The "New Michigan" Strategy - Growing a Global Engineering Village

Ranking #1! First Place! Everyone can relate to that—especially when it comes to our favorite sports team. How about in terms of our state? What about Michigan as number 1? Not the University, but the state. The goal of Business Leaders for Michigan is to make our state among the Top Ten for job, economic and personal income growth. Sure, we’d love to be number 1 but that will take some time. For now, we’d settle for Top Ten.

However, there is one area where we are currently number 1 and that’s with engineers. Did you know that Michigan is the number one state in the nation in the number of engineers per capita? We are at the head of the pack when it comes to engineers. Of course, that’s because of our strong automotive manufacturing heritage. Michigan engineers have helped the American manufacturing sector and the automotive industry achieve the highest productivity rates in the world. That’s a big deal! And, there’s more opportunity because in the future, productivity increases will be critical in developed countries as they work to improve the incomes of their citizens. Our operational excellence in auto manufacturing can be applied to other advanced manufacturing sectors to help increase productivity and efficiency there as well.

We need our engineers to continue to improve Michigan-based manufacturing but in the years ahead, the world is going to need engineers - and Michigan can supply them! As companies look for ways to improve productivity and efficiency, the need for engineering services is expected to grow at rates far greater than that of the economy as a whole. This will be especially true for high-tech manufacturing fields. Advanced and regulated industries such as aerospace and military/defense provide a strong and growing opportunity for engineering services. Those industries will continue to grow because of their strategic importance to scientific discovery and national defense.

There will also be a rising demand for cutting edge IT solutions driven by increased globalization of advanced manufacturing technologies, which may present an “on-shoring” opportunity for higher skill engineering. Translation: More work for Michigan engineers!

And, there’s more. . . Michigan’s universities have a strong pipeline of engineering talent. We have access to skilled talent in the Science, Technology, Engineering and Math (or STEM) fields, which provides us the ability to provide high-end engineering services at competitive costs. In addition, we have strong support networks through organizations like the Engineering Society of Detroit, the American Council of Engineering Companies, the Center for Automotive Research and others.

So, the world may be shopping for engineers. We can fill that need right here in the mitten state. We’ve all seen the Chrysler commercial “imported from Detroit.” How does “Engineered in Michigan” sound? By offering solutions to global companies, we could make that brand known around the world and keep our number 1 ranking. That’s something to strive for.   

Step 6: Leveraging Assets to Grow the "New Michigan"

Business Leaders for Michigan (BLM) developed the 2012 Michigan Turnaround Plan to make Michigan a “Top Ten” state for job, economic and personal income growth. Our members live here, work here and raise their families here. They want to help create a good quality of life for Michigan residents and a vibrant, sustainable economy.

The Michigan Turnaround Plan reflects our optimism for Michigan’s future, based on progress made by our state’s elected leaders during the past year and the opportunities this headway provides for building a more vibrant state.  Michigan’s turnaround has clearly begun, as evidenced by lower unemployment, higher economic growth and rising income levels.  We believe these results have been made possible by following the kinds of recommendations advocated for in the Plan.

While we continue to place a strong emphasis on improving the fiscal and business climate of Michigan, BLM believes such a solid foundation has been laid by Governor Rick Snyder and the Michigan Legislature that we can accelerate the pace of growth faster than originally projected.  BLM originally forecast it would take close to a decade for Michigan to become competitive again.  We now think Michigan can not only be competitive but also be a Top Ten state within that same time period.

To move Michigan to Top Ten status will require several actions:

• Prioritizing the investment of state revenue growth in higher education and transportation infrastructure.  These investments yield the greatest returns to grow the economy.  Specifically, to ensure we have the talent needed to fill future job openings, we recommend additional funding for universities based on how well they perform compared to their national peers.  Likewise, we need to invest more in the bridges, airports and highways that connect Michigan to the global economy.
• Supporting the growth of Michigan’s cities and metro regions, as they disproportionately drive the state’s economy.  Instead of investing in individual companies, we recommend that the state invest in services that benefit the growth of all Michigan businesses, as well as regional efforts that leverage unique economic assets and a few select urban redevelopment projects.
• Aligning policy, resources and efforts behind six existing Michigan assets that have the potential to grow a “New Michigan” economy by adding as many as 500,000 new jobs and $18,000 in per capita income over ten years – providing a clear path to Top Ten status.

These assets, and the opportunities they provide are:

1. Leverage Michigan’s status of having more engineers per capita than anywhere in the nation by growing and branding Michigan as a Global Engineering Village that meets the global demand for engineering solutions.
2. Capitalize on Michigan’s ideal strategic location, supply chain expertise and the growing shipment of goods to become an alternative to Chicago as a Gateway to the Midwest.
3. Support the growth of our universities as a Higher Education Marketplace that meets the increasing need for talent by boosting in- and out-of-state college enrollments and increases university-based research and development.
4. Develop a sustainable Natural Resources Economy that meets the world’s growing demand for food, water, leisure tourism and energy.
5. Build on Michigan’s automotive heritage to become the Global Center of Mobility that meets the world’s rising need for personal transportation.
6. Leverage our health and medical expertise to become a Life Sciences Hub that meets the needs of an older population and demands for higher quality of life.

