2013 michigan economic competitiveness study - northwood

2013 Michigan Economic

Competitiveness Study:

An Analysis of Issues to Advance Michigan in a Complex Global Economy

Executive Brief

2013 Michigan Economic Competitiveness Study Executive Brief

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About the Michigan Chamber Foundation

The Michigan Chamber Foundation was established as a non-profit supporting organization to the Michigan Chamber of Commerce in 1985 for the following purposes:

• To plan and conduct nonpartisan public education programs regarding free enterprise, productivity, and basic economic issues affecting the state of Michigan;

• To establish and operate a leadership institute designed to provide promising future leaders assessment of Michigan’s assets, challenges, and opportunities to give participants the background and network of contacts necessary to make a positive impact on Michigan’s future;

• To conduct nonpartisan research and distribute policy studies on issues facing Michigan including, but not limited to taxation, government regulation, government spending, health care, and transportation.

Michigan Chamber Foundation Board of Directors

Chair: Kelly Rossman-McKinney, Truscott Rossman

Vice Chair: John Schreuder, First National Bank of Michigan

President: Rich Studley, Michigan Chamber of Commerce

At-Large: Steve Mitchell, Mitchell Research & Communications

Dan Ponder, Franco Public Relations Group

John Sorber, TWO MEN AND A TRUCK/INTERNATIONAL, Inc.

Bill Woodbury, Auto-Owners Insurance

Executive Director: Bob Thomas


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Acknowledgements

The Michigan Chamber Foundation (MCF) would like to thank Northwood University for agreeing to conduct this study and assembling a first class team of researchers to bring it to fruition. In particular, the MCF would like to thank Northwood University President and CEO Dr. Keith A. Pretty; Study Director, Dr. Timothy G. Nash, Vice President for Strategic and Corporate Alliances and the David E. Fry Endowed Chair in Free Market Economics for shepherding the project from inception to completion. The chamber would also like to thank the research team led by Dr. Nash, which is a diverse and talented group of economists and public policy thinkers from across Michigan and nationally. Dr. Debasish Chakraborty, Professor of Economics, Central Michigan University; Dr. Richard Ebeling, Professor of Economics, Northwood University; Dr. John Grether, Associate Professor of Economics and Public Policy, Northwood University; Dr. Adam Guerrero, Associate Professor of Economics, Northwood University; Dr. Adam Okulicz-Kozaryn, Associate Professor of Public Policy, Rutgers University; Mr. Adam N. Matzke, Economics and Finance graduate, Northwood University; Mr. Adam Pretty, Law Student, University of Notre Dame; and Mr. Charlie Ruger, Graduate Student in Economics, University of Detroit – Mercy.

Finally, we would like to thank Joy Feeney, Jeffrey G. Phillips, Susan Woodcock, Bill Gagliardi, and Rochelle Zimmerman for their assistance with the chart construction, editing, typing, and researching of this project.


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Introduction

The purpose of the study is to conduct a comprehensive follow-up analysis of the Michigan

economy based on our 2012 study. Once again we evaluate its rank and performance across a

number of metrics including, but not limited to, Gross State Product (GSP) growth, tax policy,

regulatory policy, and cost of doing business. Accordingly, the focus is primarily on the

Michigan economy and its outlook for the future. It accomplishes that objective by focusing on

different aspects of the Michigan economy and compares it with all other states within the

United States. The 2012 study briefly outlined the current state of U.S. competitiveness in the

global economy and then focused on Michigan’s economic performance relative to national

averages and the other 49 U.S. states. It was important to note that the Michigan economy

moved in tandem with the U.S. economy in the sense that both experienced a decline in

competitiveness relative to its competitors. In order to find answers for what contributed to

this decline, the study’s authors conducted a comprehensive survey of the literature regarding

sources of economic growth to determine what was absent from or a hindrance to the

Michigan economy.

To continue the 2012 evaluation, the authors focus on productivity in Michigan and the factors

that impact productivity. Specifically, the study focuses on tax structures, the regulatory

framework governing businesses, education and other components reflective of the general

business environment. With a focus on productivity, this study again looks at the performance

of Right-To-Work states relative to Non-Right-To-Work states. The 2013 study looks at 200

variables that provide a comprehensive picture of the Michigan economy and the factors that

determine its success. The 2013 study is also additive and includes an analysis of Michigan

relative to the other Bureau of Economic Analysis (BEA) Great Lakes region states (Illinois,

Indiana, Michigan, Ohio, and Wisconsin). The study once again uses a statistical technique

called factor analysis, a process in which the values of observed economic data are expressed as

functions of a number of possible causes or factors to find which are the most important to

overall economic competitiveness. The overall factor analysis shows Michigan moving from

47th in 2012 to 39th in 2013. We used the same five categories of factors to be able to make


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thoughtful comparisons between the 2012 and 2013 studies. The five factor categories are: 1)

General Macroeconomic Environment, 2) State Debt and Taxation, 3) Workforce Composition

and Cost, 4) Labor and Capitol Taxation, 5) Regulatory Environment. As the study shows,

Michigan saw very little movement in factors 2 through 5, but improved substantially in the

General Macroeconomic Environment factor largely due to impressive improvements in Gross

State Product growth and reductions in unemployment in the last two years. We believe much

of this growth can be attributed to Michigan’s state business tax environment and regulatory

structure. Michigan’s labor cost still remains among the highest in some sectors while net

population migration and new business startups in Michigan are among the worst nationally.

The 2013 study also includes a new feature analyzing seven of the largest Great Lake states’

cities. There is also good news for Michigan as the Detroit and Grand Rapids areas, after facing

challenging economic times in the first decade of the 21st century, are showing signs of strong

economic improvement over the last few years. You will also see that Michigan not only led the

Great Lakes Region states in economic growth, but was one of the top performing states in the

country over the last two years. It is also important to note that the Great Lakes Region was the

fourth best performing region in the country over the last two years in terms of Gross State

Product growth with especially strong performance coming from Michigan, Indiana, and Ohio.

The Great Lakes Region also outperformed the U.S. national average in terms of personal

income growth per capital from 2010 through 2012.

