Rick Haglund: Below the surface, Michigan’s economy has serious flaws

Let’s start with some good news: Michigan has the 13th best economy in the country, far surpassing the performance of surrounding Great Lakes states, according to a new report.

The study released Monday by online financial service WalletHub found Michigan leads Wisconsin (23rd), Indiana (28th), Illinois (33rd) and Ohio (36th), based on 28 key indicators.

Michigan even outpaces Minnesota (15th), which has been widely considered to have the strongest economy in the Great Lakes region.

The top five states in the WalletHub study are, in order, Washington, Utah, Massachusetts, California and Colorado.

But — and you probably knew this was coming — Michigan’s high overall ranking masks some serious economic shortcomings. The study shows Michigan needs to make a lot more progress in creating a prosperous economy that works for everyone.

WalletHub’s study combines more than two dozen data points into three equally weighted categories: economic activity, economic health and innovation potential.

Michigan ranks an impressive fourth among states in innovation potential, which includes the number of high-tech jobs, the share of workers in STEM (science, technology, engineering and math) occupations, amount of industry research and development per capita, and number of patents by independent inventors.

Attribute that largely to Michigan’s auto industry, which is working feverishly to develop electric vehicles and self-driving cars. There are more than 2,200 research, design and testing facilities in Michigan, and 113,000 engineers working in the state.

But Michigan’s overall ranking was dragged down by subpar scores in economic activity and economic health.

The state ranks 22nd in economic activity, which includes growth in gross domestic product, share of fast-growing firms to total businesses, gross public debt as a share of GDP, business startup activity and exports per capita.

Michigan places a dismal 31st in economic health, which includes more than a dozen employment, income, poverty, health care, housing and business growth measures.

These are the factors that matter most to the state’s nearly 10 million residents.

Former Gov. Rick Snyder, who was term-limited in 2018, spent much of his eight-year tenure touting Michigan’s recovery (“the Comeback State!”) from the Great Recession, which plunged General Motors, Chrysler and dozens of major auto suppliers into bankruptcy.

Snyder’s economic focus was largely on business climate issues, such as cutting corporate taxes, trimming regulations and attacking organized labor through such schemes as making Michigan a Right to Work state.

But despite those efforts, Michigan didn’t gain much ground against other states for being business-friendly during Snyder’s years in office.

Michigan ranked 17th in the conservative Tax Foundation’s Business Tax Climate Index in 2010, former Gov. Jennifer Granholm’s last year in office. The state jumped to 13th in the Tax Foundation’s 2019 index, based on 2018 data. But that’s right where Michigan stood in the 2016 index, which used 2015 data.

And while job growth boomed during the Snyder years, Michigan still has 244,000 fewer jobs now than it did 19 years ago, when payroll jobs topped out at nearly 4.7 million in June of 2000.

That’s due in large part to the shrinkage of jobs in the auto industry and manufacturing overall, areas where Michigan policymakers have for decades centered their economic development efforts.

Michigan was among the wealthiest states in the country throughout much of the 20th century, thanks mostly to the high-paying auto industry. But hundreds of thousands of those jobs have been lost in recent decades.

And starting wages for assembly line jobs today aren’t much higher than what some fast-food and retail chains are paying.

As a result, Michigan has fallen to a dismal 34th in median annual family income at $54,909. That’s more than $13,000 a year below median family income in Minnesota, which had the highest income in the region at $68,388 in 2017, the latest available data.

Low-wage working households on the rise in Michigan

For years, mostly Republican lawmakers and governors have told us tax cuts would lead us to prosperity by putting more money in our pockets and giving businesses more capital for job-producing investments.

But instead, we have low incomes, poor-performing schools, the worst roads in the country and communities struggling to provide basic services.

It shouldn’t come as a surprise then that Michigan ranks 31st in spending per capita on K-12 education and 45th in highway spending, according to a report earlier this year by the nonpartisan Senate Fiscal Agency.

Apparently, we’re so poor that one GOP lawmaker has proposed selling the Blue Water Bridge and freeway welcome centers to pay for road repairs.

But business leaders, who’ve been some of the biggest beneficiaries of tax cuts, are now calling for more investment in education, roads and cities.

They know that the increasingly competitive, technology-infused business world requires educated workers who must continue to learn throughout their careers.

Michigan comes up short. A WalletHub study earlier this year ranked Michigan 30th among the most and least educated states. Minnesota, with the highest median family income in the Great Lakes region, ranked eighth.

Business leaders also know that young, educated workers want to live in vibrant communities with a good transportation infrastructure. Right now, Michigan can’t compete with places like Denver, Minneapolis and Seattle.

It’s important to have reasonable taxes to compete for economic development. But taxes also must provide a state with enough revenue to properly fund education, transportation infrastructure and communities.

Cutting them is the last thing Michigan should be considering now.