Rick Haglund: Newly empowered Democrats must prioritize talent development over business attraction

December 5, 2022 4:46 am

Gov. Gretchen Whitmer during business and jobs bill signing in Detroit on Dec. 20, 2021 | Ken Coleman

The last time Democrats controlled Michigan state government, personal computers were just beginning to enter American homes. Electric cars were a laboratory experiment. Bay City native Madonna, who will become Medicare eligible next year, had just released her first album.

And the iPhone, which transformed how we communicate with each other, wouldn’t be introduced for another 24 years. Our dumb phones were tethered to Ma Bell’s wires. 

The world has radically changed since 1983, the year Michigan Democrats took over the Legislature and the governor’s office. The Dems have a rare opportunity to implement an economic development strategy that recognizes the state’s prosperity depends on capitalizing on sweeping technological advancements.

That involves rapidly shifting Michigan’s business-focused economic strategy to one centered on people and talent. 

It won’t be an easy task in a state that is largely stuck in a 1980s economic development mindset.

For decades, Michigan’s strategy has focused on improving the business climate and luring factories with taxpayers’ money. That effort was turbocharged last year by the creation of a $1 billion-plus Strategic Outreach and Attraction Reserve Fund, which primarily supports electric-vehicle investment.

But an aging population and dwindling workforce threaten to derail Michigan’s business-focused approach to growing the economy, University of Michigan economists caution in a new state economic forecast.

Simply put, Michigan is running out of workers as deaths threaten to surpass births, more people are leaving than moving into the state, and fewer working-age adults are in the labor force.

It won’t matter how many new businesses the Michigan Economic Development Corp. lures to the state if there isn’t a big enough and smart enough workforce to populate them.

“In 2019, we were warning that Michigan faced a future of persistent labor shortages if historical trends continued, the U-M economists wrote. “We are even more concerned now than we were back then about the long-run speed limit that sluggish growth in the labor force will impose on Michigan’s economy.”

U of M is forecasting that the state’s population will grow at a third of the national rate through 2050. Deaths will exceed births by about 9,600. Michigan’s employment growth rate will be less than half the national rate over the next 28 years.

A more immediate worry is the lack of adults in the state who are working.

Michigan’s labor force participation rate — the percentage of working-age adults who are working or looking for work — has fallen to its lowest rate in more than 20 years.

Just 60% of Michigan working-age adults were in the workforce in October, down from 68.8% in 2000, according to the U of M forecast. Michigan ranks 40th in the country in the labor force participation rate.

Some of the decline is due to the devastating COVID pandemic. Many have left the workforce for a variety of reasons, including fear of getting sick and lack of childcare.

But the problem goes much deeper, according to a new report from a consortium of West Michigan business leaders. High incarceration rates, substance abuse problems, declining higher education enrollment and lack of technical skills all are keeping people out of good jobs, the study by Talent First Inc. found.

A University of Michigan student on Oct. 3, 2022 | Ken Coleman

Michigan experienced the largest drop in higher education enrollment this fall of any state, the report said.

That’s a frightening development at a time when most middle-class jobs require a higher level of education than in the past.

Speaking last week at a computer chip plant in Bay City that’s adding 150 jobs, President Joe Biden vowed that Michigan “will once again become the manufacturing hub of the nation.”

But these positions at the South Korean-based SK Siltron plant aren’t yesterday’s factory jobs in which you could walk into an auto plant with a high school diploma, or less, and almost immediately become a member of the middle class.

Thirty percent of SK’s new workers will be engineers with at least four-year degrees. SK said the remaining 70% will be “highly skilled” employees. The average wage in the plant will be $1,863 a week, or nearly $97,000 a year, according to the MEDC.

And General Motors, which over the past decades has provided hundreds of thousands of good-paying factory jobs, is transforming into a software company that happens to make cars.

GM has slashed its hourly workforce over the past four decades and now employs more salaried workers than hourly employees in the United States. The automaker had 48,000 salaried and 46,000 hourly workers in the U.S. in 2020, according to its latest annual report.

Some 24,000 engineers and other highly skilled employees work at GM’s Warren technical center, where the average wage is $120,000 a year.

Michigan will not continue to be the center of an auto industry that’s rapidly transforming to a software-dominant electric vehicle business unless it can produce more talent.

There is some good news on that front. Under Gov. Gretchen Whitmer’s leadership, tens of thousands of frontline workers during the COVID pandemic and others without degrees are getting free community college tuition. And a new state scholarship program offers students up to $5,500 a year to pursue a four-year degree.

But newly empowered Democrats must flip the state’s economic development script, giving precedence to workforce development over business attraction.

“Michigan’s economic future faces a major hurdle in the form of a slow-growing and aging population, U of M economists said. “Addressing those demographic challenges will be a key task in establishing the foundation for Michigan’s future prosperity.”


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Rick Haglund
Rick Haglund

Rick Haglund writes the "Micheconomy" column for the Michigan Advance. He's a former reporter and business columnist for Booth Newspapers, now the MLive Media Group, with extensive experience covering Michigan’s economy and the auto industry. He now works as a freelance writer based in Southeast Michigan.