To begin, there is fundamental agreement among economists as to the sources that drive

economic growth. There are definite reasons why some nations grow and others don't. Robert

Barro (1991) in his seminal paper, “Economic Growth in a Cross Section of Countries,” tried to

answer that question. He studied the key economic and political factors that determined 98

countries’ competitiveness that led to economic growth and standards of living. It is clear from

this study and others that economic growth is helped by investments in human capital, lower

tax rates, a lower regulatory burden on businesses, and emphasis on the overall human

development matrix. It is also clear that the U.S. in recent times has been steadily falling

behind in these critical investment areas, or at least unable to keep up with the investments vis-


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à-vis its competitors. Also, government is becoming increasingly more important in the overall

scheme of things as compared to the private sector. In addition, the federal government budget

deficit and national debt are growing alarmingly high and the financing of the deficit has been

instrumental in increasing the cost of capital, making it difficult for private businesses to invest

in critical areas. Many economists would argue that this unprecedented increase in government

spending has been the primary reason behind the relative decline in American competitiveness.

In the appendix of the study, numerous tables and charts highlight this decline in U.S.

competitiveness.

Economic growth began to slow toward the end of the 20th century and experienced additional

challenges in the early 21st century. Government was becoming more significant to the U.S.

economy with the U.S. experiencing the highest corporate income tax rate in the industrialized

world according to the U.S. Tax Foundation. Taxes continue to plague American businesses

disproportionately to its competitors. The 2013 Heritage Foundation/Wall Street Journal’s

Index of Economic Freedom measures political freedom, prosperity, and economic freedom

across 10 metrics to gauge the economic success of 184 countries around the world. In 1995,

the U.S. was ranked fourth in the world on the index, and in 2013 the U.S. is tenth.


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The following are examples of the many factors used in this study to evaluate the

competitiveness of the Michigan economy relative to the U.S. as a whole, as well as Right-To-

Work (RTW) states and Non-Right-To-Work (NRTW) states:

1. Growth in Personal Income

Personal income per capita

growth in Michigan grew 27.5%

from 2000-2012 while the U.S.

average income grew at 45% over

the same period. Personal income

growth over the period grew at

just under 49% in RTW states, at

42.7% in NRTW states, and 35.1%

in the Great Lakes region. It is

also important to note that

Michigan led the Great Lakes region

and the national average for per

capita personal income growth for

2010-2012 (See Exhibits 31 and 32).

Increasing per capita income growth

in Michigan over the last two years is

a leading indicator of a strengthening

economy and job market.


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2. Real Gross State Product (GSP)

Growth

From 1998-2012 Michigan Real

Gross State Product (GSP) lagged

the national average significantly.

While the U.S. economy grew from

an overall Gross Domestic Product

(GDP) level of more than $8 trillion

in 1998 to just under $15.5 trillion

in 2012 or 78.2%, the Michigan

economy grew by only 31.5% over the

same period. Gross State Product

grew at an average rate of 93% over

the same period in RTW states while

realizing a slower growth rate in

NRTW states of 70.2% and 52.1% in

the Great Lakes region. However,

Michigan’s gross state product growth

was very impressive in 2011 and 2012

leading the Great Lakes Region and outpacing the average of the U.S. over the same time

period. In fact, if Michigan were its own economic region it would have ranked number 2 in


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economic growth trailing only the southwest region of the U.S., clearly signaling recent

improvement in the Michigan economy. (See Exhibits 15 and 21-23).

3. Net Population Migration

Michigan’s population net

migration from 2000-2012 was

among the worst in the United

States with a loss of 590,635

people. Net migration is defined

by the difference in people leaving

a state relative to people migrating

to a state over a given period of

time. The overall U.S. population

net migration for the same period was just over 4,000 people net positive with RTW states

experiencing a positive net migration total of just under5,500,000 and NRTW states suffering a

net migration loss of just under 5,500,000 with the Great Lakes region realizing a loss of almost

1 million 8 thousand people. (See Exhibit 13). Even though population net migration is still

negative, it is decreasing with the net job creation that has taken place in Michigan over the last

two years.

4. Job Growth by State

During the same period, Michigan

Non-Farm Employment growth

declined 13.9% while U.S. overall

growth grew 3.5%. RTW states

saw employment growth at just

under 7% while NRTW states job

growth was 1% while the Great

Lakes Region realized negative


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growth (See Exhibit 29). It is important to note that net job growth in Michigan was positive in

2012 and should finish on the positive side in 2013 as well.

5. Total Government Employees

Per 10,000 People

Michigan, as of 2012, has 618

government employees per

10,000 people, ranking it fourth

best in the country (See Exhibit

56). This is a clear improvement

from last year’s study when

Michigan had 657 government

employees per 10,000 people, a

sign of improved government efficiency.

6. Index of Entrepreneurial activity per 100,000

The Kauffman Foundation ranked new business activity per month per state per 100,000 people

in 2012 with the national average being 304 and the Michigan average at just 180. The RTW

state average was 303, the NRTW state average was 306, and the Great Lakes Region was 206

(See Exhibit 82). Even though the

Michigan economy has shown

strong growth in both income and

gross state product we clearly

need to focus on bringing new

business to Michigan and

encouraging entrepreneurial

growth as we lag the national


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average and Michigan’s average level of 220 in last year’s study.

7. Industrial Cost of Natural Gas

Michigan seems to be competitive

in the area of average cost of

electricity, but not natural gas per

unit. It was below the national

average for electricity as well as

below the RTW average price for

electricity per unit in 2012.

However, the RTW average for

natural gas was below the

national, NRTW, Great Lakes Region, and Michigan averages in industrial natural gas costs we

studied for 2012 (See Exhibit 74). Michigan’s industrial natural gas price improved from last

year’s study to this year’s study, but so did the cost for the rest of the country still leaving

Michigan at a competitive disadvantage and suggesting an opportunity for public policy debate

relative to pricing structure.

8. Automobile Insurance Cost

The cost of doing business in

Michigan is high by a number of

key metrics. The median price for

an automobile insurance policy in

Michigan is the second highest in

the country, according to a recent

study released by Insure.com.

The median average in Michigan

is $2,520, the national average is

just $1,500, the RTW average is $1,494, the NRTW average is just under $1,505, and the Great

Lakes region is $1,472. Michigan requires long-term catastrophic care as a part of its no-fault


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coverage; the cost figures out to be 5% of median household income to purchase insurance.

New Hampshire is the best bargain at 1.64% of median household income (See Exhibit 62). We

used an even broader measure of cost with the 2013 study with Michigan improving from the

highest cost state to the second highest cost state, again an area for public policy consideration

and improvement.

