The Right Place's economic outlook for West Michigan

On December 16, The Right Place held its Economic Outlook for West Michigan conference at the JW Marriott downtown.

The first one was held 18 years ago, and had an attendance of 25. This year, there were 450 people in attendance, from all over the West Michigan.

It was hosted by The Right Place, an economic development org that pitches West Michigan as a destination for companies worldwide. In this task, they’ve been wildly successful.

From 2009-2013, The Right Place retained or brought in 11,207 new jobs, $371 million in new payroll, and three quarters of a billion in capital investment. They exceeded all their goals for that timeframe- even their higher, revised goals of their strategic plan.

Birgit Klohs, President & CEO of The Right Place, said that economic development is a team sport, and that’s certainly true in hte case of The Right Place. Their strategic plan was created with input from 110 regional partners in West Michigan, and speaks to the deep network for economic development that we have here in the region.

One of the surprising things in Klohs' presentation was how intense the competition is for companies among the states. One of the projects The Right Place managed to grab for West Michigan had no less than 22 regions competing for it.

This competition has led to a great deal of money being thrown at companies from state governments. It’s been said that you could have a citrus orchard in the Upper Peninsula if you threw enough money at it, and that seems true.

We have a $100 million economic development incentives fund here in Michigan, and we’re only the middle of the pack; Texas has one four times that size. They snap up a great deal of projects because they can offer a seven-million dollar building straight from state coffers. Many companies will follow this money, even when the company isn’t a good fit for the state or the region.

Tesla, for instance, located their plant in Nevada because the state offered them 1.25 billion in financing, tax incentives and grants. But as a manufacturing company in Nevada, there’s a whole slew of workforce knowledge, suppliers and supply chain infrastructure to which Tesla will need to either build or import.

Michigan, though, has these assets because we have such a strong history in that sector. We’re also extremely strong in agribusiness, which is not something many people think of when they think of Michigan.

In West Michigan alone we have an ag industry that provides over 26,000 jobs and $579 million dollars in income alone. Michigan as a whole has the second most varied agricultural economy among the 50 states, producing everything from cherries to chestnuts.

With such strengths, we can play the economic development game because we have assets that companies want, and we have organizations like The Right Place pitching our region. That’s part of the reason that our economic future looks bright. George Erickcek, Senior Regional Analyst of the Upjohn Institute, said as much in his presentation to the conference.

Nobody thinks of economists as a gregarious bunch, but Erickcek certainly bucks this trend. He’s an engaging speaker, and had a few good jokes for the crowd. More importantly, he’s adept at distilling numbers into a story that was easily told and understood.

The story that we’re seeing now is recovery. We are actually approaching full employment in West Michigan, which is obviously a happy trend. It was the first time in many years, Erickcek said, that companies were using the "mirror-fog" test for hiring: if your breath could fog a mirror, you’re hired.

However, we are seeing problems. As Erickcek put it, an economist can find a cloud in any silver lining.

First, as employment has risen in the region, wages have actually fallen 4%. This was something that Klohs spoke to in her presentation: West Michigan’s wages aren’t rising with the talent we want to attract to the region. In short, if we want top talent here, we have to pay for it.

Second, we have a workforce participation rate that is extremely low, the lowest in decades. What this means is that we have people who are not of retirement age that are either not in training, not looking for work and have exhausted their unemployment benefits. They might want to work, but are exhausted with the job search. This segment might try re-entering the workforce if things continue to pick up, which will drive up unemployment numbers.

Such headwinds are not unique to our region, and it will take a coordinated, consistent effort to address them. Luckily, we have The Right Place as our advocate, helping us to be an economic player on the global stage.