The safety net in Michigan

Poverty in the United States has increased measurably in the past ten years, and this is particularly visible in the state of Michigan. (Here is a webpage provided by the Michigan Department of Human Services with some basic information on poverty in the state.)  State departments of human services and non-profit organizations alike are being stretched by the need for poverty-related services -- food assistance, childcare, heating assistance, job training, and the like. So how good a job are we doing to ensure that poor people in the United States have reasonable access to the necessities of life?

In general, the answer to the question seems mostly to be -- not a very good job. The amount of money available for services to the poor is under pressure in most state legislatures. The processes through which low-income people need to pass in order to apply for assistance are confusing and needlessly lengthy. And the "front doors" for providers are highly decentralized, so the potential recipient of assistance needs to conduct a lengthy search simply to find a possible source.

The United Way of Southeast Michigan is a highly capable social service agency that is genuinely committed to helping to improve the situation of Michigan's poorest residents (link). Here is a UWSEM report on the status of basic needs of the population in Michigan.  The report is worth reviewing in detail.  One point stands out very starkly -- a strikingly high percentage of the state's population falls in the status of poor or near-poor.  The report provides a very legible description of the composition of the 40% of Michigan's population who are "at-risk":

This is a truly sobering statistic: two out of five residents of Michigan fall within the groups of the persistent poor, working poor, newly poor, and potentially poor.

One of the United Way's current priorities is to do a careful review of the system of assistance as a whole in the state. Generally, their finding is that resources, agencies, and strategies are highly fragmented in the state, so it is easy to guess that the provision of services is somewhat sporadic and inefficient. More importantly, their analysis shows that over a billion dollars of federal assistance to individuals are left unused year after year -- at a time when the need for assistance is greater than it has ever been.  (This report should appear on the UWSEM website sometime soon.)

It's worth looking closely at the data compiled by UWSEM. Over $34 billion are expended on assistance to the poor in Michigan, with over 55% of the funds coming from Federal sources ($19.9 billion). The state's own resources represent roughly half that amount ($9.4 billion).  Foundations and private resources make up the rest.  Second, these $34 billion are expended through a large number of state agencies -- treasury, school aid, public housing, the department of human services, etc.  And finally, the funds flowing from these multiple agencies then re-aggregate at the level of the users in a variety of basic categories of need: workforce development, housing, family preservation, food, cash assistance, and healthcare.

There are several key conclusions that emerge from the UWSEM analysis. One is that this is a process that is plainly designed for providers and auditors, not users. The idea that the system of social services should be streamlined in such a way as to allow maximum access for eligible residents is clearly not the guiding design principle.

A second point is that the system is needlessly complex for the user. It should be possible to streamline services and application processes in such a way as to increase the impact of available resources for eligible people.

A third point is that it should be possible to use the Internet to significantly increase the accessibility and transparency of the system. It should be possible for the poor person to enter a single "portal"; enter his/her information into a database; and find out on one screen what programs and benefits for which he/she is eligible.

In short, it would appear that there are significant opportunities for public "safety net" providers in Michigan to increase the efficiency and reach of their services with some intelligent redesign of the delivery systems.  And we certainly need to make sure that the billion dollars of unexpended federal benefits find their way to eligible citizens.

(Here is a nice example of how universities and communities can work together to address the issues of poverty that their region faces (link).  This collaboration between Western Michigan University and various organizations in Kalamazoo, Michigan is aimed at providing easy access to data about poverty and well-being in Kalamazoo that can help guide programs and resources towards effective reduction of poverty.)

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Posted in: CAT_Michigan,poverty

Taxes on business

What is a fair level of taxation for businesses in a state? How much should businesses pay relative to individuals in supporting the services provided by government? How should we even begin to answer this question?

The question is easier for individual taxation, since there are only a few possible alternatives: a flat rate income tax or a graduated income tax; more reliance on income taxes or consumption taxes; a tax system that attempts to shelter the most vulnerable in society or a tax system aimed at stimulating profitability and economic growth, ....  For individuals, the fundamental principle is clear: each individual should pay a share of the costs of government based on income, perhaps moderated by a graduated rate.

But with businesses the issues don't seem as clear. Businesses in a state have a clear economic interest in the services provided by government, from fire and police protection, to preservation of the environment, to provision of a skilled and well-educated workforce.  Business should pay its fair share in supporting the necessary costs of the state; but what is a fair share? And what is "necessary" when it comes to state services?

The situation is even more complicated when we bear in mind that business activity is itself an important source of good for citizens. More business activity means more employment and income. More jobs and wages mean more demand for services and products of all kinds -- and more income for people employed in those goods and service industries. Business disinvestment leads to significant hardship for citizens. A tax system that discourages business activity is harmful to the economic wellbeing of the state and its citizens. So business tax rates ought to be high enough to support a fair share of the costs of government, but not so high as to discourage business investment.

And the latter point in turn requires comparison with other feasible locations for business activity. If Michigan and Ohio assess business income at significantly different rates, we should expect some flow of investment from one to the other.

The state of Michigan is an interesting current example. Michigan's governor, Rick Snyder, has proposed a major change in the structure of business taxes in the state. He proposes abolishing the Michigan Business Tax, enacted only a few years ago, and replacing it with a 6% corporate income tax that applies only to the largest businesses and corporations in the state. This reform is promoted as one that is needed to simplify the tax obligations of businesses and to improve the business attractiveness of the state for future investment, and it has been welcomed with enthusiasm by the business community.  (According the the Tax Foundation's State Business Tax Climate Index, Michigan ranked 17th in 2010 and 2011 in the Tax Climate Index overall and ranked 48th on the corporate tax index, based on the existing Michigan Business Tax; link.)

Often tax reforms are put forward under the banner of "revenue neutrality" -- the rules are changed and simplified, but the "before" and "after" rules collect the same amount of revenue. This reform in Michigan is distinctly not revenue-neutral. In 2009 businesses in Michigan paid $2.6 billion under the Michigan Business Tax. Sales taxes collected $8.8 billion, and personal income taxes collected $6.0 billion.  (These data are presented in a 2011 report of the Citizen's Research Council in Michigan; link.)  In 2013 it is projected that the flat corporate income tax, when fully implemented, will collect only $749 million -- a decline of over 1.2 billion dollars in tax revenues for the state compared to the $2.0 billion estimated under the Michigan Business Tax if applied in that year.  (These estimates are provided in a February 17, 2011 report issued by the Michigan government; link.) This amounts to a greater than 60% reduction in the taxes paid by businesses in support of the general fund.  And this shortfall is being addressed in the state's fiscal plan through adjustments in the structure of individual taxes: pensions would be taxed for the first time and Michigan's Earned Income Tax Credit would be abolished. In other words, a billion dollars of tax reductions for business are being paid for by sacrifices by pensioners and poor people.

So here is a question worthy of discussion: are Michigan businesses being asked to pay their fair share under the revised business tax policies? Is 6% enough? Were businesses significantly over-taxed under the Michigan Business Tax? Should the corporate income tax be applied only to the small subset of businesses in the state that qualify, or should it be applied more broadly? And is a 6% corporate tax rate competitive with other states?