9. The Northwood University

Competitiveness Index

The Northwood University

Competitiveness Index was

developed for this study and is

comprised of five factor

categories measuring various

areas of economic performance

for all 50 states (1 is the most

favorable and 50 is the least

favorable). Unlike many other

indices where the data and/or

categories are assigned weights

by the researchers, the

Northwood Index assigns

weights based on factor

analysis which initially involved

200 variables. The weights are

market sensitive, and these

weights are susceptible to

change with changes in

economic conditions and data

from year to year. Thus, the indices are based on these weights which are snapshots of current


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market conditions and key factors over said period. Therefore, the model delivers an overall

ranking for a state, provides evidence of strengths and weaknesses relative to other states by

category, and the weights assigned in each category derived by the model may be useful in

prioritizing efforts to improve a state’s relative competitiveness (See Exhibits 101 and 102).

Michigan’s improvement in the rankings from 47 in 2012 to 39 in 2013 is largely due to

improvements to macroeconomic environments in the state in areas ranging from GDP growth

to improving unemployment rates.

Below are the Factor Categories and the key variables that influenced each factor: Factor 1 (General Macroeconomic Environment) - considers general measures of state-wide economic health such as unemployment rates, labor for participation rates, per-capita income, and life-satisfaction (another measure of well-being in addition to per-capita income). Factor 2 (State Debt and Taxation) - considers state debt per capita, cost of living, and tax burden per capita (tax burden considers state sales taxes, selective taxes, license taxes, corporate income taxes, and state income taxes). Factor 3 (Workforce Compensation and Cost) –considers percentage of the working population that is part of a union, percentage of the private working population that is a member of a union, percentage of the public working population that is a member of a union, and cash payments to beneficiaries (including withdrawals of retirement contributions) of employee retirement, unemployment compensation, workers’ compensation, and disability benefit social insurance programs. Factor 4 (Labor and Capital Formation) - considers employment growth, population growth, migration, and organizational birth and death data. Factor 5 (Regulatory Environment) - is a composite of other indices that consider the business friendliness of a state's regulatory framework/environment. Based on the most current available data, Michigan’s economic performance in the five

categories is:

2013 2012 1. General Macroeconomic Environment 31st 48th 2. State Debt and Taxation 14th 10th 3. Workforce Composition and Cost 43rd 45th 4. Labor and Capital Formation 44th 45th 5. Regulatory Environment 26th 24th


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Overall, Michigan ranks 39th out of the 50 states in the Index. Consequently, the state’s

relatively strong performance in terms of Debt and Taxation and Regulatory Environment are

outweighed by its relatively weak performance in the factor categories of the General

Macroeconomic Environment and Labor and Capital Formation. The key reason for Michigan’s

overall rank improvement in 2013 had to do with a stronger macroeconomic environment and

a competitive tax and regulatory environment. GDP growth in Michigan over the last two years

has been led by a resurgence in the automobile, agriculture, and tourism sectors. A careful

analysis of factors 1, 3 and 4 coupled with sound public policies designed to address said issues

will enhance Michigan competitiveness in the future.

The State Business Tax Climate

Index is produced by the Tax

Foundation one of this

country’s leading fiscal policy

think tanks. The index is a

measure of how each state’s

tax law affects economic

performance. An overall index

rank of 1 means the state’s tax

system is most favorable for

business; a rank of 50 means

least. Rankings are weighted

and do not average across to total.

The chart depicts a strong and improving climate for business in Michigan in 2013.(See Exhibit

114).


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10. A Snapshot of Key Great

Lakes Region Cities

Using the most current data

available, we took a close look

at how key cities in the Great

Lakes region have functioned

since 2000. We looked at

seven cities from the five

Great Lakes region states

including both Detroit and

Grand Rapids from the state

of Michigan. Michigan was clearly the hardest hit state economy in the country over the last 12

years. The data clearly show that Detroit was one of the most— if not the most— adversely

affected city while Grand Rapids had economic challenges as well. The inspiring news is that

Grand Rapids was the top performer of the seven cities we analyzed between 2008-11 and

trailed only Detroit in GDP growth 2009-11. Grand Rapids was also the only city in the region to

outperform the national average for GDP growth 2008-11 while both Detroit and Grand Rapids

performed at a dramatically higher level than the U.S. metro average 2009-11 (See Exhibit 113).

11. A Changing Michigan:

Comparing the 2012 and 2013

Studies

Michigan is showing stronger

growth and a brighter

economic picture when

comparing our 2013 study to

our 2012. Six of the nine key

factors outlined in last year’s

Executive Summary have


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shown some or much improvement (Factors 1, 2, 4, 5, 7, and 9) in 2013, while the other factors

outline areas for concern or improvement (Factors 3, 6, 7, and 8). It should be noted that the

cost of natural gas has declined nationally due to increases in the U.S. supply related to the

discovery, drilling, and processing of new deposits domestically. However, Michigan is still a

high cost state for industrial natural gas. It should also be noted that we used a broader based

metric to measure automobile insurance costs in the 2013 study. Even with a broader based

analysis, Michigan is still among the top two cost states for automobile insurance in the country

(See Exhibit 115).

Conclusion

It is important that the reader understands how large and important the Michigan economy still

is within the U.S. and global economy. Michigan’s GSP is roughly equivalent to the GDP of the

country of Austria, which would make Michigan one of the 30 largest economies in the world if

it were a country. The 2013 study paints a more positive picture of Michigan’s competitive

position relative to most other U.S. states in comparison to our 2012 study. Michigan’s ranking

on The Northwood University Competitiveness Index of 39 indicates Michigan has made great

progress driven by a more friendly tax and regulatory environment over the last couple of

years. This study again indicates more time and study is needed to better determine the causal

relationship between RTW legislation and competitiveness; for the time period measured in

this study, Michigan was still a NRTW state. The research contained in this study should serve

as a guidepost and tool for benchmarking for Michigan public policy leaders. For many years

Michigan was the economic catalyst for much of the U.S. economy.

Michigan is once again moving in the right direction and deserves to be studied. A few good

years of data do not make a trend nor spell “Mission Accomplished.” Michigan is: A) blessed

with highly educated and skilled white and blue collar workforces, B) in possession of an

improving tax and regulatory environment which is favorable for job creation, C) the center of

the world’s largest deposit of fresh water, D) at the center of waterway transportation for the

Great Lakes Region, the Mississippi, and to Ontario, Canada, E) a hub for rail, trucking, cargo,

and air transportation, F) home to many of the world’s leading manufacturing and technology


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companies, and G) poised to realize an energy boom via safe oil and natural gas recovery if the

public is afforded a rational and open debate.

Michigan has made it through the economically difficult first decade of the 21st century and is

showing strong signs of an economic turnaround. Michigan is showing that its economic

growth and personal income growth are not only outpacing the other Great Lake states, but is a

strong example for growth on a national level as well. There is no doubt that Michigan is on a

come-back path, but has not arrived yet. Can Michigan return to the position of greatness it

once occupied in the U.S. business structure? The answer is unequivocally yes, but only if we

continue to adopt growth-friendly public policies. Michigan must continue to set its sights high

and benchmark best economic and political practices of this country’s top performing states.

