More Investment Needed to Improve Michigan’s National Economic Ranking, Business Roundtable Analysis Shows
Michigan needs to invest more to become a top 10 state in terms of economic performance despite the ‘tremendous improvement’ and economic growth in more than a decade since the Great Recession, according to an analysis by business leaders from the Michigan.
Michigan ranks 29th nationally in the Business Roundtable analysis that rates states against a set of performance measures. That’s a jump from when the state ranked 49th in Michigan’s inaugural Business Leaders Benchmarking Report in 2009.
Still, the state is struggling to keep up or grow faster than other states, Michigan business leaders say.
“It’s a huge improvement from where it was 12 years ago. We went from the bottom to the middle, basically. However, from the middle to the top it will be more difficult,” 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 apart depending on who’s in power. Systemic and sustained changes – including in workforce and talent development and customer service – are needed to change our trajectory from an average state to a top 10,” he said. declared. “The problem is that the top 10 states are growing faster than us and there are a lot of fast movers who are even behind us in some cases.”
Tennessee, for example, is a state “growing at a rate that will soon overtake us if we don’t do things differently, if we don’t make strategic investments,” Donofrio said.
As other states strive to improve their economic climate, Michigan needs to invest consistently in areas such as developing and attracting talent, engaging in the workforce, 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 Gretchen Whitmer.
Formed at a time when the state was mired in a deep economic downturn, Business Leaders for Michigan seeks to make Michigan one of the top 10 states for jobs, education, prosperity, and economic health.
Comparing Michigan to other states in eight key metrics, Michigan business leaders found that the state currently ranks:
- 41st for labor market participation
- 35th in education college degree or training beyond high school
- 19th in talent migration
- 20th in business creation
- 15th in perception of the business climate, with a second place in growth rate over three years
- 34th in poverty
- 36th in GDP per capita.
- 35th for median household income
Labor force participation, business creation, educational attainment, and net migration in and out of state are new measures in 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 Michigan Business Leaders Benchmarking Report are Utah, Washington, Colorado, Texas, Massachusetts, Virginia, California, Oregon, Florida and Arizona .
These states succeed “because they have strengths in two areas: education and talent, and competitiveness for economic growth,” Donofrio said. The top 10 states have high percentages of people with college degrees or certifications “that really boost their economies and serve as a source of talent for companies looking for where to set up shop, where to grow,” he said. .
Putting finance to work
To make further improvements, Michigan business leaders suggest the state use one-time pandemic relief funding from the American Rescue Plan Act to invest more in areas such as child care, childcare, broadband access and affordable housing that would remove barriers to work and increase labor market participation. In addition, the state could invest more in training the workforce and implement a long-term economic development strategy focused on improving competitiveness in site development, customer service , incentives and talents.
The passing of bipartisan legislation late last year to create a billion-dollar fund to help major economic development projects in Michigan made “great strides” in improving the state’s competitiveness as high-tech industries advance and the auto industry in particular becomes electrified, Donofrio said.
Even with the action, the state needs to do more involving site preparation and other areas.
“It’s a good start, but the development of the site must be done over the long term,” said Donofrio. He noted that Tennessee began 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.
“It’s something that requires perseverance. It takes discipline, and it’s not something we’ve had in the past,” he said. “We have to constantly assess: Are we competitive on the sites? Do we have the ready-to-use facilities that employers are looking for, both to expand and to settle in this state? We need continued investment in this area and we need to continually focus on our own benchmark against other states. It’s a very good first step, and it’s a great first step, but it shouldn’t be the last.
R&D tax credit
Business Leaders for Michigan also supports the proposed reinstatement of a research and development tax credit in Michigan to make the state more competitive in pursuing investment from high-tech companies.
Legislation being considered at Lansing and sponsored by Rep. Matt Hall, R-Portage, would allow companies to claim a 15% tax credit on what they invest in R&D in Michigan. As drafted, the legislation would apply the R&D tax credit to high-tech automotive, semiconductor and life science industries.
“The problem with the business environment and the competition for investment is that nothing is ever set in stone. You have to be nimble. You have to look at what’s going to give you a competitive edge against those who are looking for those jobs and investments as hard as you are,” Donofrio said.
Hall told fellow lawmakers at a legislative hearing on Wednesday that the legislation would build on the bipartisan push to enact landmark legislation last month that created the Outreach and Attraction Strategic Reserve Fund.
“We have begun the process of setting up Michigan to compete across the country for major manufacturing projects,” Hall said during a House Tax Policy Committee hearing on Bill 5601.
“I hope this will be part of a second wave of legislation here that will continue in that spirit of collaboration, putting politics aside, to put Michigan in the best possible place to land the jobs of tomorrow,” said Lobby.