The reinvention of Michigan’s business climate is arguably the biggest economic development story in the U.S. since the turnaround of New Orleans following the Hurricane Katrina disaster of 2005.
If that sounds like an ambitious statement, consider the evidence:
- Michigan leads the nation with 89,888 new manufacturing jobs since 2009, according to the U.S. Bureau of Economic Analysis.
- Added nearly 400,000 jobs in Michigan since 2010, according to the Michigan Bureau of Labor Market Information and Strategic Initiatives, resulting in the state’s unemployment rate plummeting from 15.2 percent in June 2009 to 5.5 percent in May 2015.
- For the past three consecutive years, Michigan has ranked among the top seven states for major new corporate facilities and expansions, according to Site Selection.
- The Michigan Business Tax, described by many business leaders as a “job killer,” has been replaced by the Michigan Corporate Income Tax; and the elimination of the personal property tax has been estimated to reduce taxes on Michigan businesses by $500 million a year, according to the Detroit Regional Chamber.
- Workers’ comp rates have dropped nearly 28 percent since 2011, giving Michigan the best pure premium rate in the Midwest and the second best in the nation, according to the Michigan Workers’ Compensation Agency.
- Michigan’s venture capital community is now outpacing the national trend, with 35 venture capital firms that manage $4 billion in capital, according to the Michigan Economic Development Corporation.
Add all this up, and it’s hard to believe that just five years ago many economists were predicting the imminent demise of Michigan and writing the obituary for Detroit.
Like RoboCop, however, Michigan has roared back with a vengeance from the brink of death, and a new narrative is being written as record-setting investment announcements flood all corners of the state.
From GM announcing its intention to pump an additional $5.4 million into Michigan automotive plants to Ford possibly doubling its stake in Michigan to $6 billion, there are ample signs across the Great Lakes State that its business climate is in the best shape it has seen since the dawn of the 21st century.
Improving the Fundamentals
“Very simply, we have improved our fundamentals by lowering taxes and regulations on businesses,” says Steve Arwood, CEO of the Michigan Economic Development Corp. “All of our metrics for economic performance are trending the right way. Everywhere you turn in Michigan, you find evidence that business is rebounding. We’re no longer having the typical discussion with companies that we were having five years ago. We’re now talking about our statewide economic comeback and our dramatically improved tax code, and we’re being very aggressive about it.”
Michigan, more importantly, is confronting head-on the number one challenge facing every state these days: a critical shortage of skilled workers.
“We don’t sugarcoat it,” Arwood says. “The concern now is this: Where will we find the right workers? This involves the whole talent question, and it is one facing every state. We decided that in order to do this, we would have to look at our entire economic development program, re-prioritize the mission of talent development, and change the way we help employers meet this challenge.”
The resulting reorganization of MEDC has been substantial. Gov. Rick Snyder named Arwood to succeed Mike Finney as CEO. Michigan created the new Department of Talent and Economic Development to streamline statewide workforce development efforts and place them under one cohesive unit; and the state established the new Talent Investment Agency within that department.
“The number one thing that every business needs is talent, but that talent can go a lot of places,” notes Arwood. “It goes to places it wants to live because jobs are pretty much everywhere now. Because of that, we decided to do economic development on a holistic basis. We said, let’s not have separate silos based on government structure. We are trying to break down all of those barriers. This is a philosophical and cultural change. It allows us to go to a business or a community with all of the assets that we have. We are now in the third month of this new program, and so far it has been very well received.”
Currently, there are more than 180,000 job openings in Michigan, including more than 96,000 job openings that are posted on the state website, www.MiTalent.org.
Stephanie Comai, director of the new Talent Investment Agency, says that her agency’s creation is a recognition by state leadership that “the economic development needs of the state are squarely tied to talent development. Potential employers who are looking to expand in Michigan say that talent is their number one priority. We want to have the most advanced and responsive talent development and workforce development programs in the nation.”
Spending Where it Counts
The state puts its money where its mouth is, says Comai. “We increased funding from $10 million to $20 million to train incumbent workers and to train people for new jobs,” she says. “That takes effect October 1. We expanded our initiatives in the area of middle college. This creates more opportunities for high school students to earn community college credit while earning their high school diploma. This is a five-year program. We set aside an additional $10 million to incent local school districts to expand this middle college program.”
Comai adds that “we encourage employers to use available funds to establish more apprenticeships. Our program in Michigan is based on the German model of apprenticeships. We gave employers in Michigan access to more funds to train existing workers and to train new workers under this model. We know that 77 percent of high school students who participate in technical or trade programs go on to pursue higher education degrees. TIA oversees the administration of all these programs.”
As the Baby Boomers retire, many technical fields are being left with a shortage of skilled workers. In Michigan, this retirement wave is particularly impacting engineering jobs.