The good news is that many good things have happened in Michigan in the last year, causing

other states to benchmark to our progress

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Introduction The following research and conclusions emanate from a series of meetings and discussions between the study authors and members of the Michigan Chamber of Commerce board and staff. The study is a follow up to our 2012 study which was conceived and designed to take a careful and unbiased look at competitiveness in general and the U.S. and Michigan economies in detail.

The U.S., and therefore the Michigan economy, is part of a highly complex global economy which faces constant and often radical change. The study briefly outlines the current state of U.S. competitiveness in the global economy and then focuses on Michigan’s economic performance relative to the other 49 U.S. states. The purpose of the study is to conduct a comprehensive analysis of the Michigan economy and evaluate its rank and performance across a number of metrics including but not limited to Gross State Product (GSP) growth, tax policy, regulatory policy, and cost of doing business.

The 2013 study focuses on competition on a national scale by state, Right-To-Work versus Non-Right-To-Work states, and new this year by Great Lakes Region states with the results being comprehensive and interesting. The results are informative and unique and make a compelling case for bi-partisan discussion, action and objective pro-business reforms.

The U.S. in a Complex Global Economy Like last year, we began this year’s study with the statement that economists fundamentally agree about the source of economic growth. There are definite reasons why some nations grow and others don't. Robert Barro (1991) in his seminal paper “Economic Growth in a Cross Section of Countries” tried to answer that question. He studied the key economic and political factors that determined 98 countries’ competitiveness that led to economic growth and standards of living. It is clear from his studies and others that economic growth is helped by investments in human capital, lower tax rate, less regulatory burden on businesses and emphasis on the overall human development matrix. It is also clear that the USA has been steadily falling behind in these critical investment areas, or at least unable to keep up with the investments vis-à-vis its competitors. Also, government is becoming increasingly more important in the overall scheme of things as compared to the private sector. In addition, the federal government budget deficit and national debt have grown alarmingly high, and the financing of the deficit, along with additional post-recession banking regulation, has been instrumental in increasing the cost of capital, making it difficult for private businesses to invest in critical areas. The cost in burden of introducing the Patient Protection and Affordable Care Act (PPACA) has caused many business leaders to be indecisive and delay decisions that would

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lead to greater growth in the economy over the last year. Many economists argue that these unprecedented increases in government spending and new regulation have been the main reasons behind the relative decline in American competitiveness. In the appendix of this paper we provide numerous tables and charts that highlight this decline in US competitiveness across a variety of factors.

It is important to note that the twentieth century clearly was the “American Century.” The 1900s saw the United States become the world’s largest, most productive and most competitive economy while also becoming the world leader in invention and innovation. The U.S. was the envy of the world, producing new technologies and abandoning old ones while successfully commercializing the best at a rate the rest of the world could only dream of (see Exhibit 1). While the American competitive free enterprise system produced individual giants like Ford, GM, Standard Oil and U.S. Steel and billionaires named Rockefeller, Carnegie and Ford, the educated middle class realized rapid income growth and soaring standards of living that was the U.S. hallmark during this time (U.S. Department of Commerce, 2013).

U.S. economic performance was nothing short of exceptional during the twentieth century driven by inventors and innovators. The U.S. became the world’s most entrepreneurial, most educated and most competitive economy in the world and remained that way throughout most of the century. This creation of millions of jobs and newly founded businesses and industries that performed at exceptional levels allowed America to shoulder the burden of World War I and II while realizing a 213% increase in real disposable personal income from $9,240 in 1950 to $28,899 in 2010 (U.S. Bureau of Economic Analysis, 2010).

Toward the end of the twentieth century grave concerns were voiced as to whether or not the U.S. could or would remain in its position of prominence atop the global economy. Income growth and job growth began to slow toward the end of the twentieth century and have continued to slow into the 21st century (U.S. Department of Commerce, 2012). Simultaneously after the collapse of the Berlin Wall many of the former communist countries began to appear on the global economic stage as viable competitors to the United States. Over the last decade or more, evidence of a decline in American competitiveness has continued to mount. As an example, U.S. 15-year-olds ranked just 25th in math among the 34 industrialized countries that make up the Organization for Economic Cooperation and Development (OECD) countries and scored in the middle in science and reading on the Program for International Student Assessment (PISA) test given to students in more than 70 countries in 2009 as reported in December, 2010. The test is given every three years with the Shanghai region of China finishing number one among the 72 countries taking the exam (see Exhibit 2). In response to this report, U.S. Secretary of Education Arne Duncan stated that “the brutal fact here is there are many

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countries that are far ahead of the U.S. and improving more rapidly than we are. This should be a massive wake-up call to the entire country” (Bloomberg, 2010).

In addition, according to the Congressional Budget Office and the Heritage Foundation, government at all levels in the United States consumed less than eight percent of GDP by expenditures in 1902 and today consumes more than 41% (see Exhibit 3). Yet we still believe that eight percent government expenditures as a percent of GDP is unrealistically low in today’s complex global economy; yet we also believe that 41% is excessively high, creating a crushing burden on business and economic growth in the United States.

Additionally, the U.S. tax system is becoming more and more burdensome to U.S. competitiveness relative to the rest of the world. According to 2013 data from KPMG and the Tax Foundation, the U.S. now has the highest corporate income tax rate in the industrialized world at somewhere between 39.2% and 40%, not because we have raised taxes but rather because many of our competitors have lowered their rates over the last decade (see Exhibit 4). We also have among the highest long-term and integrated capital gains tax rates in the industrialized world at 28% and 68% respectively (see Exhibit 5).

In reviewing the 16 key indicators (including the number of scientists and engineers, corporate and government R&D, venture capital, productivity, trade performance and others) contained in the July 2011 Atlantic Century (Atkinson, 2011) report, the results show the U.S. ranked number four behind Singapore, Finland and Sweden.

While a fourth place ranking doesn’t appear to be too bad, additional studies and data sources paint a picture of a less nimble and less competitive U.S. economy and business environment. The 2013 Heritage Foundation/Wall Street Journal’s Index of Economic Freedom measures political freedom, prosperity, and economic freedom across 10 metrics to gauge the economic success of 184 countries around the world. In 1995 the U.S. was ranked fourth in the world on the index, and in 2013 we have dropped to number ten (see Exhibit 6). Another measure of economic competitiveness is the highly regarded International Institute for Management Development’s (IMD) Global Competitiveness Index, which consists of 323 variables and four sub-indices (Economic Performance, Government Efficiency, Business Efficiency and Infrastructure) and measures the competitiveness of nations by analyzing how they create a competitive business environment. The U.S. has dropped from being ranked number one on the 1999-2000 index to number seven on the 2012-13 index behind Switzerland, Singapore, Sweden and Finland (see Exhibit 7).

