Michigan’s Economy: Past, Present, and Future

Presented toMichigan Community College Association

July 25, 2014

Charles L. BallardDepartment of EconomicsMichigan State University

East Lansing, MIballard@msu.edu

Education makes a huge difference to labor-market outcomes.

(And those differences have increased in recent decades.)

Unemployment Rates in the United States by Educational

Attainment, For Workers Aged 25 and Over, June 2014

Bachelor’s Degree or Higher 3.3%

Some College, or Associate Degree 5.0%

High-School Graduate, No College 5.8%

Less Than High School 9.1%

Source: U.S. Bureau of Labor Statistics

Average Earnings in 2012, for Those Aged

45-54 Who Worked Full-Time Year-Round

(For the Entire U.S.) Men Women

Professional Degree $179,967 $119,231

Master’s Degree $115,702 $ 81,156

Bachelor’s Degree $ 96,591 $ 62,222

Associate’s Degree $ 64,159 $ 44,899

High-School Graduate $ 50,178 $ 35,926

Some H.S. (No Diploma) $ 37,547 $ 23,648

Less Than 9th Grade $ 29,367 $ 21,532

Source: U.S. Census

Michigan does have poor people. But overall, Michigan is not a poor place.

19291933

19371941

19451949

19531957

19611965

19691973

19771981

19851989

19931997

20012005

20090

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Inflation-Adjusted Per-Capita Personal Income, In Michigan and the United States, 1929-2012

Michigan

United States

Year

Per-

Capi

ta P

erso

nal I

ncom

e, in

201

2 D

olla

rs

However, although Michigan is not a poor place, our economy has not grown as fast as the national average.

19501954

19581962

19661970

19741978

19821986

19901994

19982002

20062010

85

90

95

100

105

110

115

120

125

130

Per-Capita Personal Income: Michigan as a Percent of the U.S. Average, 1950-2012

Year

Perc

ent

The states that have achieved the biggest income gains in the last generation are the states with the most highly educated work forces.

How are we in Michigan doing, in terms of educational attainment and achievement?

The brightest spot of recent years is the expansion of access to early-childhood education in Michigan.

Early-childhood education is the most productive investment a society can make.

Michigan ranks 20th in the country for the percentage of the adult population who have a high-school diploma or equivalent.

Percentage of Population Aged 25 and Over Who Are High-School Completers, 2008-2010, Selected States

Rank State Percent RankState Percent

1. Wyoming 92.2 25. Ohio 87.7

2. Montana 91.7 30. Indiana 86.6

3. Alaska 91.5 31. Illinois 86.5

4. Minnesota 91.4 United States 85.3

5. New Hampshire 91.3 36. New York 84.5

6. Vermont 91.1 38. N. Carolina 84.1

14. Wisconsin 89.9 43. New Mexico 83.1

18. Massachusetts 89.0 49. California 80.7

20. Michigan 88.6 50. Mississippi 80.7

23. Pennsylvania 88.0 51. Texas80.3

In terms of comparisons among the states on the NAEP, Michigan doesn’t do so well. Our rankings among the states in 2013:

4th grade reading: 38th

4th grade math: 42nd

8th grade reading: 32nd

8th grade math: 37th

Michigan lags behind the national average in college attainment.

19401950

19601970

19801990

20002010

0

5

10

15

20

25

30

35

40

45

Percent of the Population Aged 25 and Older With A Bachelor's Degree or Higher, 1940-2010

United StatesMassachusettsMichiganArkansas

Year

Perc

ent

The challenges we face

1. I don’t need an education; I’m going to get one of those high-paying factory jobs.

Manufacturing’s Share of the Economy Has Shrunk Dramatically

0

5

10

15

20

25

30

35

40

45

50

Manufacturing as a Percent of Gross Domestic Product, In Michigan and the United States, 1963-2012

Michigan

United States

Year

Perc

ent

The challenges we face

2. “What about all those children who can’t learn algebra?”

The Detroit metropolitan area is more racially segregated than any other major area in the United States.

Many of the problems of the city and the metropolitan area stem from the lack of a regional focus.

The challenges we face

3. If we just cut taxes far enough– if we just lay off enough teachers– if we just let our roads crumble– then businesses will flood into Michigan!!!!!!!!

Tax Effort Has Reduced Substantially

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

7

9

11

13

15

17

19

State and Local Taxes as Percent of Personal Income, 1972-2011

New York

Michigan

United States

Texas

Year

Per

cen

t

I have emphasized formal education, but that is not the only game in town.

Career and technical education has an extremely important role to play for many of our young people.

To attract and retain talented young people for Michigan, we need more than jobs and educated workers. We need quality of life.

The MIplace Partnership Initiative

(Miplace.org) :

• Housing choices • Historic preservation• Mixed-use development • Public transportation• Pedestrian orientation • Entertainment and

recreation• Quality public

infrastructure

Charley’s Wish List:

• Continue to expand early-childhood educ.• Extend the K-12 school year.

• Support higher education, including community colleges and

universities.• Extend the sales tax to services.

• Establish a graduated income tax, or raise the flat rate. • Use an independent, non-partisan

commission to draw legislative

district boundaries.

Michigan, My Michigan

A song to thee, fair State of mine,Michigan, my Michigan.

But greater song than this is thine,Michigan, my Michigan.

The whisper of the forest tree,The thunder of the inland sea,Unite in one grand symphony

Of Michigan, my Michigan.