The New Michigan strategy recognizes that while fiscal, budget, tax and business climate reforms are critical, they are insufficient for Michigan to become a Top Ten state in today’s economy.  The most economically successful regions of the nation and world have leveraged their unique assets to become growth leaders. We can do the same.

BLM believes that focusing on the six existing strengths identified in the Plan, rather than picking business sectors to attract to the state, is the best path to growth. These six assets were identified after researching a wealth of data, case studies and turnaround models from similar economies around the globe. Each promises tremendous opportunities for success. Together, they have the potential to make our state a vital economic powerhouse.

Michigan cannot become a Top Ten state without the support of all Michiganders. We invite you to be part of this work. Each of us can have a role in Michigan’s turnaround by sharing the Plan with friends and family, asking your community to align its work with the Plan and encouraging our state leaders to do the same.  If we focus our efforts, there’s no stopping Michigan from becoming the comeback story of the decade. 

Step 5: Accelerating the Economic Growth of Cities & Metros

In late February, Business Leaders for Michigan released an urban strategy for Michigan, prepared by Public Sector Consultants and the Brookings Institution Metropolitan Policy Program.  The first three steps of our Michigan Turnaround Plan were focused on fixing the basics —adopting good management practices, structurally balancing the budget along with improving the delivery of state services and providing a competitive business environment. Our goals for prioritizing state investments came after those three steps because if you don’t have a sound foundation, your investments won’t have as good a return and your economy won’t grow as much as it should.

Step 5 of the Michigan Turnaround Plan focuses on our cities and metro areas because we believe that healthy urban areas are essential to our state's long-term well-being. The report begins with a review of current economic conditions and focuses on how to grow the economies of our metro areas with a strong emphasis on innovation and exports as drivers of the next economy.  The strategy is based on facts and on the existing strengths and assets of our metro areas and it includes several recommendations our state, cities and metro areas can implement to help strengthen and grow their economies.  To read the report, click here.

The report also highlights the strength of our metros compared to their peers across the nation and some of the statistics may surprise you.  For example:

• Of the 20 largest U.S. metro areas, Detroit is first in terms of export intensity (the share of its output that is exported)
• Grand Rapids ranks 10^th among the 100 largest U.S. metro areas in terms of export intensity, and 10 of Michigan’s 14 metro areas are more export-oriented than the U.S. average

Clearly, exports are a very important piece of the economic picture.  As other countries continue to develop and grow, the ability to sell our products to them is a critical component of strengthening and growing our economies.  And as the report shows, we are well positioned to build upon our current successes.

The report also reflects the importance of manufacturing—which is good news for Michigan.  Everyone knows Michigan has a strong history of manufacturing, but what they may not realize is the connection between innovation and manufacturing.  You need a strong manufacturing base in order to grow innovation jobs.  And, the data shows that 11 of Michigan’s metro areas have a higher share of manufacturing jobs than the national average or the U.S. metro average. 

Talent is another critical piece of the pie.  The dynamics of a changing workforce and ensuring workers have the skills required for new jobs heighten the need for strong workforce development systems.  Immigrants, older workers and workers with higher education levels and skill sets are all part of the solution. 

The last section of the report—but perhaps the most important in sustaining long term growth in our cities and metro regions—is called “building the basics.”  Just as we believe our state had to get its fiscal house in order before it could move to making investments, the same is true for our cities and regions.

The basics are the foundation upon which all of the strategies in the urban report are built.  As citizens, it’s what we should expect and at the same time we should support elected leaders who are focusing on these as their top priorities.  It’s critical that our cities and urban areas have:

• sound fiscal management and ethics standards
• effective public safety
• results-oriented redevelopment strategies
• cost-effective and reliable basic services, and
• support for regional solutions

The recommendations in this report are good ones and they offer some solid steps that can be taken to help our cities grow. BUT, if our communities cannot provide basic services and do them well, then the other actions won’t achieve the same results.  

There is no silver bullet.  There wasn’t a silver bullet to fix our state and there isn’t one to fix our cities.  It will require hard work, the courage to make difficult decisions and implement policies and programs that will bear fruit years down the road, the ability to know who and what we are and are not, and the vision and leadership to stay the course.  The state has begun that path as have some of our cities and metro areas; now it’s time to help all of them on the same path.  What is clear in the report is that we have a solid footing from which to grow—and that’s the best news of all.