U.S. competitiveness is being adversely impacted by a number of factors, including our mounting national debt which now stands at more than $17 trillion and is greater than 100% of our projected 2013 GDP. The national debt of the United States took more than 205 years to

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reach the one trillion dollar mark, and in roughly 32 years we have increased it more 16-fold (see Exhibit 8). According to the U.S. Department of the Treasury and the U.S. Congressional Budget Office (CBO), U.S. gross interest rate payments on treasury debt securities in 2012 was $360 billion dollars (more than the total GDP of some of the most advanced economies in the world). It is also important to note that the debt has been serviced at a historically low average interest rate of just 2.62% (see Exhibit 9). We are concerned with the future burden of high gross interest rate payments in the United States if the economy recovers or if we enter an inflationary spiral; in either case, interest rates will rise as will the cost of servicing our national debt.

Many believe that the solution to the U.S. deficit problem is simply to raise taxes, especially on those in the top one percent on personal income taxes and on corporations. According to the Tax Foundation in 2010 (most recent tax data available), the top one percent of income earners paid 37.2% of total U.S. personal income taxes while the top ten percent paid 70.6% (Tax Foundation, 2013). Additionally, in 2012 the U.S. gained the dubious distinction of having the highest corporate income tax rate in the industrialized world, making the U.S. and the North American region less competitive (see Exhibit 10).

We are of the opinion that somewhere over the last one hundred years the United States as a country has lost sight of what made it great. There is less understanding of the contributions of (a) economic and political freedom and (b) entrepreneurship and investment to (c) business success, infrastructure development and rising standards of living. Productivity and wealth generated by a free and dynamic business sector allow for households to prosper and government to exist and operate in a vital role in an economy. All three of the macro flow variables (households, business and government) are important (see Exhibit 11). It seems to us that the mix of resource allocation among households, businesses, and government needs to be closely reexamined as government is consuming an ever-increasing share of U.S. GDP thus thwarting U.S. competitiveness and growth. The above is also true on a smaller scale at the state level as the 50 states that comprise the United States of America often compete with each other as well as internationally for business, human capital, and economic growth.

Michigan in a Changing U.S. Economy The U.S. economy’s pace for invention, innovation and new business formation was staggering throughout the 20th century, and Michigan was at the epicenter of much of that growth. Michigan-based companies like Amway, Chrysler, Credit Acceptance Corporation, The Dow Chemical Company, Ford, General Motors, Kellogg, Upjohn, Whirlpool and many others were complemented and supplemented by thousands of small and medium-sized entrepreneurial organizations, making Michigan a center for business excellence (U.S. Department of

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Commerce Report, 2012). A further measure of Michigan’s success in that period is the fact that Detroit had the highest per capita average income in the United States in 1950 (Skorup, 2009)

As we reported last year, Michigan began to lose its competitive edge to lower-cost U.S. states and foreign countries starting in the 1970s and continuing into the 21st century. Today, the Michigan economy is still heavily reliant upon the automobile industry and has not attracted sufficient new businesses to the state or developed home-grown entrepreneurs to ensure strong economic growth and wide scale economic diversification. The following analysis will shed some light on the factors impeding economic growth in Michigan while comparing Michigan to numerous national averages and the average for U.S. Right to Work (RTW) states, U.S. Non-Right to Work (NRTW) states, and Great Lakes Region states. We are pleased to report that Michigan has made great progress both on a regional and national level as evident by the coming findings included in this study. Michigan has moved from an overall competitiveness rank of 47 in our 2012 study to 39 in this, our 2013 study.

Population, Employment and GDP Growth in Michigan and the United States Michigan’s U.S. population net migration from 2000-2012 was among the worst in the United States with a net loss of 590,635 people. Net migration is defined as the difference in people leaving a state relative to people migrating to a state over a given period of time. The overall U.S. population net migration for the same period was just over 4,000 net positive with RTW states experiencing a positive net migration total of just under 5,500,000 and NRTW states suffering a net migration loss of just under 5,500,000, and Great Lakes Region states lost just under 1,800,000 in net migration exodus (See Exhibits 12 and 13).

From 1998-2012 Michigan Gross State Product (GSP) lagged the national average significantly, while the U.S. economy grew from an overall Gross Domestic Product (GDP) level of more than $8 trillion dollars in 1998 to just over $15.5 trillion dollars in 2012 or 78.2%, and the Michigan economy grew by only 31.5% over the same period. Gross State Product grew at an average rate of 93% in RTW states while realizing a slower growth rate in NRTW states of 70.2%, while Great Lakes Region states grew 52.1% over the same period (See Exhibits 14-20).

However, there is very good news for the Michigan and Great Lakes Region over the last two years. Real Gross State Product grew at 2.3% in the Great Lakes Region while it only grew at 2.5% for the U.S. as a whole. The Great Lakes Region was the fourth best performing region in terms of average gross state product growth in 2011 and 2012 and Michigan led the region in average GSP growth at just under 3% during this time (See Exhibits 21-23).

As one should expect, poor growth or negative growth in GSP is generally correlated with higher levels of unemployment. From 2000-12, the average unemployment rate in Michigan

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was 8% while the average for the United States was 5.83%. Average unemployment in RTW states was 5.59%, while NRTW states averaged 6.02%, and Great Lakes Region states averaged 6.71% (See Exhibits 24 and 25). Michigan and U.S. unemployment has quarterly improved over the last 2 years; the averages above reflect unemployment averages since 2000.

Employment growth in the Non-Farm segment of the U.S. economy from 2000-2011 averaged 3.5%. Michigan’s job creation was negative, ranked dead last out of the fifty states for job growth during this period. The average rank for job growth in RTW states over the same period was 20.1, while the average rate out of 50 states for NRTW states was 29.9, and Great Lakes Region states had an average rank of 46.6 (See Exhibits 26-29). It is important to note that Michigan was a net positive producer of new jobs over the last two years. Even though Michigan was the only state to realize net population loss based on the 2010 census, Michigan has clearly showed above national average performance in economic growth and job creation over the last two years.

