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Challenges and Opportunities Facing Michigan’s Economy

Challenges and Opportunities Facing Michigan’s Economy. CLOSUP Conference February 9, 2009. John Austin, Director Southeast Michigan New Economy Initiative Brookings Institution Non-Resident Senior Fellow Vice- President, Michigan State Board of Education. METROPOLITAN POLICY PROGRAM.

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Challenges and Opportunities Facing Michigan’s Economy

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  1. Challenges and Opportunities Facing Michigan’s Economy CLOSUP Conference February 9, 2009 John Austin, Director Southeast Michigan New Economy Initiative Brookings Institution Non-Resident Senior Fellow Vice- President, Michigan State Board of Education METROPOLITAN POLICY PROGRAM THE BROOKINGS INSTITUTION

  2. From Industrial Powerhouse… To “Tech Belt” Region is in Transition

  3. To America’s “Freshwater Coast” Cleveland Minneapolis Milwaukee Detroit

  4. Advanced manufacturing joined by growing knowledge services – Michigan knowledge industry GREW last 5 years Seattle Portland Twin Cities Boston Hartford Detroit Bridgeport-Stamford New York Toledo Cleveland San Francisco Dayton Pittsburgh Philadelphia Chicago Columbus Baltimore Indianapolis Washington Cincinnati Denver San Jose Kansas City St. Louis Charlotte Los Angeles Knoxville Phoenix San Diego Atlanta Motor vehicle parts Finance Dallas Information Technology Aerospace New Orleans Houston Pharmaceuticals Tampa Legal Services Measuring Instruments Energy Miami Biomedical devices Accounting/Consulting Industry Concentrations, 2005 High Value Leading-edge* Manufacturing Industries Fast Growing Leading-edge Service Sectors Source: WTO; BEA * Industry share of world exports > 1.5 times U.S. share of world exports Metro areas displayed specialize in and contain at least 1% of U.S. Industry compensation

  5. Advanced manufacturing sector significant share of output – sector is wildly productive, but hence directly produces less jobs Manufacturing Output and Employment Data Source: U.S. Department of Labor, Bureau of Labor Statistics Graph Source: William Testa, Chicago Federal Reserve Letter Challenges and Prospects Report, 2004

  6. Michigan has a factory economy legacy of low education attainment levels relative to new economy leaders… Share of State Population with a Bachelors’ Degree or Greater, 2006 Map Source: B. Affolter-Caine: 2006

  7. Manufacturing and auto restructuring also means lots of dislocations… Unemployment Rate, 2005 Map Source: B. Affolter-Caine: 2006

  8. Like sister states, Michigan suffering from the “brain-drain” of college educated 25-39 year olds… Net Migration Rate, 1995-2000 Source: U. S. Census Bureau, Census 2000, special tabulation.. The young are those who were aged 25 to 39 in 2000; the single are those who were never married, or were widowed or divorced in 2000; and the college educated are those who had at least a bachelor's degree in 2000.

  9. Michigan and the region lack capital to commercialize the large number of new ideas generated in the region Great Lakes Share of Venture Capital and Awarded Patents Compared to U.S. Source: U.S. Census Bureau, 2000 and 2005 American Community Survey Notes: Patents issued include utility patents and other types of U.S. documents (i.e., design patents, plant patents, reissues, defensive publications, and statutory invention registrations). Origin of patent determined by residence of first-named inventor.

  10. Along with culture, industrial structure, and talent loss mean new knowledge is not fueling entrepreneurship Entrepreneurial Activity Rank, 1990-2001 Map Source: B. Affolter-Caine: 2006

  11. The region’s large employers and labor forged unique American model of employer-based health care and pensions – today undermines competitiveness and hurts worker adaptability Union Membership in 1982 Map Source: B. Affolter-Caine: 2006

  12. But Michigan and region have assets that matter in knowledge economy – 1st as center of huge market

  13. Michigan produces 4% of all US intellectual property, in region that produces 1/3 of all US new ideas and technologies Patents per 100,000 Jobs, 1999 Source: A. Reamer, L. Icerman and J. Youtie, Technology Transfer and Commercialization: Their Role in Economic Development, 2003

  14. GLER Research Universities Canadian Research Extensive CIC Region is also home to the largest network of learning institutions and most powerful educational infrastructure on earth… Map Source: B. Affolter-Caine: 2007

  15. Including 20 of 100 top-ranked universities in the world, more than any other region… Great Lakes’ Top 100 Ranked Universities in the World Source: Institute of Higher Education, Shanghai Jiao Tong University, 2005

  16. A center of talent generation - 41% of all US-Canada degrees are produced in Great Lakes…

  17. …punch above our weight in the sciences, engineering, MBAs – Michigan produces 4.6% of all US engineers Great Lakes Regional Share of Degrees Conferred of Total U.S. Source: U.S. Census Bureau, 2000 and 2005 American Community Surveys

  18. Foreign born immigrants have offset some domestic population losses, and are relatively well-educated Share of Foreign-Born Residents with a BA Degree or Greater, 2005 Map Source: B. Affolter-Caine: 2006

  19. Over 33% of all new tech companies in Michigan last 10 years – started by immigrants

  20. Comparative advantage in key sectors Advanced Manufacturing: 44% of US and Canada come from Great Lakes New Energy: Transport systems, batteries, fuel cells, biofuels, wind, solar, nuclear if we go there Creative economy – arts, media, music, design Freshwater technology is a $490 billion dollar a year business – Michigan poised to lead Health, Medical Bioscience centers of excellence/leadership - IT (invented the Internet) Trade/logistics/security – at center of global market

  21. Percentage of Total Can/US Bilateral Trade This trade is concentrated in the Great Lakes Region – 62% of all US Canada Trade Canada/U.S. Combined Exports Gateway of Global Trade Nearly 39 percent of U.S.-Canadian trade with the world. GLER Share EU: 30.5% Mexico: 18.8% Japan: 22.9% Chin/HK: 22.9% Over $500 billion in two-way merchandise trade flow Over 110,000 Canadians commute to work in U.S. cities daily Ambassador Bridge two way trade equals all U.S. exports to Japan Compromising restrictions post-9/11 Canada is top trade partner for 37 of 50 states

  22. Michigan as “Great Lakes State” has natural infrastructure central to economic growth in North America 1/5 World’s Freshwater 10,000 miles of coast Rich Natural Amenities: Forests, Rivers and Lakes Environmental and Historical Recreation/Tourism Opportunities for Water-Based Development Lead in “Clean-Green Technologies”: freshwater research, education and technology

  23. Major metros, university towns and places with special quality of life are the talent magnets and activity centers Share of County Population with a Bachelors’ Degree or Greater, 2000 Map Source: B. Affolter-Caine: 2006

  24. NEI Areas of Focus Areas of economic comparative advantage for SE Michigan Areas that are fundamental, generic enablers of economy TALENT Creative Economy Green – Blue “Sustainability” Sector Global Detroit/Trade/Border Auto Transformation Health - Bio-Medical Entrepreneur Nurturing Place-making for talent Workforce/Education Venture Capital CULTURECHANGE INNOVATION

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