Let's look at the competitiveness question. It is broadly asserted by leading business organizations in Michigan that businesses pay too much taxes for the state to be competitive, and that 6% is about as high as the rate can go without losing investment to other states. But the facts appear to be otherwise.  The Tax Foundation provides annual data on corporate income rates by state (link). Here is the Tax Foundation data, ranked by the highest bracket.  (A number of states have a graduated rate, so small businesses pay lower rates.)

State corporate income tax rates (ranked by hightest bracket)
source: Tax Foundation
http://www.taxfoundation.org/taxdata/show/230.html
State	Rates		Brackets(a)	Rank
Iowa	12.00%		$250K	1
Pa.	9.99%		$0	2
D.C.	9.98%		0	3
Minn.	9.80%		$0	4
Ill. (c)	9.50%		$0	5
Alaska	9.40%		$90K	6
N.J. (b)	9.00%		$100K	7
R.I.	9.00%		0	8
Maine	8.93%		$250K	9
Calif.	8.84%		$0	10
Del. (a)	8.70%		$0	11
Ind.	8.50%		$0	12
N.H. (a)	8.50%		$0	13
Vt. 6%	8.50%		$25K	14
W.Va.	8.50%		$0	15
Md.	8.25%		$0	16
Mass.	8.25%		$0	17
La.	8.00%		$200K	18
Wis.	7.90%		0	19
Nebr.	7.81%		$100K	20
Idaho	7.60%		$0	21
N.M.	7.60%		$1M	22
Ore.	7.60%		$250K	23
Conn.	7.50%		$0	24
N.Y.	7.10%		$0	25
Kans.	7.00%		$50K	26
Ariz.	6.97%		$0	27
N.C.	6.90%		$0	28
Mont.	6.75%		$0	29
Ala.	6.50%		$0	30
Ark.	6.50%		$100K	31
Tenn.	6.50%		$0	32
Hawaii	6.40%		$100K	33
N.D.	6.40%		$50K	34
Mo.	6.25%		$0	35
Ga.	6.00%		$0	36
Ky.	6.00%		$100K	37
Okla.	6.00%		$0	38
Va. (a)	6.00%		$0	39
Fla.	5.50%		$0	40
Miss.	5.00%		$10K	41
S.C.	5.00%		$0	42
Utah	5.00%		$0	43
Colo.	4.63%		$0	44
Nev.	0.00%			45
S.D.	0.00%			46
Wash. (a)	0.00%			47
Wyo.	0.00%			48
Mich. (a)
Ohio (a)
Tex. (a)
Note: In addition to regular income taxes, many states impose
other taxes on corporations such as gross receipts taxes and franchise
taxes. Some states also impose an alternative minimum tax.
(a) Michigan, Ohio, Texas, and Washington do not have a corporate
income tax but do have a gross receipts tax with rates not
strictly comparable to corporate income tax rates.
(c) On January 12, 2011, Illinois increased its corporate income
tax from 7.3% to 9.5%, retroactive to January 1, 2011. Illinois’s rate
includes two separate corporate income taxes, one at a 7% rate
and one at a 2.5% rate.
Source: Tax Foundation; state tax forms and instructions.

The 6% rate proposed for Michigan falls at the bottom end of this ranking; 35 states have higher rates, extending to 12% in Iowa; four states have a 6% rate; and nine states have a lower rate.  It would appear that a 7% or 7.5% rate would still leave Michigan in a competitive position when it comes to the corporate income tax.  This would result in an additional $200 million in revenue -- and would permit significant dollars for the Earned Income Tax Credit.  So a larger share from business would permit a better outcome for poor and working people.

But the really difficult question is the "fair share" question: how should the costs of government be allocated across individuals and businesses? What principles of equitable contribution are helpful in addressing these issues?  And how would we try to judge whether Michigan's corporate tax reform plan results in a fair allocation of the costs of government across individuals and business?

(Here is an interesting post by Donald Barrett and James Steele on "Are Corporations Paying Their Fair Share of Taxes?".  In a word -- no!)

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Posted in: CAT_Michigan,justice,policy

Urban and metropolitan problem solving

The issues that almost all large American metropolitan regions and cities are facing are important and messy. Here is a short list: racial segregation, concentration of poverty, poor health and nutrition, poor schools, crime and violence, and disaffection of young people. These problems are important because they hold back the personal lives of millions of Americans living in poverty and degraded urban neighborhoods. And they are messy because they are multi-causal and interconnected. Each problem feeds into another, and it is generally difficult to say what kinds of policy changes and plans would lead to eventual improvement. These are "wicked" problems (link) that require planners to work with complex and unpredictable processes in an effort to improve Cleveland, Chicago, Oakland, Miami, Houston, Kansas City, and Detroit.

There is another reason why urban and metropolitan problems are hard to solve -- the lack of political will to seriously address the problems in a long-term and sustained way. State legislatures often have an anti-urban bias. Regions often embody conflicts of interest between suburbs and city. Jurisdictions are often more concerned about their own narrow interests than in finding workable regional solutions. And the Federal government often fails for decades to mount serious and realistic urban strategies. So the result is often stasis -- nothing happens.

One aspect of the challenge is the availability of timely, reliable data about a region's health and performance. City governments collect a lot of data about health status, land use, and crime; but they are often reluctant to make their information available to researchers and the public. Foundations and individual researchers undertake studies focused on one problem or another; but often the reports are difficult to find and difficult to compare.

So we might hypothesize that the situation would be improved if there were an active, well-resourced clearinghouse for regional data from a wide range of sources: census, municipal departments, academic studies, land use surveys, and environmental surveys. Ideally these data sets would be managed by a professional staff who are able to integrate the various sources into a query-based GIS system, and ideally the data sets themselves would be publicly available (subject to appropriate privacy conditions). this kind of regional data warehouse would not directly solve the problems the region faces; but it would give a clear understanding of the scope and distribution of the problems that need to be addressed; it would provide an empirical base for proposed policy solutions; and it would provide a baseline for eventually evaluating the policies that are adopted.

Fortunately, there are good examples of exactly this kind of effort underway in various regions around the country. One such effort is underway at the Community Research Institute, part of the Johnson Center for Philanthropy at Grand Valley State University in Michigan (link). The Institute focuses primarily on several counties surrounding Grand Rapids, but it is also preparing to expand its coverage to other parts of Michigan. With a foundational database linking US Census data geographically, the Institute attempts to provide geographically linked data down to the neighborhood level. Here is an example of a map of the teen birth rate in neighborhoods of Grand Rapids (link). The Center has developed a general tool, MAPAS, that can serve as a platform for integrating and presenting a wide range of social data sources (link).

A similar effort is underway in the Detroit metropolitan region, under the rubric of Data Driven Detroit (link). D3 is attempting to create this kind of publicly accessible, spatially presented data warehouse for the city and the region, and the early results are promising.  Here is a report on a recent study conducted by D3 on housing stock in Detroit (link).

