Study shows Michigan ready for future economy: 19th overall, state most improved
BYLINE: John Gallagher, Detroit Free Press
Feb. 28--Ready for some good news about Michigan's economy?
A new study that tracks how states are preparing for the knowledge-based economy of the future reported Tuesday that Michigan has made more progress since 1999 than any other state.
Michigan ranked 19th overall in the 2007 State New Economy Index, up from 34th place in the 1999 version of the report and up from 22nd place in the 2002 index. That 15-place improvement since 1999 was the most by any state.
Robert Atkinson, president of the Washington, D.C.-based Information Technology and Innovation Foundation and chief author of the index, said Michigan is doing a lot right in spite of its high unemployment rate and its troubles in the domestic auto industry.
"The shift is a real shift," he said Tuesday, citing high investment in research and development and the influx of highly trained immigrants into Michigan as high points for the state.
Patrick Anderson, an East Lansing-based economist who has studied innovation in Michigan, said he agrees with the basic findings of the index.
"Beneath the deeply troubled exterior of the Michigan economy, there are some overlooked areas of strength," Anderson said. "And one of them is the deep pool of high-tech talent and of companies that are already exploring and pioneering in the new economy."
Michigan's rise in the index since 1999 is not an exact comparison because new variables were added for both the 2002 version and the newest one. Even so, Atkinson said the state's progress appears real.
The 92-page report was produced by Atkinson's group and the Kansas City-based Ewing Marion Kauffman Foundation.
The 2007 index measured 26 variables, including use of computers in schools, the number of state residents who use the Internet, the amount of research and development spending by state companies, immigration of highly educated workers and the amount of venture capital available.
Michigan scored surprisingly high in some categories and not so well in others.
Attracting workers
Belying fears of a brain drain because of young people leaving the state, Michigan ranked 6th among the 50 states in attracting highly educated workers.
Atkinson said that reflects the influx of engineers coming to Michigan from nations such as China, Korea and Taiwan. They come for jobs not only in the automotive industry but also in life sciences and other fields.
"That's a great number," Atkinson said. "Most people don't think of Michigan as a haven, but that's a really very good number."
Michigan's best single category was electronic government, measuring how much use government makes of digital technologies, such as letting citizens pay taxes or renew drivers licenses online. Michigan ranked 1st in the nation in this e-government category.
"Technology is no longer a luxury -- it is a necessity," said Michigan Secretary of State Terri Lynn Land. "States must embrace technology's boundless potential to ensure a dynamic, prosperous future. In Michigan, we are using it to the advantage of our customers."
Among its other above-average categories, Michigan ranked 4th in industry investment in research and development, 10th in foreign direct investment in the state, and 11th in managerial, professional and technical jobs.
Michigan lagged behind in some other categories. The state ranked 40th in entrepreneurial activity, 32nd in the use of technology in schools and 30th in new stock offerings.
In this 2007 index, Massachusetts led all 50 states, followed by New Jersey, Maryland, Washington and California.
West Virginia ranked at the bottom, with Mississippi 49th, South Dakota 48th, Arkansas 47th, and Alabama 46th.
Political implications
The study might have political implications in Michigan's current debate over the state's budget deficit. Gov. Jennifer Granholm's plan to tax services to invest in job training and other economic programs is something Atkinson said his data support in general over a simple tax-cutting strategy.
"If you want to look at a state that followed the cut strategy, it's basically Arkansas in the last 15 years," Atkinson said. "And they increased their rank by two by following that strategy, from 49th to 47th. That strategy is really not a very effective strategy."
He added, "States that have lagged behind are typically those who have not invested in education and skills and infrastructure."
At the same time, though, he cautioned that states also must improve their business climate conditions, something that critics of Granholm say the governor has been slow to do. Critics are particularly opposed to her plan to tax services, saying it would hurt businesses rather than help them.
Contact JOHN GALLAGHER at 313-222-5173 or gallagher@freepress.com.
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