Office of the Vice President for Global Communications

Tuesday, September 8, 2009

Recession speeds change: More jobs require degrees, others cut

Through months of recession, the U.S. economy gained jobs requiring a higher education while shedding millions of low-education jobs, according to the second annual report by Michigan Future Inc. and a U-M economist on the state's transition to a knowledge-based economy.

In the first 13 months of the current recession that began in December 2007, the United States lost 3.75 million jobs in low-education industries such as manufacturing, construction, retail and hospitality, while gaining 163,000 jobs in high-education attainment industries. The number of jobs requiring higher education peaked in August 2008, prior to the historic Wall Street meltdown.

"What we found is stunning," says Michigan Future Inc. President Lou Glazer, who conducted the study with economist Donald Grimes. "The trends that we have written about in our previous report have accelerated in the downturn."

Glazer and Grimes say the long-term trend is clear: Job growth in America is concentrating in the knowledge-based economy. Employment in low-education industries has grown 16 percent since 1990, while the number of jobs in high-education industries has grown 32 percent.

In their report, the researchers analyzed data from the Bureau of Labor Statistics from 2001-07 on all 50 states and the 54 U.S. metropolitan areas with populations of at least a million, plus Lansing and Madison, Wis.

They found that the most prosperous places in the country are big metropolitan areas where college-educated adults and knowledge-based employers are concentrating. Surprisingly, the largest urban areas have the highest proportion of households with incomes of $75,000 or more, but also the smallest proportion of households with incomes less than $25,000.

"In a flat world, where more work can be done anyplace, many predicted an economic resurgence in small metropolitan areas and rural areas," Glazer says. "The pattern we found is the opposite."

Glazer and Grimes say that high-education industries — such as information, finance and insurance, professional and technical services, health care and education — accounted for 60 percent of U.S. job growth from 2001-07. The average wage in these knowledge industries is nearly $59,000, compared to about $33,000 in all other industries.

Unfortunately, Michigan and its big metropolitan areas are lagging in the transition to a knowledge-based economy, the researchers say.

In 2007 the state ranked 33rd in per capita income — down from 16th in 2000 — 34th in the proportion of adults with at least a bachelor's degree, and 36th in the share of wages from knowledge-based industries. From 2001-07 Michigan ranked last in both overall employment growth and job growth in high-education attainment industries.

Among large U.S. metropolitan areas, Detroit ranked 25th in per capita income, 36th in college attainment and 37th in knowledge-based industries in 2007. Grand Rapids lagged even more — 51st in per capita income, 44th in college attainment and 53rd in knowledge-based industries. The story is pretty much the same for Lansing, which substantially trailed the comparable Madison, Wis., area on all economic metrics.

"What most distinguishes successful areas from Michigan is their concentration of talent, where talent is defined as a combination of knowledge, creativity and entrepreneurship," Grimes says. "Quite simply, in a flattening world, the places with the greatest concentrations of talent win.

"Michigan has lagged in its support of the assets necessary to develop a knowledge economy at the needed scale. Building that economy is going to take a long time and require fundamental change. But we believe it is the only reliable path to regain high prosperity."

According to the researchers, the plan for economic vitality is clear. Michigan must:

• Place a higher value on learning and entrepreneurship;

• Create places where young, talented individuals want to live (e.g., vibrant central city neighborhoods;

• Ensure the long-term success of its higher-education system by expanding public investment;

• Transform teaching and learning to align with the realities of a "flattening" world; and

• Develop new private and public-sector leadership that is clearly focused on preparing, retaining and attracting talent — not re-creating the old economy.

Glazer and Grimes caution that Michigan must build a diversified knowledge economy based not only on information technology, the life sciences, alternative energy and green technology, but also on finance and insurance, professional and technical services, health care and education.

They also acknowledge that, while in great decline, the auto industry and other manufacturing will continue to be important to Michigan's economy. Good-paying, low-skilled manufacturing employment, however, no longer is the path to prosperity or to a broad middle class.

"There is a widespread concern that the decline of good-paying manufacturing jobs will mean the days of a mass middle class in America are coming to an end," Glazer says. "Far more likely is a change in the nature of good-paying jobs, not their decline. Middle-class employment in the future will come primarily in the high-education attainment industries."

The report was released Tuesday at the U-M Detroit Center and shared with officials from the University Research Corridor, an alliance of U-M, Michigan State and Wayne State, to marshal their collective resources to transform, strengthen and diversify Michigan's economy.

For a copy of the report and more on Michigan Future Inc., go to www.michiganfuture.org. For more on the URC, go to www.urcmich.org.