Household Income Growth and Minimum Wage in Michigan and the United States Personal income per capita growth in Michigan grew 27.5% from 2000-2012 while the U.S. average income grew at 45% over the same period. Personal income growth over the period grew at just over 48% in RTW states, at just under 43% in NRTW states, and just over 35% in Great Lakes Region states. It is also important to note that Great Lakes Region states and Michigan in particular outperform the national averages over the last three years (See Exhibits 30-32).

Household income can be measured by median income (generally the parent or parents in the household). Michigan lags the national average while having an average median household income that is slightly higher than the averages for RTW and Great Lakes Region states. NRTW states have higher average incomes, but the margin is narrowing relative to RTW states due to more rapid income growth and GSP growth in RTW states over the past decade (See Exhibits 33-34).

Minimum wage rates are often considered to be a barrier to entry for young and/or unskilled workers who either lack necessary skills or job experience or both. The U.S. federally mandated minimum wage floor is $7.25, thus no state may set its minimum wage below this rate. The Michigan minimum wage for 2013 remained at $7.40. Michigan is now $.13 below the national average and $.20 below the Great Lakes Region average. In 2013, Michigan is only $.05 cents above the RTW average an improvement of $.02 cents from last year’s study. There is a $.33 differential premium between RTW and NRTW states regarding minimum wage rates (see Exhibits 35 and 36).

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Assessing the Cost of Government in Michigan and the United States Tax burdens, especially on business, have a generally negative effect on job creation, job growth, and new businesses attraction. The average state and local income tax burden as a percent of income in Michigan in 2011 was 9.8% which is slightly above the U.S. average of 9.5%. The average in RTW states is 8.8% while the average in NRTW states is 10%, and the Great Lakes Region states average 10.1% (See Exhibits 37 and 38). The average combined state and local tax rate on corporations in Michigan in 2013 was 6%, more than a half percent below the national average, almost 1.5% below the NRTW state average, and better than the Great Lakes Region average (See Exhibit 39-44).

Unlike the federal government and many other states, Michigan’s state debt as a percent of Michigan Gross State Product (GSP) has improved over last year’s study and is down to 7.88% and now below the national average of 7.99% of GSP. This compares to 5.24% on average in RTW states, 10.15% in NRTW states, and 8.11% in Great Lakes Region states (see Exhibits 45 and 46). State debt per capita in Michigan is relatively low and has improved over last year’s study, down to $2,723 per capita, with the U.S. average at $3,368, the NRTW state average at $4, 423, and the Great Lakes Region states at $3,170. However, the RTW average is considerably lower at $2,026. Michigan’s rate of per capita debt decline since last year’s study is among the most impressive of the country (See Exhibit 47 and 48). In examining state debt as a percent of tax revenue, Michigan fared well with the national average at 150% and the Michigan average down to 131.64% (a decline of more than 10% since last year’s study), while RTW states’ debt as a share of tax revenue was just over 110%, NRTW states average more than180%, and Great Lakes Region states averaged just under 153% (see Exhibits 49 and 50). Michigan’s debt service as a share of tax revenue is 4.84% and is below the national average of 6.3%, and the Great Lakes Region states average of 6.97% (see Exhibits 51 and 52).

Michigan’s state liability ranking is 30 out of 50 with RTW states’ average rank at 23.6 and NRTW states’ at 27 (See Exhibits 53 and 54). The effects of a challenging economy in Michigan and greater efficiencies and productivity at the governmental level have allowed the state to see a reduction in the number of government employees at all levels over the past decade. As of 2012 Michigan has 618 government employees per 10,000 people, ranking it among the lowest in the country. This represents a sizable improvement from last year’s study (See Exhibits 55 and 56).

Looking at state and local government employees alone, Michigan ranks among the ten lean-government states in the country and well below the U.S., Great Lakes Region, and even RTW state averages (See Exhibits 57 and 58).

Government operating efficiencies notwithstanding, Michigan received the highest level of federal bailout funds per capita associated with the financial crisis of 2008-2009. It can be

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argued that without said funds, the economic downturn in Michigan and in the U.S. automobile industry would have been dramatically worse, yet many debate the long-term effect the bailout will have on the competitiveness of both Michigan and the U.S. automobile industry. Federal bailout funds have much less impact on the Michigan economy today, as bailout funds in 2013 are just above $400 per capita in Michigan (see Exhibits 59 and 60).

Cost of Key Goods and Services in Michigan and Nationally The cost of doing business in Michigan is high by a number of key metrics. We used a more broad-based measurement in pricing the average automobile insurance policy in Michigan with some improvement over last year’s study. The median average in Michigan is $2,520 while the national average is $1,500. The RTW average is $1,494, while the NRTW average is just under $1,505, and the Great Lakes Region average is $1,472. Because Michigan requires long term catastrophic care as a part of its no-fault coverage, the cost figures out to be just over 5% of household family income to purchase insurance. New Hampshire is the best bargain at 1.64% of household family income (see Exhibits 61-64).

Michigan is less competitive in the area of average cost of electricity relative to last year’s study, and remains less competitive in the areas of industrial natural gas prices and gasoline taxes. It is above the national average for electricity relative to all metrics for electricity per unit in 2013. However, in 2013 Michigan’s gasoline tax is well above the national, Great Lakes Region, NTRW, and RTW state averages with the fourth highest total gasoline tax in the nation. Moreover, RTW state averages for natural gas again are below the national, Great Lakes Region, NRTW, and Michigan averages in general when looking at all three natural gas categories we studied for 2012 (See Exhibits 65-74).

Finally, the average insurance trust expenditure in Michigan is still among the highest in the country, but declined to $901 per capita from last year’s study number of $1,018. The national average has increased to $842 with the Great Lakes Region average cost being $960 per capita (See Exhibits 75 - 78).

Competitiveness Metrics in Michigan and the United States In this section we have attempted to compile a number of measurement tools related to the business environment and business competitiveness of a state and the subsequent rankings. We have broken them down to compare Michigan with RTW and NRTW states.

We looked at a study by hospitality marketing research firm Cvent, which noted the top 50 cities for meetings and conventions, and Michigan did not have one city in the top 50 (See Exhibit 79 and 80). Also, the Kauffman Foundation ranked new business start-ups per 100,000 people per month per state in 2012 with the national average being 304 and the Michigan average among the lowest in the country at just 180. The RTW state average was 303, the

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NRTW state average was 306, and the Great Lakes Region state average was 206 (see Exhibits 81 and 82). In this study we were able to find additional data on establishment births and deaths from 2002-2010. Michigan trails the national average and the RTW average in births. RTW states are producing new organizations at a faster pace than NRTW states as well (See Exhibits 83-90).

