Published in Economic Development

Studies show Michigan’s economic climate needs further improvement

BY Sunday, November 25, 2018 07:19pm

A couple of recent benchmarking reports reiterate that despite Michigan’s decade of significant economic progress, the state needs to continue to change to maintain momentum and further improve.

The progress this decade, marked by Michigan rising from the bottom of performance rankings to middle of the pack, requires further action since other states also have worked to become more competitive.

Doug Rothwell COURTESY PHOTO

“Average really isn’t good enough when you’re in a global economy and there are lots of good places out there to live and work, and so we just have to keep our foot to the pedal to move even faster,” said Doug Rothwell, CEO of Business Leaders for Michigan.

“We’re trending in the right direction, but not moving fast enough,” Rothwell said. “The thing that we have to guard against is complacency. We’re better. We’re not good enough.”

The latest benchmarking report from Business Leaders for Michigan shows the most progress this decade was made in “getting our costs and fiscal house in order” for state government, changes in the state’s business tax early in outgoing Gov. Rick Snyder’s tenure, and through regulatory reforms. Those have “all given a lot of certainty to the business community that Michigan is a good place to invest,” Rothwell said.

“On the other hand, the value you get for that cost isn’t good enough,” he said. “Our education results are weak and our infrastructure is not good, so we have to fix these issues.”

Business Leaders for Michigan aims to make Michigan a top-10 performing state. Highlights of the 2018 benchmarking report included:

  • Michigan’s annual unemployment rate, despite declining nine percentage points since 2009 to 4.6 percent, still lags the average of 10 peers and the 3.8 percent rate of top-10 states. Michigan’s annual unemployment rate as of 2017 ranked 34th nationally.
  • Michigan’s per capita personal income levels continue to grow, but remain well below peers and top-10 states.
  • Michigan per-capita income growth outpaced the average in recent years, although 2017 per-capita personal income level was more than $4,000 less than the peer state average and more than $10,000 less than top-10 states.
  • Michigan’s per-capita GDP continues to grow, but remains well behind those of peer and top-10 states.
  • Michigan’s population stabilized, yet peer states and the top 10 are growing faster.
  • As of 2017, Michigan either was improving or holding steady in 37 of the 54 metrics Business Leaders for Michigan uses to gauge the cost of locating in the state and the value provided. Michigan’s overall ranking remained in the bottom half of states on nearly 60 percent of the measures.
  • Michigan’s talent and infrastructure gaps “continue to pose significant long-term challenges.”

Along those lines, road funding remains a top priority for Business Leaders for Michigan, Rothwell said.

“I say it’s an embarrassment that when people come to this state, they don’t think we want to invest in ourselves with the condition of our roads,” he said. “There’s been a lot of effort to move some money to help fix that problem, but it’s not enough. It’s half as much as what the governor’s own task force and our independent study showed is needed.

“We need at least a billion or two dollars more a year over what we’re spending today to really fix the problem.”

The Business Leaders for Michigan benchmarking report followed an analysis Northwood University conducted for the Michigan Chamber Foundation that said the state made “dramatic” progress since coming out of the Great Recession, steadily improving from near the bottom of a competitiveness index to the middle.

Northwood University researchers this year ranked the state 20th nationally in a competitiveness index, up from 21st in 2017 and far better than the ranking of 47th in the first-ever report in 2012.

When measuring performance since 2011 alone, Michigan ranked eighth nationally with the automotive, tourism and agriculture industries as its strongest economic drivers.

The progress stems from Michigan having a friendlier business environment, according to the report’s authors, who noted the state led the Great Lakes region in economic growth from 2012 to 2018 “and was a strong performing state nationally over the last seven years.”

Michigan’s “relatively strong performance” for debt, taxation and regulation outweighed a “relatively weaker performance” in workforce composition, cost and labor, and capital formation, said Tim Nash, senior vice president and director of Northwood University’s McNair Center for the Advancement of Free Enterprise and Entrepreneurship.

To sustain the progress, the state “must continue to set its sights high and benchmark best economic and political practices of this country’s top-performing states,” according to the Northwood University report.

To compile the competitiveness index, the McNair Center uses 200 metrics that include gross state product, tax and regulatory policies, employment growth, and the cost of doing business.

The report’s authors noted that Grand Rapids was the top-performing city among eight in the Midwest in an analysis of data from 2000 to 2017.

In the five factors that go into the overall competitiveness index, Michigan ranked:

  • 7th in general macroeconomic environment, versus 48th in 2012
  • 13th in state debt and taxation, compared to 10th in 2012
  • 33rd in workforce composition and cost, versus 45th six years ago
  • 27th in labor and capital formation, compared to 45th in 2012
  • 25th in regulatory environment, a decline from 18th in 2017

“There is no doubt that Michigan continues down a comeback path, but it has not arrived yet,” the report’s authors wrote.

Additional Info

  • Image_Position: Headshot
Read 908 times
SUBSCRIBE TO MIBIZ TODAY FOR WEST MICHIGAN’S FINEST BUSINESS NEWS REPORTING >