So how can data sources like these be folded into good planning efforts for urban and metropolitan progress? The city of Detroit under the leadership of Mayor Dave Bing is just beginning an important planning effort that ties into the need to adjust the cityscape to the dramatically smaller population it now contains. This effort is called the Detroit Works Project (link), and it is explicitly committed to data-driven decision making and planning.

Another effort that is underway is the Integration Initiative within Living Cities (link, link). Detroit is one of the cities that has been funded within the program.  Here is how Living Cities describes the national project of the Integration Initiative:

The Integration Initiative builds upon Living Cities’ 20-year history of investing in cities. It acknowledges both the power and limitations of the neighborhood as a lever for change and seeks to drive a broader perspective that recognizes the role systems and regions must play in securing economic opportunity for low-income people.

The Integration Initiative will provide at least $80 million in grants, loans and Program-Related Investments (PRIs) to five regions to help them tackle the greatest barriers to opportunity for low-income residents, including education, housing, health care, transit and jobs. Living Cities and its members are making a total investment of $15 million in grants, $15 million in PRIs and $50 million in commercial debt. PRIs are flexible, low-cost loans provided at below-market rates to support charitable activity.

In order for a project like this to succeed, it needs to be based on solid empirical data.  It is crucial for the progress of metropolitan Detroit, and other cities around the country, that the region succeed in creating a unified regional data source.

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Posted in: CAT_Michigan,city,economic development,poverty

Opportunity index

It would be very interesting if we had something we might call an "opportunity index" that could be applied to young children to estimate their probability of later success in life. The idea would go along these lines: Take some measure of adult success -- perhaps graduation from college or success in attaining a skilled job or career by the age of 30. Then identify a series of societal developmental factors that enhance the probability of the outcome. Finally, construct an index of these factors for each child that estimates the overall likelihood of success for that child. The logic is analogous to identifying risk factors for heart disease: given this set of factors, the individual's likelihood of O is p.

The positive opportunity factors might include things like this:

• Quality of schools
• Reading level at grade 5
• Presence of caring adults and mentors
• Quality of family environment
• Adequate nutrition
• Adequate housing
• Adequate family income
• Access to healthcare

There are probably redundancies here; public health professionals and education specialists would need to chime in. But suppose we've got some set of factors that can be scored 1-5, and suppose the index aggregates the factors to an overall estimate of probability of success. Maybe it goes along these lines: children with low scores in all factors (1) have only a 20% likelihood of success. (I.e. some children survive even crushing adversity; but it is only a small percentage who do.) Children with a 3 score have a probability of success of 75%. And children with the top scores have a probability of success of 95%. (I.e. students with good schools, high reading levels, great families, and affluent circumstances are almost certain to succeed.)

Just supposing we had such an index, what would it tell us when we applied it to a large population of children? The index collects societal factors that influence the child's likelihood of success, and the aggregate index is intended to correspond to the overall likelihood of success. So looking at the distribution of the likelihood of success over a population would be sort of a CT scan of the opportunity structure that is presented to children in different social locations: affluent suburb, poor inner city, declining suburb, farm community, ... And we could then look at the index as a way of measuring "opportunity equity."

My suspicion is that the result of this thought experiment would be pretty shocking. The factors that individually contribute to success are likely to covary by neighborhood, income, and race. It is therefore likely that whole schools full of children are likely to have similar scores. This suggests that there are gross inequalities of probability of success by race and poverty status. And this would highlight what is really a glaring source of injustice in our country: the likelihood of life success varies enormously by race and affluence.

Further, since the factors mentioned here are external social factors which are simply presented to the children, there is no sense in which we could maintain that these differences derive from things the child is responsible for. So, in other words, these gross inequalities of opportunity and outcome are fundamentally unjustifiable.

I'm led to this set of thoughts as a result of spending some time with young people in Detroit. The high school and college graduates I've been acquainted with display a remarkable set of talents and aspirations. They are on their way to success in whatever way we choose to define that term. And yet their own stories demonstrate what a difficult road it has been for them, and how many of their peers have been left behind. Fewer than 50% of Detroit school children go on to graduate from high school. Violence, hunger, homelessness, indifference, and illiteracy have prevented so many of their brothers and sisters from achieving the same kind of success. These are system characteristics, not individual failings. And these are the objective obstacles to opportunity that simply must be eliminated.

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Posted in: CAT_Michigan,justice,race

Truth and reconciliation commissions

When does a society need a process of "truth and reconciliation" along the lines of such processes in South Africa, El Salvador, and Argentina?  Here are some recent examples of truth and reconciliation processes:  the fate of the "disappeared" in Argentina (link); Indian Residential Schools in Canada (link); Korean War civilian casualties (link); Liberian civil conflict (link); lynchings in the US South (link); and, of course, the Truth and Reconciliation Commission in South Africa (link).

The general theory of TRC is that a society is sometimes grievously divided over events and crimes that have occurred in the past, and that honest recognition of those crimes may lay a foundation for reconciliation within the society. Here is a summary statement of the purpose of a Truth and Reconciliation Commission from the South African Ministry of Justice:

... a commission is a necessary exercise to enable South Africans to come to terms with their past on a morally accepted basis and to advance the cause of reconciliation.

But what more can we say about what facts might trigger the need for a TRC process?

First, such a process is only invoked when there is a serious history of injustice within the community, leading to a situation in which one group has been badly treated by other groups or powerful institutions.  The stakes need to be high for current members of society in order to justify establishing a TRC.

Second, a TRC process seems to be most needed when the consequences of the past injustice persist into the present: the bad things that happened in the past continue to burden some groups in the present.

Third, there is an implication of abiding resentment and rancor within the current population. The injustice of the past continues to be a source of emotional division between members of the relevant groups. This is the reconciliation part of the agenda: by honestly confronting the facts about the past injustices, the groups subject to this treatment may be in a better place to resolve their rancor. And more practically, honest recognition of the past may lead to concrete steps in the present to restore the interests and rights of affected groups.

Fourth, there is a common feature of violence and subjugation in the instances where TRC processes have been invoked to date: pogroms, mass killings, lynchings, and other forms of inter-group violence.

So what are some important examples of historical circumstances where TRC is called for? There are many:

• The expatriation of French Jews by the French government into the hands of the Nazis, leading to the deaths of thousands of people from this community.
• The Rwandan genocide.
• The Argentine military's policy of "disappearing" large numbers of its opponents, involving secret imprisonment, torture, and murder.
• White violence against black people in the American South, enforcing white power through lynchings, shootings, and violent intimidation.
• Organized ethnic cleansing and mass murder in Croatia, Bosnia, and Slovenia.
• The fact of slavery as practiced in the United States through Emancipation.
• The crimes of death squads in El Salvador in the 1980s, including a degree of US support and involvement.
• Robert Mugabe's use of ZANU-PF paramilitary thugs in Zimbabwe to maintain his political power.

