Michigan labor market—was no longer a driver of growth or prosperity. The path to prosperity had become the knowledge economy. Michigan needed to concentrate more on knowledge-based industries and to do that it needed to attract and retain more young, college-educated adults.

Unfortunately, 20 years later, that shift has not occurred. 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.

“When we first compiled the data in 2004, we feared that without a recognition of the new drivers of prosperity, we risked falling behind,” said Donald Grimes, an economist at the Research Seminar in Quantitative Economics, part of the Department of Economics in the College of Literature, Science, and the Arts at the University of Michigan. “Nothing really changed and Michigan is now one of the nation’s poorest states.”

Michigan’s per capita income in 2022 was 13 percent 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.

The report, both the first and second editions, 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.

“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,” Glazer 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.”

To view the updated second edition of ‘A New Path to Prosperity? Manufacturing and Knowledge-Based Industries As Drivers of Economic Growth’, click here. For more information about Michigan Future, Inc., visit www.michiganfuture.org.

 Michigan Future Inc. is a non-partisan, non-profit organization with a mission to be a source of new ideas on how Michigan can succeed as a world class community in a knowledge-driven economy. Its work is funded by Michigan foundations.

More at MichiganFuture.org .

Image above via Wikimedia Commons.

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