“We need more engineering talent,” Comai says. “This is very important for our manufacturing base. We work closely with the Michigan Manufacturing Association to design and fund programs to make sure that the whole supply chain is served. We even feature Mike Rowe of ‘Dirty Jobs’ in a series of videos in a public awareness campaign. He talks about how acquiring technical skills can provide a launching pad for a successful career. We like using Mike because he really likes Michigan.”
With a median wage of over $21 an hour, the skilled trades in Michigan provide young people with the stepping stones toward a lucrative and rewarding career, notes Comai. “The Skilled Trades Report that we commissioned here in Michigan showed that there will be continued demand and expansion for these types of jobs in the future.”
Site selection consultants who were interviewed for this story say that Michigan is on the right track with its newly placed emphasis on talent development, attraction and recruitment.
Kate McEnroe, president of Kate McEnroe Consulting in Atlanta, says that skilled workforce talent is actually a site selection advantage for Michigan. “Southeastern Michigan may be second only to Silicon Valley in the number of software application developers because of the technology going into our cars right now,” she says. “Research and design and production are all increasing in Michigan. The people there know how to build stuff and how to figure stuff out.”
Detroit, in fact, ranks 10th in the nation with a 3.8-percent increase in college-educated millennials from 2009 to 2013, according to HeadlightData.com. And Michigan’s University Research Corridor — which includes Michigan State University, the University of Michigan and Wayne State University — ranks first in the nation in medical degrees, second in advanced degrees in high-tech fields, first in total degrees awarded, and first in enrollment among the top eight university clusters in the country.
The three URC schools account for 93 percent of academic R&D in Michigan and contribute $16.8 billion annually to the state economy. Of their 1.2 million living alumni, more than half reside in the state.
“The kind of jobs that many employers say they don’t have enough workers to fill tend to be in the high-skilled trades, and Michigan is very good at producing these workers,” McEnroe says. “Employers always want to know — what do people know how to do, and what can you train them to do? Michigan excels in both of these areas.”
Evidence of Comeback Mounts
Brad Migdal, executive managing director of Transwestern Commercial Services LLC in Chicago, concurs. “Detroit is on its way back, and Michigan is on its way back,” he says. “There are great universities all over the state. I would be comfortable putting any manufacturing operation in Michigan. Michigan’s problem several years ago was that it was having a ton of people leaving the state, but now they are having people come back to the state. We are seeing a lot of investment being made in Michigan, and that’s because the critical skill sets are there. A lot of the skills that are related to advanced manufacturing can be found in Michigan.”
Migdal says Michigan has created a business climate that welcomes workers. “They have low taxes on homes, moderate income taxes, the cost of living is very affordable, and when you look at what you can buy for a home in Michigan versus the rest of the country, you can buy a much nicer house in Michigan,” Migdal says. “Unlike in many other states, people can afford to live close to where they work in Michigan. I think the foundation has been laid and the revitalization is now occurring in Michigan.”
Maureen Donohue Krauss, vice president of economic development for the Detroit Regional Chamber, says she sees evidence of this revitalization occurring all around Detroit and Southeast Michigan.
“I have been doing economic development work here for roughly 25 years and there has never been a more exciting time for the Detroit area,” says Krauss. “People want to talk to us about development opportunities now, and that is fantastic. We have an incredible amount of real estate activity going on now in the city and region.”
Office vacancy rates for the Detroit region dropped from a high of 18.5 percent in 2010 to 15.3 percent in the first quarter of this year, while industrial vacancy rates declined from 13.8 percent to 7.2 percent.
About 500,000 sq. ft. of new industrial space was built during the first quarter of 2015 in the Detroit region, while an additional 100,000 sq. ft. broke ground.
In the office sector, 47,000 sq. ft. of new space was delivered, while an additional 573,000 sq. ft. remains under construction.
“We are now hearing developers talk about spec building, and it has been a long time since that happened here,” Krauss notes. “GM announced over a $1-billion expansion of its technical center in Warren that will add over 2,000 jobs.”
Krauss also credits Gov. Snyder with “giving us better talking points. The elimination of the personal property tax is huge. We are number 12 in the nation in overall tax burden now, and that is up from the bottom five just a few years ago. The second big change is right-to-work. That gets people’s attention. That attracts both site consultants and real estate developers.”
Talent will be the ultimate decider, she adds. “We are producing 6,000 new engineers every year here in the region,” says Krauss. “We have the largest concentration of engineering talent in the country and the largest concentration of tool and die makers. But we are going to have a huge increase in demand for the skilled trades over the next 10 years, and we really need to work on this.”
Armed with the newly reorganized MEDC, the new Department of Talent and Economic Development, and the new Talent Investment Agency, economic developers like Krauss say that Michigan is now in its best position ever to foster and promote economic growth in all corners of the state.
Only this time it didn’t take RoboCop. It just took a lot of Michigan leaders who were willing to change the way the state does business and the way it treats those who create jobs.
This Investment Profile was prepared under the auspices of the Michigan Economic Development Corp.
For more information, contact the MEDC at 888-522-0103. On the Web, go to www.michiganbusiness.org.