Here is the immediate question of interest in this posting: how do the facts of northern race relations fit into the parameters of truth and reconciliation?  In the Detroit area the Michigan Roundtable for Diversity and Inclusion is calling for a Truth and Reconciliation Commission to honestly examine the history of race and residence in the region (link).  The Roundtable states that --

The establishment of a Truth and Reconciliation Commission, inspired by the process that took place in South Africa, will allow us to develop an appropriate understanding of past injustices and to envision constructive remedies to create a new regional culture of fairness, equal opportunity and prosperity.

(Here is a link to the Facebook page for the organization in which the initiative is launched.)

So let's ask the crucial question: are the patterns of racial segregation and inequality of opportunity that are unmistakably involved in most US large cities an appropriate cause for a process of truth and reconciliation?

In many ways the answer appears to be "yes." Urban segregation was and is a source of massive injustice for black Americans.  It embodied a quasi-permanent pattern of inequality of opportunity and outcome on African-American citizens.  It was the result of specific but often hidden social practices that embodied a pattern of white privilege.  And these practices sometimes involved actual and threatened violence.  So entrenched discrimination and segregation constitute social harms that meet most of the criteria mentioned above, and the truth about the underlying mechanisms is not widely known.

In short, most honest observers would probably agree that the history of racial segregation in Southeast Michigan reflects serious injustice and continues to inflict harms on people in the region today.  These harms include disproportionate levels of poverty, unemployment, inadequate education, and differential health outcomes.  And many would agree as well that social injustices of this magnitude need to be addressed openly and honestly.

The map of the Detroit metropolitan area below represents a measure of "neighborhood opportunity" across the region.  It is published in an important report, "Opportunity for All," by john a. powell and the Kirwan Institute for the Study of Race and Ethnicity at Ohio State University (link).  What it documents in a very visual way is the current effects of past and present practices of residential segregation: the areas of high African-American population line up very precisely with the areas of low "neighborhood opportunity".  (Here is a keynote address by john a. powell to the Michigan Roundtable for Diversity and Inclusion (link) that lays out the data in great detail.)

So a sustained and honest effort to uncover and disseminate the historical causes of these patterns of racial segregation in the region is a positive step forward.

What is perhaps more difficult to answer is the question of efficacy.  Do these TRC processes actually work?  Do they succeed in changing attitudes in the populations in which they operate?  Do they help communities develop more harmonious and collaborative approaches to the problems they face?  And does "truth" lead to "reconciliation" in a significant number of cases?  The Michigan Roundtable conducted a survey of racial attitudes in Michigan in 2009, and one question in particular stands out.  In 2009 56% of residents said that we will have racial equality "in 100 years" or "never," compared to 48% in 2008.  In other words, well over half of all Michigan citizens despair of achieving racial equality within five generations.  And 68% of African American citizens in Michigan expressed the same lack of hope.  We need to do better than this at achieving real racial equality; the question is, whether the proposed Truth and Reconciliation Commission can help us move forward in practical and effective ways.

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Posted in: CAT_Michigan,inequality,justice,race

More on jobs and people in Michigan

Olivier Blanchard and Lawrence Katz did an important empirical study of regional adjustment to employment shock in 1992 (link). Here is their central conclusion:

"We have shown that most of the adjustment of states to shocks is through movements of labor, rather than through job creation or job migration." (54)

In other words, they find that the US labor market is fairly well integrated, and an extended period of unemployment and low wages leads workers to seek new opportunities in other regions. (Here is a recent book by Katz and a collaborator; The Race between Education and Technology.)

What implications does this have for Michigan? Let's say that Michigan's unemployment rate will adjust to approximately the national rate by 2020, and that the national rate will recover to 6% by then. This implies 6% unemployment for Michigan, compared to 14% today. Let's assume that less than half of the recovery comes from new and imported jobs. What does this imply for out-migration and population loss for the state?

The arithmetic is straightforward. There are currently about 4.2 million jobs in Michigan and 681,000 unemployed workers, for a labor force of about 4.9 million. (Here is a page of data from the Bureau of Labor Statistics for Michigan; link.) What would it take to bring Michigan's unemployment rate down to 6% by 2020? Here is one solution: 150,000 new jobs and 250,000 out-migrants from the labor force. And assuming that each worker has one dependent on average, this means a loss of about 500,000 people from Michigan's current population of about 9.9 million--for a total population of 9.4 million in ten years.

This is a significant but not overwhelming loss of population -- about 5%. And the number of jobs required on this scenario is moderate and achievable -- 150,000 new jobs in ten years. This amounts to about 4% jobs growth per year.  We can make some educated guesses about the demographics of the population that leaves the state -- they are likely to be young, they are likely to have children, and they are likely to be better educated than the general population. So the economic and social impact of this exodus is likely to be greater than their 5% share of the general population. But all of that conceded, it would appear that there is a reasonably achievable pathway for Michigan to dig itself out of its current crisis.

So let's get serious about preparing the ground for a healthy recovery; let's enhance K-12 education, extend the reach of university attainment, improve the quality of life in our cities, and get serious about redesigning our state's fiscal system.

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Posted in: CAT_Michigan,economic development

Michigan's population loss

Earlier posts have raised the possibility that Michigan's jobs crisis will lead to significant population loss (link, link, link).  The basic idea is this: Michigan has lost more than 800,000 jobs since 2002.  Its population in 2002 was about 10 million.  The current unemployment rate in the state is about 15%, or just under.  In order to bring the unemployment rate back to the 2002 levels (~6%), roughly 800,000 jobs need to be created; or else the working population needs to decline by about that much.  Assuming one dependent for each worker, that amounts to a loss of about 1.6 million people.  Other combinations are possible; create 400,000 jobs and only 800,000 Michigan residents would leave; etc.

So what is the situation of out-migration today?  Here are some recent reports over the past twelve months:

• Detroit News 4/2009: Eight-year population exodus staggers state (link)
• AnnArbor.com: 89,844 residents lost 2005-2008 link
• CrainsDetroit 12/23/09: population falls below 10 million; low birthrate and high out-migration responsible link
• Michigan State University report on population loss 12/09 link
• Toledo Blade: Michigan is tops in 1-year population loss 12/09 link
• Detroit Free Press: Rochelle Riley, City's rebirth at risk over lack of births link
• Data Driven Detroit: data sources on population in Detroit link

And where are Detroit metro families going?  Here is a map Forbes published (link) showing the destinations in 2008:

Notice that almost all the lines are red, indicating out-migration.  Compare that with the pattern of migration for Seattle:

And Chicago:

In other words, a significant amount of out-migration has already occurred in Michigan, and there is no indication that this process will slow down.

In fact, some observers have argued that Michigan's population losses have been less than expected in the past 18 months because of the generally bad economic conditions in other parts of the country (and because of the difficulty of selling a house).  But if this is a factor, then we should expect an increase in out-migration when job creation takes hold in other parts of the country.

There is another worrisome part of this story: the fact that the best-educated and most talented people are likely to be the first to go.  They are nationally competitive with skills that can bring value to employers in other parts of the country; so population loss is likely enough to be talent-drain as well.

