www.mybaycity.com February 12, 2011
Business Article 5670
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Michigan's Economic Future Explored by MSU, U-M Economists/Author

February 12, 2011
By: MyBayCity Staff


Michigan State University economics professor Charles Ballard, author of the book "Michigan's Economic Future: A New Look
 
Donald Grimes, a researcher at the University of Michigan's Institute of Labor and Industrial Relations

EDITOR'S NOTE: This article is adapted from an interview done prior to the election last year by Gwen Ifill of PBS with two Michigan economic experts, Michigan State University economics professor Charles Ballard, author of the book "Michigan's Economic Future: A New Look," published by Michigan State University Press, and Donald Grimes, a researcher at the University of Michigan's Institute of Labor and Industrial Relations.

GWEN IFILL: So, Professor Ballard, starting with you, why is the economy suddenly such a big issue in Michigan?

CHARLES BALLARD, Economics Professor, Michigan State University: Well, it's been an issue, a big issue for many, many years. For most of this decade, Michigan's economy has not done nearly as well as the rest of the United States' economy.

Our incomes on average have been relatively flat.

GWEN IFILL: Mr. Grimes, let's talk about the auto industry.

DONALD GRIMES, Institute of Labor and Industrial Relations: Well, it is the loss of jobs in the auto industry that is essentially undermining the Michigan economy.

Since 2000, we've lost about 150,000 jobs in the automobile industry, in the automobile factories, and that has resulted in a loss of about 450,000 jobs in the entire state in all industries.

So it is the auto industry that is the primary problem in Michigan. The housing industry has sort of ganged up and sort of joined in and caused problems within the last couple of years. But unlike the rest of the country, the problem is primarily the auto industry.

GWEN IFILL: Professor Ballard, let's take these different challenges one at a time, starting with the auto industry.

CHARLES BALLARD: Michigan has actually mirrored the rest of the country in recent years, because we have had a widening gap between those at the top and those at the bottom.

When we speak of the Michigan economy as a whole, it sounds like it's a monolith, but in fact it's a mosaic. And some parts of the Michigan economy have done very well. The upper 5 percent, the upper 20 percent of the income distribution have actually prospered.

DONALD GRIMES: Well, these jobs are not going to come back. The 150,000 auto industry jobs that we have lost are not going to come back ever.

And, in fact, we're going to continue to lose auto industry jobs. And there are a variety of reasons for that that go well beyond anything that any political statesman can do.

So the key question is to transform Michigan's economy into a higher-paying, more knowledge-based economy, also take advantage of our Great Lakes.

Michigan has more shoreline than any other state in the country, except for Alaska. That creates great recreational opportunities and also great possibilities to attract higher-income retirees and other professional workers who want to live near or on the water.

There are a lot of assets in Michigan, including two fine universities who you've dug up some economists from. And we can use those assets to build a good economy in Michigan, but it will look very different than the economy that Michigan had in the 1950s or even six years ago.

If you look around in Michigan, you'll see that there are shortages of nurses, and doctors, and other health care professionals. So that's just one industry that is growing now, will continue to grow.

GWEN IFILL: Let's talk about, Professor Ballard, about the fuel efficiency standards, which when the energy bill passed here not too long ago, there was a big discussion about that being good news for the economy or good news at least for the environment.

Is it considered to be good news, what Washington did on this issue, in Michigan?

CHARLES BALLARD: I think there are a lot of folks in Michigan who are very concerned about it, because of the automobile industry still, even after its shrinkage in recent years, is still a disproportionately large portion of the Michigan economy.

And if those auto companies struggle to meet the new fuel efficiency standards, that will be a continued challenge.

I actually think that it's not going to be a bad issue for Michigan over the long haul, because the long-term trajectory of the price of oil is almost certain to be upward. And that means the price of gasoline is going to go upward.

And that's going to force the automobile companies worldwide to make their cars more fuel-efficient, regardless of the CAFE standards that have been put forth from Washington.

GWEN IFILL: So, Mr. Grimes, what are the growth industries in Michigan?

DONALD GRIMES: Well, the health care industry, which is growing in Michigan -- in fact, it's grown, added jobs every year since 2000, despite the weak economy overall.

And if you look around in Michigan, you'll see that there are shortages of nurses, and doctors, and other health care professionals. So that's just one industry that is growing now, will continue to grow, and probably even will grow at a faster rate as the Baby Boomers age and need more health care services. So that's one industry.

Of course, the entire knowledge-based economy, which can continue to grow in Michigan, engineering, information technology services. I think you'll find a lot more activity within the sort of the tourism and leisure and hospitality services, again, as baby boomers retire and sort of purchase those services.

So there's a lot of great opportunities in Michigan, but they will not be manufacturing industry jobs in the auto industry. There will be a few of those jobs left, but the number of jobs in that industry is certain to shrink.

And nobody should mislead the residents of the state of Michigan into believing that those jobs are going to come back. They need to realize that those jobs are gone, and they need to understand that they need to engage in the new economy, go forward in the new economy, and build their lives around the new economy, and not the old economy.

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