Step 4: Michigan Turnaround Plan - Strategically Investing in Michigan's Future

Michigan’s higher education institutions are not just the academic centers of our state, they are also important economic drivers of its economy.  Step 4 of the Michigan Turnaround Plan (MTP) calls for Michigan to prioritize state investments in the areas that will promote the greatest economic growth, so it’s no surprise that higher education has a prominent place in our 2012 Michigan Turnaround Plan. In fact, higher education is also included in the New Michigan strategy (Step 6 of the MTP), as one of Michigan’s six distinctive assets that can drive future economic growth.

Our universities, considered some of the finest in the world, drive talent production.  Here in Michigan, we graduate a higher percentage of students than the national average in science, technology, engineering and math (STEM) disciplines.

Our higher education institutions are also driving innovation. In 2009, Michigan’s universities ranked 10^thin the nation in research and development spending at $1.7 billion.  This level of investment is important because it fuels patent development, business start-ups and ultimately more jobs. In fact, between 2004 and 2008, Michigan ranked in the top 5 for patent activity and business start-ups.

Our universities spur economic growth. A 2002 study by the Michigan Economic Development Corporation put the total economic impact of Michigan’s public universities at almost $40 billion – at that time representing 12.6% of Michigan’s gross state product. In 2010, Michigan’s major research universities alone had an estimated economic impact of $15.2 billion, equal to 4% of our gross state product.

We believe these numbers will grow if we invest in our universities and increase their ability to attract more research dollars, increase innovation, and create more businesses. To realize this potential, we need a long-term, shared commitment to higher education from both the state and our public higher education institutions.

From the state, we are seeking a commitment to make higher education a higher priority in the budget. This will help make college more affordable for hundreds of thousands of Michigan young people.

From our universities, we are looking for dedicated efforts to control costs, leading to   more affordable tuition bills. Our universities also need to increase research and development efforts to best-in-class status and partner with businesses to increase industry-supported research and development, so we can put that ingenuity to work right here in Michigan.

The goal of the MTP is to make Michigan a “Top Ten” state for job, economic and personal income growth. Thanks in great part to the difficult work done by our leaders in Lansing over the past year, much of the original plan has been fully or partially achieved. We have begun to see some evidence of an economic turnaround with lower unemployment, higher economic growth and rising incomes.

While work remains on fiscal, budget, tax and business climate reforms, those measures alone are insufficient for Michigan to become a “Top Ten” state in today's economy.  The regions around the nation and the globe that have been most economically successful leverage their unique assets to drive economic growth.

As our chief producer of talent, one of our main sources of innovation, and as a powerful driver of Michigan’s economy, our higher education system is one of Michigan’s MOST valuable assets.

Step 3: Creating a Competitive Business Climate

Step 3 of the MTP focuses on creating a competitive business climate. In 2011, state leaders made tremendous progress in this area when they enacted the most comprehensive reform to Michigan’s tax structure in over two decades. In replacing the Michigan Business Tax with a flat corporate income tax, policy makers made Michigan’s tax environment more competitive by simplifying Michigan’s primary business tax and ending the practice of double taxation on hundreds of small businesses.

In fact, according to the Tax Foundation, a non-partisan tax research group based in Washington D.C., as a result of this change Michigan now has the 7^th most competitive corporate tax environment nationally. This represents an incredible improvement over Michigan’s previous rank of 49^th in this category.

Still, in the same index, Michigan ranks below many of its competitors in areas such as Property Taxes and Unemployment Insurance Taxes. And our regulatory environment ranks 43^rd nationally according to Pacific Research Institute, a non-profit free market think tank located in San Francisco. We must continue to improve in these areas to compete nationally and globally for jobs, economic and personal income growth. Going forward, Michigan should take the following actions:

• Phase out the Personal Property Tax without adversely impacting those communities that are overly dependent on Personal Property Tax revenues;
• Create a responsive, collaborative regulatory system that includes aligning Michigan’s regulatory requirements with national standards;
• Provide a seamless, one-stop process for business growth that aligns state and local site development and business regulations;
• Create a modern, cost-effective incentives program;
• Strengthen Michigan’s workforce by fostering a frictionless workforce; environment, matching education and training supply with workforce demand, and attracting and retaining skilled immigrant, mid-career and young talent; and
• Increase capital availability.

Some will point to states like California and Massachusetts and say that the lowest tax states don’t always win. It’s true that companies compare the total cost of doing business against a region’s assets when evaluating site location decisions. Some regions of the country such as the Silicon Valley of California and the Boston areas in Massachusetts, have been able to attract and keep industries in high-tech and related fields because those businesses perceive the value provided in those regions, whether it’s the of quality of life, access to capital, or highly entrepreneurial, highly skilled workforces, as sufficient to mitigate the higher cost of doing business. While Michigan has made important strides to improve our cost-value proposition, businesses don’t yet perceive Michigan’s assets as valuable enough to offset our higher cost structure. 

In our next blog, we will look at how the state can provide greater value by investing in key areas that will promote future growth.