It is hard to find any political or business leader in the state of Michigan who believes that it is possible to create 100,000 new jobs a year in the state over a prolonged period.  This seems to imply chronic high unemployment in the state for a very long time, with all the features of poverty, poor health, and low quality of life that comes along with this scenario.

So is there a different possible future for Michigan that assumes a different paradigm: a smaller population; smaller cities; but a more robust and diverse economy and a higher overall standard of living?  Is it time, perhaps, to be planning for a smaller but more prosperous and healthy state?

There are many serious challenges that this transformation would create.  A declining population implies a declining tax base; so state and municipal revenues would decline as well.  School systems were built for a certain level of capacity; take 15-25% of the children out of a school system and you have a funding crisis in the schools as well.  Detroit's Mayor Dave Bing is grappling with the need to consolidate the land area of the population served by the city of Detroit, in order to achieve a balance between resources and needs.  And, of course, the state would continue to lose representation in the House of Representatives.  So designing a strategy for "smaller, healthier, wealthier" is not simple.  But it may be time to begin thinking along these lines.

UPDATE December 28, 2010

The results of the 2010 census are now available, and Michigan is the only state in the country to have lost population since 2000.  The country as a whole gained 9.6%, whereas Michigan lost .6% of its population -- roughly 60,000 people.  Here is a news article from AP (link).

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Posted in: CAT_Michigan,economic development,employment

What now for Michigan?

The Detroit Regional Chamber Leadership Conference at Mackinac has come and gone. Leaders from all sectors in Southeast Michigan participated in discussions about how the state might move forward and regain the vitality and quality of life that the state has lost in the past decade. All agree that the state faces very tough challenges. And solutions and strategies were put forward. Central themes included a range of strategies -- Create more jobs.... Improve K-12 schooling.... Create and retain more college graduates.... Improve the climate for business and entrepreneurs.... So there are ideas about what is needed, and there are organizations investing effort in achieving some of these goals.

So why might one board the ferry from the island with a sense of disappointment? For a few reasons. First, there are a number of critical social issues that got no public discussion at all: the persistence and depth of urban poverty in each of Michigan's cities, the continuing reductions the state is imposing on the social services budgets, the enduring inequalities the state accepts along racial lines, and the state's stubborn refusal to face up to its fiscal crisis, to list several. One might imagine that these problems would disappear if and when the state's economic crisis abates; but I'm not persuaded of that.

A more fundamental source of disappointment is the lack of serious, realistic analysis of the problems we face in the state and what interventions might actually succeed in addressing them. The lack of realism in these discussions is often truly staggering. There are exceptions, of course; for example, Lou Glazer's efforts at Michigan Future are data-driven (link), and the Citizens' Research Council has done great work on the fiscal crisis of the state (link). But all too often various political and business leaders have picked out one small issue and have tried to present it as a comprehensive strategy. For example, leaders in state government tout the opportunity represented by alternative energy and the manufacture of windmills. But there is no honest calculation of the likely scope of labor force demand created by this sector; and to date, the numbers are tiny. The state has lost over 800,000 jobs in the past eight years, and windmill manufacture has the potential to employ a few thousands. So how can this be a realistic avenue for "putting Michigan to work again"?

Similar comments might be made about the idea that Michigan should focus on biotechnology. The state has assets in this field, to be sure, including world-class researchers in many of its universities. But how many states and regions have already declared themselves for the future of biotechnology (including Pittsburgh, several of whose leaders spoke at the conference); and how many are likely to succeed? So picking out alternative energy and biotech as the primary areas of growth in the state sounds sexy but unrealistic.

More credible is a broad strategy of improving the human capital and quality of life of the state. Logically, it makes sense that dramatic improvement in K-12 education, educational attainment, and college graduation will add a broad-based and fungible resource to the state's arsenal for productive activity in the future. And equally, it seems very logical that creating appealing, safe, and fun cityscapes will be conducive to productivity, quality of life, and business growth. (These are Richard Florida's central insights in the CreativeClass.) So investments in education and the urban environment seem to be very practical ways of increasing the prosperity of the state in the medium run. (The unemployment rate of baccalaureate adults is about 1/3 that of high school graduates in the state right now.)

But significantly, each of these areas of public investment has declined in the past 8 years. State support for K-12 and post-secondary education has declined significantly over the past eight years. All cities and municipalities in Michigan are facing a current and severe fiscal crisis because of declining property values and revenue sharing, and this crisis will get dramatically worse in the next 5-10 years. So improving urban quality of life is not being supported either.  (Proposal A makes matters worse, since it means that it will take many years for cities to regain the tax base they lost during the real estate meltdown in the past several years; link.)  So the result is that Michigan is disinvesting in exactly the factors that hold out the greatest promise for improvement in the next 15 years.

It is possible that there is no intelligent solution to Michigan's crisis -- no smart strategy that could be pursued by public and private organizations that would do this set of things in order to bring about that set of good results.  It is possible that regions come out of economic tailspins only through a lot of trial and error, and sometimes they come out in a much reduced state.  Nothing guarantees that the end of this story will be a happy one, resulting in a prosperous society of 10-12 million people moving forward confidently.  In other words, it may be that repairing deep economic and social damage is essentially beyond our ability.  But one would want to think otherwise.  We would want to think that there are investments and reforms that can be adopted now that will make recovery most likely and full.  And we would want to think that it is possible to identify some of the broad structural obstacles to productive growth, and work to remove these.  Each of these efforts is likely to bear fruit -- much as a baseball team increases the odds of success by recruiting and cultivating strong players, working on the essentials of teamwork, and removing the process issues that may be in the way of success.

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Posted in: CAT_Michigan,economic development

Revitalizing our cities

It is hard to think of an American city that is doing really well these days.  Dense urban poverty in the core, super-high rates of unemployment, failing schools for many urban children, high rates of crime, chronic and overwhelming fiscal crises resulting from too little public revenue for needed public services, and health outcome discrepancies that mark debilitating life disadvantages for urban people -- these seem to be fairly widespread features of cities from Miami to Cleveland to Los Angeles to Chicago to Detroit.

The most recent victim of the urban crisis in the area of publicly provided social services in my city, Detroit, is indicative; this week it was announced that Detroit's Neighborhood Services Organization would lose 2/3 of its funding effective immediately (link).  This program reaches out to Detroit's homeless people and provides transition assistance permitting 1000 people per year to return to housed status.  It is now forced to close down its operations entirely until October 1, since the program has already expended 1/3 of its budget for 2009-10.  No one disputes that NSO is doing great work and returning multiples of benefits relative to its budget; but the state's fiscal crisis has been passed on to this effective, people-oriented program.  (CEO Sheilah Clay was featured as a guest on the Craig Fahle show on WDET today -- one of the best parts of the urban Detroit dial.  Thanks, Craig!)

So cities are suffering from very significant structural disadvantages in the United States today.  And yet, as Richard Florida argues so persistently and so correctly, cities are crucial to the future of the United States and the rest of the world (link).  When they are healthy, they create a concentration of talent, innovation, and synergy that simply cannot be beaten.  So we need healthy cities and metropolitan regions if we are to thrive in the twenty-first century.