Professors from the University of Warwick in England and Hamilton College in New York have done some path-breaking work trying to measure happiness and quality of life, having published it in the journal Science. We took their survey rankings from 2005-2008 and compared Michigan to RTW and NRTW states and discovered the following. In 2012, Michigan ranked 36th happiest in the country which is a major improvement over last year’s study in which Michigan ranked 48 in happiness (See Exhibits 91 and 92).

The American Legislative Exchange Council annually ranks states on economic performance considering seven factors ranging from corporate tax rates and GSP growth to non-farm payroll growth and population growth. We took the average of their 2000-2011 scores on several variables, and Michigan ranked dead last at 50 in economic performance with the average ranking for the Great Lakes Region at 45.20, RTW states average ranking of 17.09, and NRTW states averaging ranking of 32.11 (see Exhibits 93 and 94).

We then took the 2012 Forbes Best States for Business Index and broke it down to compare Michigan to RTW and NRTW states. The Forbes Index considers seven variables ranging from business costs and the regulatory environment to the economic climate and a state’s growth prospects. Michigan remains ranked 47 overall out of 50 with 1 being the highest and 50 being the lowest. The Great Lakes Region average according to the Forbes Index is 35.60, the RTW states average 17.86, and NRTW states measured 31.50 (See Exhibits 95 and 96). In this study, we again did a similar analysis with data from the 2012 CNBC Index of America’s Top States for Business. The ten general variables used by CNBC range from education and infrastructure, to cost of living, and cost of business. Michigan fared a little better here with an overall rank of 33 out of 50, an improvement from 34 last year (50 being least favorable) with RTW states averaging just over 18 and NRTW states averaging just over 31(see Exhibits 97 and 98). Michigan again fared best on the Beacon Hill Institute’s Competitiveness Index, which includes government and fiscal policy, security, infrastructure, human resources, technology, business incubation, openness, and environmental policy factors with a ranking of 28 (1 being most favorable) the GLR average was just above33, RTW states averaged just above 24, and NRTW states averaged just under 27 (See Exhibits 99 and 100).

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The Northwood University Competitiveness Index In this study, Michigan shows strong improvement in many measures of competitiveness mentioned earlier ranging from happiness and business climate to economic performance in general. In order to define the combined effects of our data, we took the roughly 200 variables in our study for all 50 states and conducted a factor analysis to find five categories or aggregate factors.

Unlike many other indices where the data and/or categories are assigned weights by the researchers, the Northwood Index assigns weights based on factor analysis. The weights are market sensitive since they change with changes in the economic conditions, and the indices are therefore subject to change as the values of our data change over time. Thus, the model delivers an overall ranking for a state, provides evidence of strengths and weaknesses relative to other states by category, and the weights assigned in each category by the model may be useful in prioritizing efforts to improve a state’s relative competiveness.

The Factor Categories and the key variables that influenced each factor are:

Factor 1 (General Macroeconomic Environment) - considers general measures of state-wide economic health such as unemployment rates, labor for participation rates, per-capita income, and life-satisfaction (another measure of well-being in addition to per-capital income).

Factor 2 (State Debt and Taxation) - considers state debt per capita, cost of living, and tax burden per capita (tax burden considers state sales taxes, selective taxes, license taxes, corporate income taxes, and state income taxes).

Factor 3 (Workforce Composition and Cost) – considers percentage of the working population that is part of a union, percentage of the private working population that is a member of a union, the percentage of the public working population that is a member of a union, and cash payments to beneficiaries (including withdrawals of retirement contributions) of employee retirement, unemployment compensation, workers’ compensation, and disability benefit social insurance programs.

Factor 4 (Labor and Capital Formation) - considers employment growth, population growth, migration, and organizational birth and death data.

Factor 5 (Regulatory Environment) – represents a composite of other indices that consider the business friendliness of a state's regulatory framework/environment.

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Based on the most current available data, Michigan’s economic performance in the five categories is:

2013 2012 1. General Macroeconomic Environment 31st 48th 2. State Debt and Taxation 14th 10th 3. Workforce Composition and Cost 43rd 45th 4. Labor and Capital Formation 44th 45th 5. Regulatory Environment 26th 24th

Overall, Michigan ranks 39th out of the 50 states in the Index. Consequently, the state’s relatively strong performance in terms of Debt and Taxation and Regulatory Environment is outweighed by its relatively weak performance in the factor categories of the General Macroeconomic Environment and Labor and Capital Formation. The key reason for Michigan’s overall rank improvement in 2013 had to do with a stronger macroeconomic environment and a more competitive tax and regulatory environment. GDP growth in Michigan over the last two years has been led by a resurgence in the automobile, agriculture, and tourism sectors. A careful analysis of factors 1, 3 and 4 coupled with sound public policies designed to address said issues will enhance Michigan competitiveness in the future (See Exhibits 101-112). The following is additional analysis of Michigan’s competitive environment.

An Economic Snapshot of Key Great Lakes Region Cities Using the most current data available, we took a close look at how key cities in the Great Lakes region have functioned since 2000. We looked at seven cities from the five Great Lakes region states including both Detroit and Grand Rapids from the state of Michigan. Michigan was clearly the hardest hit state in the country over the last 12 years. The data clearly show that Detroit was one of the most, if not the most, adversely affected city while Grand Rapids clearly had economic challenges as well. The inspiring news is that Grand Rapids was the top performer of the seven cities we analyzed between 2008-11 and trailed only Detroit in GDP growth 2009-11. Grand Rapids was also the only city in the region to outperform the national average for GDP growth 2008-11 while both Detroit and Grand Rapids performed at a dramatically higher level than the U.S. metro average 2009-11 (See Exhibit 113).

Additional Data on State Business Climate The State Business Tax Climate Index is produced by the Tax Foundation one of this country’s leading fiscal policy think tanks. The index is a measure of how each state’s tax law affects economic performance. An overall index rank of 1 means the state’s tax system is most favorable for business; a rank of 50 means least. Rankings are weighted and do not avearage across to total.

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The chart depicts a strong and improving climate for business in Michigan in 2013.(See Exhibit 114).

Comparisons of Key Data from 2012 and 2013 Studies Clearly Michigan is showing stronger growth and a brighter economic picture when comparing our 2013 study to our 2012. Six of the nine key factors outlined in last year’s Executive Summary have shown some or much improvement (Factors 1, 2, 4, 5, 7, and 9) in 2013, while the other factors outline areas for concern or improvement (Factors 3, 6, 7, and 8). It should be noted that the cost of natural gas has declined nationally due to increases in the U.S. supply related to the discovery, drilling, and processing of new deposits domestically. However, Michigan is still a high cost state for industrial natural gas. It should also be noted that we use a broader based metric to measure automobile insurance costs in the 2013 study. Even with a broader based analysis Michigan is still among the top two cost states for automobile insurance in the country (See Exhibit 115).

