Beat Down Economics

The beating continues until morale improves.

That's the central message of a thought-provoking new study titled Michigan's Economic Transition: Toward a Knowledge Economy.

The report, published by the Center for Local, State, and Urban Policy at the University of Michigan, doesn't ignore the fact that the Great Lakes State has shed more than 274,000 manufacturing jobs in the past eight years. But it strives to make the case that "descriptions of Michigan's economy as imploding are inaccurate and counterproductive."

Indeed, the 12-page study cites numerous trends to suggest that the state is in the midst of an intense economic transformation. Not an economic meltdown. Based on data from the U.S. Census Bureau and the U.S. Bureau of Labor Statistics, the report highlights job growth and other positive news in several key 'knowledge economy' sectors such as finance, healthcare, and education. Highlights of the findings include:

Michigan's financial sector, which includes banks and insurance companies, experienced employment growth in 7 of the last 10 years and generated approximately 12,000 new jobs.

The state's professional and business services sector demonstrated 7 percent job growth in the past decade – including three straight years of employment gains since December 2003 – and added some 39,000 new jobs overall. The sector includes industries such as accounting, consulting, and administrative support services.

The education and health services sector, which includes schools and colleges, hospitals, and a variety of health care professionals, has experienced eight straight years of job growth. Overall growth, in fact, exceeds 20 percent since 1996 and has generated some 101,000 new jobs.

"Declines in manufacturing employment accompanied by increases in the new economy sectors have resulted in a more balanced and diversified employment base for the state," the report says.

Growth Amidst Destruction

Findings also include a series of fun facts which suggest that Michigan has the capacity to accelerate its transition from a de-industrializing Rust Belt state to a much more competitive force in the global knowledge economy. The state is a global leader, for instance, when it comes to graduating highly educated scientists and engineers – key components of the knowledge economy workforce – from top tier universities. Michigan ranks 9th nationally, in fact, in the number of patents awarded per 1,000 individuals working in the fields of science and engineering, demonstrating an impressive ability to generate and license the key commodity in the knowledge economy: new ideas.

Several other signs suggest that Michigan is well positioned to compete and win in the modern marketplace. The state ranks 1st out of 50 states in total jobs generated by new startups; 4th nationally in privately funded research and development; and 2nd nationally for jobs in high-tech sectors as a percentage of total state employment.

These and other stats compile a convincing case that "Michigan is undergoing economic diversification during a period of transition from a dying economic model to an emerging one."

Time for an Attitude Adjustment

The new UM report isn’t the first effort to describe Michigan's economic evolution from the Industrial Era to the Digital Age. An October 2006 analysis published by Public Policy Associates, a Lansing-based think tank, revealed that employment opportunities are on the rise in the recreation, business support, and healthcare industries while they decline at auto manufacturing plants and steel mills. In fact, the report found that, of the 122,500 jobs Michigan added during the past four years, some 55,000 were generated in sectors that represent new economy industries. Think design, computer tech, and finance.

The Vital Center, a a comprehensive study published in October 2006 by the Brookings Institution in Washington D.C. argues that Michigan, and the greater Midwest region as a whole, has a solid foundation on which to build the next generation economy. As evidence, the report cites, among other things, the region's globally unique system of higher education; its leadership in emerging global industries such as alternative energy, bioscience, and clean technology; and the Great Lakes, the world's largest freshwater ecosystem and an unmatched environmental asset that powers a distinct quality of life.

So Michigan, it would seem, has all it takes to be an influential player in 21st century society and the state appears well on its way. The trouble is media reports, policy debates, and popular opinion is dominated by the idea that the state is an economic disaster zone, according to the recent UM report. And that negative sense of pessimism and self pity, the authors suggest, now threatens to hold the state's resurgence down.

"If the way forward to a new economy requires talent, entrepreneurialism, innovation, risk-taking, and a more educated workforce," the report states, "then focusing only on negative news will hinder the state's ability to take the positive steps required to reach that brighter future."

"The sense of gloom has to be overcome," the report continues. "The self-image of a rust-belt wasteland has to be replaced by a more complete view of a state in transition. The new economy requires vision, optimism, and hope."

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Andy Guy, the managing editor at Rapid Growth Media, is a journalist who lives in Grand Rapids. He's also a project director at the Michigan Land Use Institute and authors a blog titled Great Lakes Guy.

Photos:

The housing market continues to suffer (courtesy of istock)

Sections of the Michigan economy dealing with education grew in the last decade (courtesy of istock)

The Van Andel Institute in Grand Rapids anchors that city's move to medical research as a new economic model for growth - photo by Brian Kelly