So what can be done, given that the deck seems to be stacked against our cities?  This evening Judith Rodin, president of the Rockefeller Foundation and former president of the University of Pennsylvania, gave an important lecture on this subject at Wayne State University in its Van Dusen Forum on Urban Issues.  Rodin is an ideal speaker on this subject, because the University of Pennsylvania developed very strong urban renewal strategies aimed at West Philadelphia during her tenure, and because the Rockefeller Foundation has taken urban revitalization as one of its core goals for quite a few decades. Rodin is the author of an important book about the process that unfolded in Philadelphia around the University of Pennsylvania (The University and Urban Revival: Out of the Ivory Tower and Into the Streets), and it is worth reading.  She estimates that there are roughly 50 "megaregions" in the United States -- Detroit Metro, Chicago-Land, ... -- and that these megaregions represent 65% of the population and a higher percentage of all economic activity.  So healthy development of American cities is enormously important. But likewise, the institutions that find themselves deeply integrated into the geography of these cities urgently need a future in which their cities begin to grow more habitable, healthy, and equitable.  Here is a memorable line from the speech -- "Blight of the city becomes the plight of the university."

What actors and strategies can help attain a positive trajectory of urban revitalization?  Rodin's central thrust is that universities and health systems can serve as "anchor" institutions in cities, and that they can design strategies that substantially improve the economic development and quality of life of the cities they inhabit.  (She calls these institutions "eds and meds".)  They provide very significant employment opportunities and purchasing power in the city; and more important, they necessarily make significant investments in real estate and infrastructure in the city.  So in principle, it is credible that the resources of these institutions could be used in ways that leverage positive change in the cities in which they live.

But Rodin draws several very important lessons from the example of Penn and Philadelphia.  There needs to be a broad and sustained institutional commitment to making strategic decisions around the goal of enhancing the process of urban development.  The strategies can't be "one-off" -- they need to be sustained and thoughtful.  Strategies need to be coherent and comprehensive -- not piecemeal and stop-and-go.  Third, she emphasizes that successful revitalization strategies require us to think innovatively.  Existing solutions haven't worked; we need to bring fresh thinking to the situations we confront and the outcomes we want to achieve.  And, finally, she emphasizes over and over the need for partnership and community participation in the plans that the institution arrives at.  Full, uninhibited partnership is essential if any of these strategies are to work.  So communication, partnership, and genuine collaboration with all stakeholders is essential to a successful strategy. Another memorable line -- "Urban revitalization can't be done for the community or to the community; it must be done with the community."

The examples that Rodin offered from Philadelphia largely had to do with neighborhood revitalization and investments by the university in stabilizing the neighborhoods surrounding it in West Philadelphia.  For example, the university bought dozens of homes and buildings in the neighborhoods, renovated them, and leased them back to residents and businesses; and, significantly, it did so at a loss.  The idea was to make attractive properties available to city residents and businesses, bringing housing, children, and consumers into once-blighted neighborhoods.  Another example -- she highlighted crime and safety on the streets as a key issue; so the university organized a program for street lighting in a number of neighborhoods.  The new lighting system invited people back into the streets; but more people in the streets in turn reduced the prevalence of crime.  A third example -- she talked about a mortgage incentive program the university offered to faculty and staff, to give them an incentive to live in the targeted neighborhoods.  In other words, through a targeted and sustained investment strategy in real estate and neighborhoods the university was able to help Philadelphia achieve meaningful change.

The upshot of these examples comes down to two basic causal ideas: invest in real estate in ways that invite people to live and work in the central city; and find ways of changing behaviors so that the neighborhoods will be increasingly attractive.  Crucially, Rodin suggests that the university's investment is a sizable one; but it is a small fraction of the total investment in these neighborhoods that eventually comes about as residents, business owners, and investors acquire more confidence in the safety and stability of the neighborhoods.  So the change of behavior is really essential to the whole plan; unless people begin occupying homes, purchasing in grocery stores and other businesses, and enjoying parks and cinemas in these neighborhoods, nothing fundamental will change.  No single institution has the resources to turn West Philadelphia into Back Bay, but early investments by "anchor institutions" may pay off through their ability to leverage many times those resources through other sources.

What Rodin didn't talk about so much in her lecture is how the research energies of the university can be a positive factor in urban revitalization.  But this aspect of the university's ability to contribute is crucial.  The social problems that modern cities face are "wicked" problems -- big, messy, complex, and multi-sectoral problems (link).  Everyone wants to improve the quality of urban schools.  But what interventions might actually work?  This requires a broad research effort, incorporating teacher training, pedagogy, curriculum, the cultural and social environments that poor children live in, school leadership, system bureaucracy and governance, and a host of other complex causal processes.  So 800-word editorials in the local newspaper won't be able to provide a guide to policy reform.  The remedies won't be simple.  Or take racial disparities in health outcomes.  Why are certain diseases so much more prevalent in poor neighborhoods?  Some of the answers are fairly simple; but overall, this is a complex phenomenon that requires careful, detailed applied research.  And schools of public health have exactly the right constellations of talent and expertise to help sort out the causal processes leading to these outcomes -- and the kinds of policy interventions that can reverse them.  Here again, the research capacity of a university is crucial to the solution or amelioration of the problems our cities face.

Another major impact that a university can offer a city is in the form of an engaged student body.  If students are motivated to support community service organizations, they can have an immediate impact.  If they are encouraged to take service-learning courses that give them a better understanding of the city, this will deepen their ability to contribute.  And both these forms of engagement will produce something even more important: adults who are prepared to extend themselves in forms of community service throughout their lives.  Learning the habit of engagement can be a lifelong change.

Significantly, a number of urban and metropolitan universities are adopting institutional missions that highlight the kinds of partnership, engagement, and urban/metropolitan impact that is described here.  In particular, the Coalition of Urban and Metropolitan Universities represents a group of universities with precisely those commitments.  Here is the Declaration that members of the coalition endorse.  Another important recent development is the establishment of a new Carnegie classification of universities, the classification for Community Engagement (link).

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Posted in: CAT_Michigan,city,crime,economic development,education,urbanization

Detroit: Taking charge of our story

New Detroit (link) and Wayne State University are putting on a major and significant conference on how the story of Detroit is being told today. Detroit is getting a lot of press these days --and it's mostly about crisis, decline, and despair. It is hard for a city to move forward in the context of such a negative picture. And many in Detroit find this national story to be superficial and misleading. So how can we do a better job of understanding and presenting our story? (Here is a link: Ourdetroitstory.)

There is a persistent feeling in the region that the national press is writing the story of Detroit in ways that retell the myths about the past and sensationalize the present. And it makes a difference. We need more nuanced stories, and today's conference is an important effort in that direction.

