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Published in Economic Development

Further investment needed to improve Michigan’s national economic ranking, according to business roundtable analysis

BY Thursday, January 20, 2022 12:01am

Michigan needs to make further investments to become a top 10 state in economic performance despite the “huge improvement” and economic growth over more than a decade since the Great Recession, according to an analysis by Business Leaders for Michigan.

Michigan ranks 29th nationally in the business roundtable’s analysis that rates states against a set performance metrics. That’s a large jump from when the state ranked 49th in the first Business Leaders for Michigan benchmarking report in 2009.

Jeff Donofrio COURTESY PHOTO

Still, the state struggles to keep up with or grow faster than other states, according to Business Leaders for Michigan.

“That’s a huge improvement from where it was 12 years ago. We’ve gone from the bottom to the middle, essentially. From the middle to the top, though, is going to be harder,” Business Leaders for Michigan CEO Jeff Donofrio said in an interview with MiBiz.

“We need smart investments in the coming months and consistent long-term strategies that focus on decades-long growth that won’t fall to the wayside depending on who is in office. Systemic, sustained changes — including in workforce and talent development and customer service — are necessary to change our trajectory from being an average state, to being top 10,” he said. “The problem is that the top 10 states are growing faster than us and there are a lot of fast movers that are even behind us in some cases.”

Tennessee, for instance, is a state “growing at a clip that is going to surpass us soon if we don’t do things differently, if we don’t make strategic investments,” Donofrio said.

As other states work to improve their economic climates, Michigan needs to make consistent investments in areas such as talent development and attraction, labor force participation, improving K-12 education, and preparing sites for major economic development projects, said Donofrio, who served as director of the state Department of Labor and Economic Opportunity under Gov. Gretchen Whitmer.

Formed at a time when the state was mired in a deep economic downturn, Business Leaders for Michigan seeks to make Michigan a top 10 state for jobs, education, prosperity and economic health.

In benchmarking Michigan against other states in eight key metrics, Business Leaders for Michigan found that the state presently ranks:

  • 41st in labor force participation
  • 35th in education attainment of a college degree or training beyond high school
  • 19th in talent migration
  • 20th in new business creation
  • 15th in business climate perception, with a second-place ranking in three-year growth rate
  • 34th in poverty
  • 36th in GDP per capita.
  • 35th in median household income

Labor force participation, business creation, educational attainment and net migration in and out of the state are new metrics to the annual benchmarking report. They were added to reflect issues “that are really going to drive economic health, where we’re headed and how healthy the economy is overall,” Donofrio said.

The top 10 states in the annual Business Leaders for Michigan benchmarking report are Utah, Washington, Colorado, Texas, Massachusetts, Virginia, California, Oregon, Florida and Arizona.

Those states are succeeding “because they have strengths in two areas: In education and talent, and competitiveness for economic growth,” Donofrio said. Top 10 states have high percentages of people with college degrees or certifications “that are really driving their economies and serving as a talent source for companies that are looking where to locate, where to expand,” he said.

Putting funding to work

To drive further improvements, Business Leaders for Michigan suggests that the state use one-time pandemic relief funding from the American Rescue Plan Act to invest more in areas such as child care, broadband access and affordable housing that would remove barriers to work and increase the labor force participation. As well, the state could invest deeper in workforce training and implement a long-term economic development strategy focused on improving competitiveness in site development, customer service, incentives and talent.

The passage late last year of bipartisan legislation to create a $1 billion fund to assist major economic development projects in Michigan made “big leaps” in improving the state’s competitiveness as high-tech industries advance and the auto industry in particular electrifies, Donofrio said.

Even with the action, the state needs to do more involving site preparation and other areas.

“That’s a great start, but site development needs to happen over the long term,” Donofrio said. He noted that Tennessee started investing 20 years ago in a site that Ford Motor Co. and SK Innovation Co. selected last fall to build facilities that manufacture both electric vehicles and batteries.

“That’s something that takes persistence. It takes discipline, and that’s not something that we’ve had in the past,” he said. “We have to continuously evaluate: Are we competitive on sites? Do we have the shovel-ready facilities that employers are looking for, both to expand and to locate in this state? We need a continual investment in that and we need a continual focus on evaluating ourselves versus other states. That’s a really great first step, and it’s a big first step, but it has to be not the last step.”

R&D tax credit

Business Leaders for Michigan also is tracking the proposed restoration of a research and development tax credit in Michigan to make the state more competitive in pursuing high-tech business investments.

Legislation under consideration in Lansing and sponsored by Rep. Matt Hall, R-Portage, would allow companies to claim a 15-percent tax credit on what they invest in R&D in Michigan. As written, the legislation would apply the R&D tax credit to the advanced automotive, semiconductors and life sciences industries.

“The thing about the business environment and competing for investments is that nothing is ever carved in stone. You have to be nimble. You have to look at what is going to put you at a competitive advantage versus those who are seeking those jobs and investments just as hard as you,” Donofrio said. Business Leaders for Michigan hasn’t taken a formal position on Hall’s bill.

Hall told fellow lawmakers at a Wednesday legislative hearing that the legislation would build on the bipartisan push to enact historic legislation last month that created the Strategic Outreach and Attraction Reserve Fund.

“We started the process of putting Michigan in a place to compete across the country for major manufacturing projects,” Hall said during a House Tax Policy Committee hearing on House Bill 5601.

“I’m hoping it will be part of a second wave of legislation here that continues in that spirit of working together, putting politics aside, to put Michigan in the best place possible to land the jobs of tomorrow,” Hall said.

Editor’s Note: This story has been clarified to say that Business Leaders for Michigan hasn’t taken a formal position on House BIll 5601.

Read 2327 times Last modified on Thursday, 20 January 2022 08:19
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