Strengths & Challenges

BUSINESS

Strengths & Challenges

Business leaders assess Michigan’s long-term economic prospects.

LOUIS FINKELMAN CONTRIBUTING WRITER

News coverage of economic issues often concentrates on the immediate future: Experts try to tell us what factors will influence the bottom line in the next quarter. Sustained trends can make more difference in our lives, so we asked Michigan’s business leaders to tell us what they foresee about Michigan’s economy in the long run.

STRENGTHS

1. Diversifying Economy

Not long ago, people said “Detroit” as a shorthand for automobile manufacturing. Now, our economy includes a wider variety of products and services. According to Matt Lester, president and founder of Princeton Enterprises, and president of the Jewish Federation of Metropolitan Detroit, “We have shed, to a large degree, the tag of Rust Belt by diversifying from manufacturing and by improving the manufacturing in terms of technology, in terms of green and growing sustainability.” In short, Lester says, “We have turned the corner.”

2. Government-Business Cooperation

Lester identifies a strength of our state: We enjoy “a good partnership between government and business — that should foster economic development and hopefully serve as an example to other states.” Jeff Donofrio, president and CEO of Business Leaders for Michigan, offers a similar positive assessment of government and business relations in Michigan.

3. Experienced Workforce

Maureen Krauss, president and CEO of the Detroit Regional Partnership, emphasizes that an experienced workforce can attract employers to Michigan. For example, Krauss notes, we have a high concentration of engineers in Michigan, second only to those in Northern Matt Lester, president California. and Founder Steve Tobocman, executive director of of Princeton Global Detroit, agrees about Enterprises and president the central importance of our of the Jewish workforce. “Talent,” he says, Federation of “is the single biggest driver of Metropolitan Detroit economic prosperity in the 21st century.”

Steve Tobocman, executive 4. Access to Water

director Access to the Great Lakes of Global Detroit promises to become increasingly important in the coming years as other regions of the world experience drought and problems accessing clean water.

5. Quality of Life

“We are a geographically friendly spot,” according to Sandy Baruah, president and CEO of the Detroit Regional Chamber. As he notes, we are “not visited by earthquakes or hurricanes in any great degree.”

We also have positive attractions. Lester lists “affordable home ownership and safe, clean neighborhoods.” He adds that Michigan offers opportunities for recreation, for families to enjoy time together, “away from work.”

CHALLENGES

1. Education

Tobocman assesses education as “the single biggest driver” of Michigan’s economy. Krauss lauds the international reputation of Michigan’s universities. Krauss expresses concern, however, that “we have lagged in the past few years on educational attainment, and that is troubling for the long term.”

Baruah detects the same problem, characterizing education in Michigan as “under resourced.” Recognizing the problem, the Detroit Regional

Chamber sponsors programs to assist underserved communities in K-12 schools, to help students achieve success in two-year and four-year degree programs and also to attract highly skilled workers to relocate to Michigan.

Baruah notes that just over 40% of Michigan’s adult population hold college degrees, lagging behind the nearly 50% in other states. The Chamber sets 60% as a goal, and Baruah lauds Michigan Gov. Gretchen Whitmer for adopting the 60% goal. To achieve that goal, Baruah believes, Michigan will have to overcome racial disparities in education.

Lester suggests we need to increase teachers’ salaries and improve their working conditions. “We need to attract talent, and pay them, and treat them as important.”

How important is the goal of improving education in Michigan? Jeff Donofrio says, “It’s key. No state can be successful without a best-in-class K-12 and post-secondary education system.”

2. Population

Baruah points to a serious economic problem in Michigan: “We had a big decline in population.” Population decline leads to labor shortages and other bad consequences. As Tobocman observes, “The Midwest faces dire demographics — aging population, lower birth rates, lower numbers graduating high school. The implications are huge and profound. Think of how disinvestment and flight devastated the local economy in Detroit.”

Exacerbating the problem, as Donofrio notes, “Michigan has a lower percentage of people in the labor force compared to Great Lakes states (on average), even when comparing people with the same level of education.”

It does not look like the solution can come from natural growth. Krauss laughingly challenges audiences, “How would you feel about having five more children?”

From where can demographic growth come? Tobocman says, “Immigration accounts for all of the population growth in Michigan over the last 25 years. Without immigration, we would not have grown our population since 2000.”

Donofrio agrees: “We firmly believe Michigan must work harder to increase migration and immigration to the state, which would help us bring in more talent to our labor force.” Krauss observes that “the past few years of opposition to immigration was just exacerbating the problem.” Baruah would welcome increased immigration, especially from high-skilled, educated foreigners. He lists leading companies that “are looking for new high-tech talented people. And frankly, we just don’t produce enough in the United States.”

Krauss, though, says we need all sorts of immigrants. “We need both. It is not either/or; it is both/and.”

3. Infrastructure

Baruah notes that the Detroit Regional Council has been trying to bring stakeholders together to upgrade mass transit. “There really aren’t prosperous cities across the country, or frankly, even across the world, that don’t have a robust regional public transit system,” he said.

We need sustained attention to other infrastructure needs: the classic repair challenges of aging dams, bridges, roads and water treatment facilities, along with new challenges of internet access.

4. Competition for Business Incentives

When businesses decide where to locate new projects, they often ask governments to compete in offering incentives such as tax breaks and relaxed regulation. “In a perfect world,” according to Krauss, “none of us would offer incentives.” But state and municipal governments do offer incentives to businesses to encourage them to build projects, and so Michigan must compete. She says, “If we take that [incentives] off the table, and the competition still offers incentives …” She does not need to finish the sentence. Donofrio explains the difficult balance: “While we don’t want to win a project only because of incentives, we also don’t want to lose projects because we weren’t willing to offer them.” Because we do need to offer balanced incentives, Donofrio praises “the recent bipartisan economic

Sandy Baruah, president and CEO of the Detroit Regional Chamber Jeff Donofrio, president and CEO, Business Leaders for Michigan.

Maureen Krauss, president and CEO of the Detroit Regional Partnership

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