MICHIGAN — Michigan is a little more competitive with other states today than two years ago. But despite that progress, the state is still far from a goal of corporate CEOs to become a top 10 state for economic, job and income growth, according to an annual report.
After a decade of decline, and despite lagging top states nationally, employment, per-capita GDP and personal income are at least all “headed in the right direction,” says the annual benchmarking report from Business Leaders for Michigan. The report also shows that national perceptions about Michigan’s business climate are improving, albeit slowly. It states that even with changes last year in the tax structure, the cost of doing business in the state remains comparatively high.
The benchmarking report on Michigan’s competitiveness, prepared by the Anderson Economic Group, shows the state overall is recovering faster from the recession than most others.
Coming out of the tough economic times, Michigan is making the structural changes that were needed, said Dough Rothwell, CEO of Business Leaders for Michigan. Changes need to continue to build on the improvements of the last two years and assure the state’s long-term recovery, Rothwell said.
“These are all headed in the right direction, but we came off such a low base we have a long way to go,” he said of the key metrics in the 2012 benchmarking report. “Even though a great deal of progress has been made these last two years, we have got to really sustain the pace of change for another five to eight years in order to get to be a top 10 state, and that’s hard to do. We have not had a history in Michigan of doing that. We tend to get a little complacent when times get better.”
Michigan also continues to lag peer states in venture capital investments, college graduates and entrepreneurial activity. As a result, university research and development activity goes underleveraged, according to the Business Leaders for Michigan report.
Yet as Michigan continues to lag other states in many categories, the progress of the last two years has created a foundation for further improvements, Rothwell said.
“We have a lot more confidence. We are very bullish on Michigan’s long-term economy and much more optimistic on Michigan’s future than we are in the country’s in terms of economic health,” he said. “The issues are getting addressed in Michigan that have been perplexing us for the last decade. What gives us pause is that we have such a long way to go to be a top 10 state.”
Two recent moves by the Legislature – adopting a plan to repeal the personal property tax on industrial property and making Michigan a right-to-work state – can further help the state’s business climate and national reputation, Rothwell said. He cautions, however, not to expect too much too soon from the right-to-work legislation.
Whether a state has a right-to-work law “is one of many factors businesses look at when deciding where to locate,” Rothwell said.
“Just like any change in the business climate, it’s going to take time for businesses to become aware of it,” he said.
Business Leaders for Michigan did not take a stand on the right-to-work legislation.
Two key priorities for the CEO group in 2013 are improving funding to fix Michigan’s deteriorating road system and for higher education.
“Let’s fix our roads, let’s start making an investment for the long term and let’s prioritize what money we do spend in state government by giving kids an opportunity to go to college,” Rothwell said.
The report compared Michigan to 12 peer states – six that are considered traditional peers, and six more that are deemed as “new economy” states – and those that rank in the top 10 in economic, job and income growth.
Michigan from 2010 to 2011 outpaced the top 10 states in all three areas:
- Year-to-year employment growth was 2.77 percent, versus an average of 2.02 percent for the top 10 states.
- Per-capita GDP was 2.88 percent, compared to a top 10 average of 1.18 percent.
- Personal income in Michigan grew 2.02 percent, versus an average of 1.39 percent.
In an index on the cost of doing business, Michigan scored a 103 for 2012, compared to 104 in 2011 and 2010, to rank 12th nationally but below every peer state except Massachusetts and California. The index for the cost of doing business in the 12 peer states averaged a 93.
Michigan was fifth-worst in the perception of business leaders nationally for tax and regulatory environment, workforce quality and living environment.