The lead speaker was Tom Sugrue, author of the 1997 book, The Origins of the Urban Crisis: Race and Inequality in Postwar Detroit. Sugrue made several key points. Most importantly, he points out that the received wisdom about Detroit is wrong. It's not mostly about the 1967 uprising, the white flight of the 1960s, or the racialized politics of Mayor Coleman Young. Instead, our current situation is the result of racial discrimination in employment in the 1940s through 1960s, the flight of industry from the city that began following World War II, and the patterned and systematic racial segregation that followed from Federal home loan policies, real estate steering, and violent and harrassing homeowner associations aimed at intimidating black home buyers.

So Sugrue argues that telling today's story requires an honest understanding of 70 years of our past. The past has created a set of social forces and patterns of economic and political inequality that profoundly affect the present and future. And he argues that the boundaries that divide our region have become a deep barrier to our progress.

The next panel involved lively presentations and discussions by distinguished observers: Robin Boyle (Wayne State University), Malcolm Dade (former political strategist for Coleman Young), David Freund (University of Maryland and author of Colored Property: State Policy and White Racial Politics in Suburban America), and Marcella Wilson (Matrix Human Services). There is a strong theme of needing to achieve a greater reality of racial justice to our city -- and that so many other forms of progress won't be achieved without this important dimension of change.

The discussions today are an important part of Detroit's efforts to reinvent itself in a more equitable and affluent way. And this means understanding our history and our patterns of systemic racial disadvantage more fully.

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Posted in: CAT_Michigan,economic development,race

Measuring recession's impact: Michigan

Michigan has been in a rolling crisis since 2002 or so: the state has experienced the loss of manufacturing jobs, mortgage foreclosures, and plummeting state and municipal revenues at a pace that has left the region badly shaken. What have been some of the macro-level effects?  How have population, income, employment, and housing changed since 2000?  In particular, what effects has the recession had on southeast Michigan, where almost half of the state's population lives?

The Southeast Michigan Council of Governments (SEMCOG) has released a preliminary analysis of the data collected in the 2008 American Community Survey (a periodic resurvey conducted by the US Census Bureau; link).  Some of the results are startling. Most dramatic is what has happened to income, but the region also shows important changes in residential occupancy, poverty rates, and unemployment.

The report considers data for seven counties in southeast Michigan -- Livingston, Macomb, Monroe, Oakland, St. Clair, Washtenaw, and Wayne.  (This corresponds loosely to the definition of the Detroit Metropolitan Statistical Area, which consists of the six counties of Lapeer, Livingston, Macomb, Oakland, St. Clair, and Wayne.) The population of this region was 4.8 million in 2008, essentially unchanged since the 2000 census. So the region had not experienced significant net out-migration as of 2008 (post).  But the age structure of the population has changed noticeably, from a median age of 35.2 in 2000 to a median age of 38.1 in 2008.

The most striking change in this period is a dramatic drop in household and per capita income.  In 2000 the median household income was $64,590, which fell to $54,184 in 2008 -- a 16% decline in household income.  And per capita income fell from $40,993 to $34,665 -- a 15% decline in per capita income.  This is a very large decline in a short time. 

The report also documents a wide income gap based on race.  In 2008 median white household income was $63,183, whereas in black households it was $40,021 and in Hispanic households it was $44,548.  White households were about 50% more affluent than black households. 

Both parts of these findings are important.  The overall decline in personal and family income in eight years is quite remarkable; it certainly represents a very significant decline in the standard of living in the region as a result of recession-related job losses and wage cuts.  And the racial disparities indicated by the gaps between white, black, and Hispanic households demonstrate the persistent racial disadvantages that seem to be hard-wired into the region.

The decline in family income has other harmful consequences as well.  The net purchasing power of the region dropped by a significant percentage -- which translates into the loss of revenues for small businesses whose revenues depend on consumer purchases.  And state revenues based on income taxes and sales taxes in the region fell as well by a comparable percentage -- leading to a fiscal crisis for the state and for municipalities.

Not surprisingly, the ACS data demonstrate that there was a significant upsurge in the poverty rate in the region between 2000 and 2008.  In 2000 10.6% of the population lived below the poverty line; and in 2008, this group had risen to 13.9% -- a 31% increase.  The percentage of families with children in poverty rose from 11.5% to 15.7%, an even greater increase than in the general population.

The effects of the foreclosure crisis are visible in this report as well.  Changes in residential vacancy rates are an indicator of rising frequency of foreclosures.  In 2000 there were 106,680 vacant housing units (5.5%).  In 2008 this number had risen to 260,974 units (12.6%).  This reflected large increases in both homeowner and rental vacancy rates over the time period.

Another noteworthy feature of the report is the light it sheds on differences by county in some important variables across the region.  Most striking is the percentage of adults with a college degree.  The region as a whole has 28% of its adults with a bachelor's degree or higher.  And this number has increased from 25% in 2000.  (At the other end of the spectrum, 12.4% of the adult population lacks a high school degree in 2008.)  But this average masks a very wide range of college attainment rates by county, from a low of 13.9% in St. Clair County (the extreme northeast of the map above) to highs of 42.3% in Oakland County and 51.3% in Washtenaw County.  Wayne County has a college completion rate of 19.5%.

Also striking are the income differences across counties.  Median household incomes ranged from a low of $42,376 (Wayne County) to a high of $71,486 (Livingston County).  Washtenaw County (home of Ann Arbor and the University of Michigan) is somewhat anomalous: it has the highest percentage of college-educated adults, but its median household income is in the middle, at $57,848.

Predictably, poverty rates varied across counties as well.  Livingston County had the lowest poverty rate in 2008 (7.6%), while Wayne County had the highest poverty rate by a significant margin (20.1%).  So a person in Wayne County had almost three times the likelihood of living in poverty as a person in Livingston County.  Washtenaw County's poverty rate is also surprisingly high, at 14.6%.

Finally, it appears that the foreclosure crisis had differential impact across the region as well.  Wayne County shows the highest residential vacancy rate in 2008 (17.9%), whereas Livingston, Macomb, Monroe, and Washtenaw Counties fall between 7.6% and 8.6%.  So the residential vacancy rate in Wayne County is at least double that of other parts of the region.

This set of data from the 2008 American Community Survey sheds light on two very important facts.  First, southeast Michigan has suffered deeply and rapidly as a result of the recession.  The loss of jobs and shrinking of business activity resulted in rapid and sharp declines in family income; the recession greatly increased the number of home foreclosures; and it resulted in placing another 155,000 people in poverty -- a 31% increase in the number of people in poverty.  And second, the 2008 data demonstrate that these effects are not uniformly distributed across the region.  Several counties weathered the recession relatively well.  The worst effects have been experienced in Wayne County and the city of Detroit.  And, given the degree of racial segregation that is demonstrated in Southeast Michigan, this implies that the recession had disproportionately harmful effects on the African-American population of the state.

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Posted in: CAT_Michigan,economic development,poverty,race

Messy regional problems and collaborative leaders

Regions are highly complex social formations: millions of people, thousands of businesses, hundreds of non-profit organizations, and lots of problems.  Some problems are relatively simple to deal with.  If the local river is being polluted by sanitary system overflows during heavy storms, the solution is costly but straightforward: the region needs to invest in a sewer separation infrastructure project.  

