A recent University of Michigan report suggests that the solution to Michigan’s economic malaise is to produce more college-educated citizens, which will then attract more job providers. Much like the "Cool Cities" scheme promoted by Gov. Jennifer Granholm, the idea is that potential employers make plant location choices based on which states have the "coolest" cities and coolest "knowledge" workers.
This premise is deeply flawed. The reality is that capital goes where it’s welcome, and an unfavorable tax and regulatory environment has shredded this state’s welcome mat. Businesses do not exist to pay taxes or even to provide jobs, but to make a profit for their owners. If an unfriendly tax and regulatory climate makes it impossible to accomplish that here, enterprises will move or never start up in the first place. The number of college graduates is irrelevant to that bottom-line reality. Michigan has plenty of qualified workers, but they are increasingly forced to move to places that do make capital welcome.
In addition, newly minted college graduates are highly mobile. Most haven’t started a family, don’t own property and have already been living away from home. Their friends may have moved and they’re eager to try new things. If forced to choose between underemployment here and a flourishing career elsewhere, those with "get up and go" will do so.
More state spending on higher education won’t change that. Indeed, research by Mackinac Center adjunct scholar Richard Vedder, Ph.D., shows that because higher tax burdens are associated with such spending, the result may be slower economic growth. That would mean even fewer job opportunities for college graduates in their home state.
This is happening here already: A few weeks after the University of Michigan report, a Michigan State University survey found that Michigan employers plan to hire 43 percent fewer new college graduates next year than they did this year. However, the survey found that nationwide such hiring is expected to grow between 5 and 8 percent.
Remarkably, the University of Michigan report ignores these realities, choosing instead to promote the dual myths that more diplomas will boost Michigan’s economy and increased public spending on university research will create technological innovations that yield long-term economic growth.
The latter proposition is as fallacious as the first. It ignores the fact that almost all growth-generating technological innovations came about in the private sector, unsubsidized by government. The steam locomotive, the radio, the light bulb, the automobile, the airplane, the telephone (and later the cell phone), the personal computer, the iPod — all were developed because private investors saw the promise of gain. This is not surprising: Why would anyone believe that the clumsy and myopic institutions of government, including public universities, can divine the next new thing better than private investors and entrepreneurs putting their own precious time and capital to work?
Examples are legion. A century ago, the Smithsonian Institute wasted the equivalent of millions of today’s dollars to subsidize an absurdly impractical flying machine developed by Samuel Pierpont Langley, its director. Nine days after his "aerodrome" splashed ignominiously into the Potomac River, two brilliant bicycle sellers named Wright flew the first real airplane, developed without any government money. Here’s another: Almost a century later, a multi-billion dollar, multi-decade government "human genome project" was made irrelevant when a private entrepreneur mapped the human genome sequence in just a few years at a fraction of the cost.
The reality is that Michigan’s economic malaise has nothing to do with a qualified worker "supply shortage." Instead, excessive regulatory and tax burdens have created a shortfall in demand for the services of those qualified workers. Self-serving calls for more spending on ivory tower research, or for increasing the number of college graduates, won’t reverse that trend. In fact, if these practices make our tax burden even less competitive, the effect will be just the opposite.
Here’s a better idea: Increase the demand for skilled workers by reducing burdensome business regulations and passing significant supply-side tax relief. When this state becomes a hotbed of job opportunities, able youngsters will have ample incentive to make themselves qualified and will successfully do so. On the other hand, if bad public policies wreck job opportunities here, it won’t matter how many qualified applicants our educational system cranks out — they’ll just leave anyway.
Jack McHugh is a legislative analyst for the Mackinac Center for Public Policy.