From the Daily: Reinventing Michigan

Michigan was once at the leading edge of the nation’s economy, thanks in large part to the booming automobile industry and the manufacturing sector centered around it. Now, however, as companies move manufacturing jobs from Michigan to lower-cost states and countries, the state has found itself at an economic crossroads. Faced with two divergent roads – to attempt a rescue of manufacturing jobs by lowering taxes and labor costs or to rebuild the economy ground-up with a focus on human capital and knowledge – legislators must be courageous in avoiding the path of least resistance. While attempting to revive manufacturing is in the short term both easier and less expensive, only a complete transformation of the state’s economic base can promise long-term prosperity.

Slowly opening their eyes to this reality, lawmakers in Lansing have begun deliberating higher education’s part in building an educated, robust workforce. But for all the interest in higher education – and the consensus that higher education is vital to the state’s future – there have been few concrete plans put forth. On one extreme, Duderstadt has drawn out proposals for new taxes that would secure sufficient funding to increase higher education appropriations by as much as 30 percent. Not surprisingly, conservatives – well aware of the state’s dire fiscal situation and averse to new taxes – have called for less sweeping changes; members the state Chamber of Commerce have endorsed a plan that would reallocate existing funding toward specific fields of study deemed “useful” to the economy, such as natural science and engineering, at the expense of the “less useful” humanities and social science fields. Presented with these two extreme proposals, the Legislature should err toward Duderstadt’s more expensive, but expansive, package. While tech degrees produce the most tangible and immediate economic results, it would be foolish to elevate them at the expense of other academic departments.

Several politicians have expressed concern over Duderstadt’s proposal to increase taxes. Yet, while advocating tax increases is tantamount to political suicide, public opinion should not be dictating economic policy. While voters are generally averse to tax hikes, there is a growing consensus among public policy experts that suggest they can stimulate economic development when applied to worthwhile causes.

In both Massachusetts and California, higher taxes have enabled the state to pursue expensive yet lucrative public policy agendas. With a strong focus on higher education, the states have nurtured some of the nation’s best-educated workforces and sustained enviable growth rates. Both states thrive off of research conducted at well-funded, prestigious universities such as the University of California at Berkeley and the Massachusetts Institute of Technology. Much of the technology boom in Silicon Valley, for example, was driven by research conducted at Bay area universities. In conjunction with lower-profile institutions, these universities have also produced a wealth of educated workers immediately ready to contribute in high-end, knowledge-based jobs. In Michigan, which lacks elite private institutions like MIT and Harvard University, public universities – led by the University of Michigan – will have to drive this economic renaissance. Higher state taxes, which could be directly translated into more generous higher education funding, will enable public universities to offer top-quality degrees and produce cutting-edge research while still maintaining affordability and accessibility.

On the other hand, states with low tax rates find themselves burdened by uneducated workforces and dismal roles in the global economy. Because most manufacturing jobs are outsourced to developing nations with low labor standards and cheap wages, American workers have no chance of effectively competing solely on cost; they must offer something more. Increasingly, when given a choice between operating in a state with an uneducated workforce but low taxes and a state with an educated workforce but high taxes, corporations are choosing the latter. Case-in-point: Toyota, instead of creating new factories in southern states with low tax rates, decided to locate new production facilities in Canada, where tax rates are high but the workforce is well-educated. If Michigan wishes to attract new industry, it must make a concerted effort to cultivate the sort of human capital that Toyota seeks.

Some state legislators, who have – to their credit – recognized both the need for higher education and the constraints imposed by Michigan’s budget situation, have suggested that whatever funding exists should be targeted at programs that would produce the largest short-term bang for the buck. Unfortunately, this “targeting” amounts to a decrease in funding for various liberal arts fields that do not provide clear-cut economic benefits. Such an approach, which would be counterproductive to the University’s goals, should be avoided. This University is not a manufacturing plant for prospective engineers. While many of today’s well-paid jobs are in scientific and technological fields, the intangible benefits of a strong liberal arts program cannot be discounted.

It is interesting to note that most successful and elite universities are financially and administratively autonomous; of the top 25 research universities in the country, more than 20 are privately run. This correlation is not mere coincidence; at private institutions, where educators are given final authority over all educational decisions, class offerings are dynamic and responsive to leading educational trends. Deans and administrators have the ability to allocate funding to where it will be most effective, while professors and lecturers have the ability impart the lessons they find most important. Educational experts, not elected politicians, decide what is “useful.” If Michigan is to emulate states with successful economic policies, it must fully embrace the idea of autonomously run institutions of higher education.

If legislators wish to push more students into the natural and applied sciences, the state should start earlier; encouraging students to pursue specific majors in college is ultimately less productive than encouraging them to take an interest in science and math programs during their formative K-12 years. Additionally, the state could consider targeted scholarships and better aid packages for students who choose a major associated with science or engineering. Already, the federal government offers full scholarships to students who choose to pursue military service though the ROTC and service careers such as education through Teach for America. A similar approach for the sciences would allow public policymakers to encourage certain fields of study without infringing on institutional autonomy.

It is encouraging that most state legislators recognize the value of a higher education, but rhetoric aside, it is time for action. The state’s economy shows no sign of self-resuscitation, and absent intervention from Lansing, will continue to wither. Despite next year’s upcoming elections, state politicians should take risks for a worthwhile cause: statewide economic revival.