What is more difficult for a region to handle is a situation where it is confronted by a complex of problems that are substantially inter-related and that fall outside the scope of traditional policy-making organizations.  These are sometimes referred to as "wicked" problems, and they are difficult both scientifically and practically.  They are difficult scientifically because it is hard to trace the various interlinked forms of causation that have created the problem.  And they are difficult practically because their solution requires the cooperation of groups and actors whose interests and understandings of the situation are often at odds.  And this cooperation may need to persist over a very extended period of time -- longer than the attention span of many of the politicians, business leaders, and university presidents who have taken an interest in the problem.

Take the problem of job losses in the Detroit metropolitan region.  This is a situation that is caused by a complex set of conditions and occurrences of long and short duration: business decisions about plant closings, national trends in consumer behavior, the financial crisis of 2008, family traditions of college attendance, cultural expectations about blue-collar and white-collar work, patterns of racial segregation, fiscal problems for state and local governments, and deterioration of the natural and built environment.  This problem is particularly difficult to deal with for several important reasons:

• the causes of the problem are interdependent
• high unemployment itself reinforces some of the causes of rising unemployment
  
• the policies that would reverse job losses are not easy to identify or implement
• solutions fall outside the scope of authority of the individual decision-making organizations
• solutions may require legislative action, business decisions, and mass behavioral changes that are difficult to elicit or coordinate
  

Solutions that have been proposed include --

• increase the percentage of college-educated adults
• make the metropolitan area more attractive to talented young people
• encourage entrepreneurship 
• create a more business-friendly environment
• lower the tax burden on businesses
• restructure state and municipal government to reduce public costs
  
• encourage investment in high-tech industries such as alternative energy and bioengineering
• create an "arts corridor" that links Motown and the design talents of the auto industry
  

But notice this important fact: these recommendations do not add up to a coherent and actionable strategy.  This is true for several reasons.  The relationship between the factor and the intended result is not a certain one in any of these cases; the actors who would need to take concrete actions in order to bring the factor into being are different in most of these cases; each intervention is costly, so we can't actually do all of these at once; the operational timeframes of these strategies are very different, from months to decades; and some of the strategies here would interfere directly with the efficacy of others.
 
More abstractly, interventions that might have a positive effect on employment may be difficult to achieve for a number of different reasons:

• they require coordinated action by multiple actors: for example, the legislature, the county executive, and several major corporations; and coordination is difficult to achieve
  
• the promising interventions may be conditional on achievement of several other difficult actions as well by other actors
• there may be a "blocking" actor whose interests would be harmed by the intervention in spite of its otherwise positive effects

It seems evident that a region that faces "wicked" and strongly interlinked problems like these needs to manage to create a plan for addressing the problem and a coalition of actors who have the resources and decision-making authority to take the steps specified by the plan.  The plan needs to be based on the best possible analysis of the economic and social effects of various interventions, based on sound social science and social policy analysis.  The actors might include: a group of legislators and the governor and mayor; multiple business groups; a cohesive set of labor leaders; and a few regional foundations which are prepared to commit significant resources to the plan.

Every step of this description poses new challenges for the region, because essentially we are faced with a public-goods problem at the level of a large, complicated public with a number of independent actors: there are costs associated with the formulation of a plan and the marshalling of a coalition, and the benefits of the effort will be broadly shared by the public as a whole.  So no single organization or actor has an incentive to play the lead as agent of change, and the incentives for collaboration are weak as well.

This is where "leaders" come in.  One would hope that a region has a cohort of individuals and organizations with a specific set of characteristics:

• an evidence-based vision concerning the way forward -- the changes that are needed in order to address the problem and the sorts of interventions that would bring these changes about
  
• a broad conception of the balance of public and private interests
• a willingness to engage in costly collaborations that promote the public good
• a practical ability to create and sustain collaborations among other powerful actors
• access to the resources of an organization: money, staff, prestige, and influence with other actors
  

The traditional categories of leaders are easy to understand.  Their positions might include "elected official," "corporate CEO," "non-profit CEO," "foundation president," "newspaper publisher," "labor leader," or "university president."  These individuals stand at the head of formal organizations, and their organizational positions give them ready-made channels of influence on public policy.  Their experiences in leading their organizations may also give them a degree of insight into how to approach the broad problems that a region often faces -- disaster recovery, loss of major industries, a rising trend in social or ethnic conflict.

Some of these leaders are officially charged with the responsibility of formulating strategies and policies that will assist in the solution of problems; so mayors and governors need to be actively involved in the formulation of plans for dealing with these sorts of challenges.   But most of these leaders are not charged in this way; instead, their formal responsibilities include specific organizational goals: "maximizing stockholder value," "achieving the philanthropic goals established by the board of directors," "increasing readership and advertising revenues," "protecting the interests of the members."  There will always be a wide distribution of balance points between private and public interest that are chosen by these leaders; some are more public-spirited, and some are more single-minded about the interests of the organization they lead.

In addition to these traditional categories, there are sometimes leaders in a complicated community who don't fit into the usual boxes.  They don't have executive authority in corporations, foundations, or labor unions, and they aren't elected to positions of official leadership.  What they do have is a set of assets that fall in the category of social capital:

• a big rolodex filled with relationships to powerful and influential people
  
• a strong and positive reputation in the leadership community
• an ability to be persuasive in dealing with a wide range of actors
• a passionate commitment to "making the region better"
• a philosophy of collaboration that they can make compelling to other actors
  

We might call this kind of leader a "high-level socially connected broker" (HLSCB) -- a person who is well positioned to broker relationships among other powerful "elite" actors.  The influence these leaders wield does not derive from the dollars they can commit from their own organizations (foundations, corporations), or the votes they can marshall (labor unions, student organizations), or the direct legislative influence they can wield (lobbyists, large law firms, business associations).  Instead, their influence stems from ideas, passion, and relationships, and their ability to facilitate durable collaboration among actors with somewhat divided interests.  The size of the rolodex is a measure of the density of the networks within which this actor functions; the HLSCB is unusually rich in a set of network relationships that permit him/her to make contact with an unusually large number of other influential actors.  And the HLSCB has a set of personality characteristics that lead him/her to make use of the networks and personal charisma he/she possesses to form working coalitions dedicated to solving difficult problems.  These leaders can be successful in helping a region address its wicked problems -- and perhaps more successful than the more traditional varieties of leaders are likely to be.

Why is this an interesting set of topics for UnderstandingSociety?  For several important reasons: it casts a spotlight on some of the most difficult types of problems that a region can face; it highlights some of the reasons that actors in a single sector are unlikely to be able to solve such problems; it underlines the question of motives and incentives for leaders and stakeholders that plague efforts to solve these types of problems; and it postulates one of the conditions that may be most important for securing meaningful collaboration around efforts to solve these large problems.  And it would appear that the broker-leader is one of those ingredients for successful collaboration.

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Posted in: CAT_Michigan,economic development,leadership