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Cobb-Douglas Analysis As a follow-up to our 2012 study we continue to assess whether RTW laws are a cause or effect. Once again we apply a different approach towards identifying whether RTW matters with regard to a state’s economic performance. In this study, regression analysis was used to estimate a standard Cobb-Douglas production function. The Cobb-Douglas production function is a tool used by economists to examine the dependency between economic output and inputs such as capital, labor, and technology.

The percentage changes in state gross domestic product, employment, and organizational births were used to measure output, labor, and capital formation in the Cobb-Douglas function. It was from this equation that we derived a measure for technological formation, a proxy for business competitiveness. A series of regression models were then estimated to examine the relationship between business competitiveness and whether a state had in place right-to-work legislation, controlling for factors including, but not limited to, state-by-state union participation rates, government expenditures, and tax policy. In all of the models estimated, empirical support was provided for the notion that right-to-work states are more competitive.

There are two main conclusions that we have derived from this year’s Cobb-Douglas Production Function analysis (with last year’s results in mind):

1) When we use the residuals from the Cobb-Douglas Production Function as a proxy for competitiveness, we can conclude that right-to-work states are more competitive than non-right-to-work states at a statistically significant level. This is the case even after controlling for corporate tax rates, government spending, government taxation, and union participation rates, whether they are public, private, or private manufacturing.

2) Another main result is that there are limitations associated with using organizational births as a proxy for capital formation during economic downturns, especially considering that the most recent economic downturn was one of the largest in American history. Before the recession the percentage change in organizational births when combined with increases in employment explained a huge percentage of the variability in per-capita gross domestic product from one state to the next, but this was not the case for updated analyses that included information through 2010.

The conclusion is that during downturns, it is probably better to examine the percentage change in already existing business investment to proxy capital formation. Next year we intend to explore this in more detail – this will be a robust economic analysis/finding. Next year we also intend to examine the Cobb-Douglas Production Function from one region in America to the next in addition to interstate analyses. We will also look at how worker productivity varies from one industry to the next as a function of whether a state is right-to-work while controlling

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for other key variables. The following is a detailed analysis of this year’s Cobb-Douglas Production Function methodology and results.

1. The Meaning and Definition of Productivity

How competitive an economy is often depends upon how productive that economy is. Productivity is a measure of the rate at which outputs of goods and services are produced per units of inputs. Broadly defined, the inputs are labor, capital, and other inputs like raw materials.

Productivity = Output/Input. Productivity is defined as the amount of goods and services produced per worker per hour. Thus productivity is technically the ratio between real output produced and the number of inputs that are needed to produce that output. To study economic growth economists have often used the aggregate production function. In economics the aggregate production function relates physical output of a production process to physical inputs. The production function is one of the key concepts of mainstream neoclassical theories. Specifically, production function defines the physical relationship between the number of units of output produced and the number of units of inputs needed to produce that level of output. Traditionally, the aggregate level of output produced in an economy is a function of the available supply of labor and capital. Thus productivity is a “supply side” measure depicting the relationship between output and inputs.

2. Different Measures of Productivity: There are two measures of Productivity, Labor Productivity and Total factor Productivity. Labor Productivity: One important measure of productivity is Labor Productivity. Labor productivity is the ratio of output to labor input. It is measured by the number of units of output produced per labor hour. So labor productivity increases if the output (defined by the number of units that are produced) increases while number of working hours remains the same. Labor productivity is important because an increase in labor productivity raises per capita income. It indicates that the production of goods and services is expanding more rapidly than the increases in the population. This is the only way a country or state can ensure that the per capita income is expanding. Economists agree that only when there is an increase in per capita income can we say that the prosperity of the nation is increasing. Thus increase in labor productivity, which leads to increase in per capita income, is one of the principle determinants of economic growth. In summary, economists are always in pursuit of economic policy that promises to ensure that the production of goods and services are greater than the growth in population leading to economic growth and prosperity. One has to be careful about

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interpreting Labor Productivity. Although labor productivity measures how productive labor is, it often reflects something more than that. Labor productivity measures output per unit of labor. However, we know that many other factors besides labor, like the quantity and quality of capital, and the level of technology that is available to workers also influences output. So it probably could lead to a misleading conclusion if we interpret labor productivity as solely attributable to performance of labor and nothing else.

Multi-Factor Productivity: However, since all economies face a finite supply of factors of production (labor and capital), it is important to also see how efficient an economy is in using its supply of labor and capital in producing output. In that sense productivity can also be broadly defined as a measure of efficiency. We all rely on productivity numbers because it indicates how competitive the country is. In economics we use the concept of productivity to serve as a proxy for efficiency. So we use the concept of Multi-Factor Productivity also known as the Total Factor Productivity (TFP). Multi-Factor Productivity or Total Factor Productivity is the ratio of output to the combined input of labor capital and raw materials. That efficiency, in turn, depends upon the level of technology, and the efficiency of the prevailing institutions. In principle, total factor productivity is a more comprehensive measure of productivity.

3. What does productivity measure? Productivity usually measures the following effects in a production process:

a. Technological change or improvements: b. Improvements in human capital c. Institutional improvements resulting in reductions in inefficiencies d. A general increase in productivity could also signal resource allocation from low

productivity sectors to high productivity sectors.

4. The importance of Productivity Growth:

We know that Productivity = output/Input. Thus we can state the same thing in growth terms and come up with some real interesting conclusions. We can state that

Productivity Growth = Output growth – Input Growth.

Thus we have

Output Growth = Input Growth + productivity Growth.

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So both the growth in input and the growth in productivity contribute to growth in output. So since increase in input is slow and often uncontrollable, one way to foster economic growth is through ensuring growth in productivity.

Since the per capita GDP often is used to reflect standard of living, we can see how productivity can have a profound influence on standard of living. Per capita income = GDP/Population.

So we can rewrite the equation to reflect an important fact:

GDP/population = [GDP/# of Hours worked] X [# of Hours worked/Population]

GDP is both income and output. So per capital GDP is the product of GDP/# of hours worked (labor productivity) and hours worked per person. Since it is very difficult to change the hours worked per person, it is therefore true that per capita income is directly related to labor productivity. Thus productivity growth is a crucial source of growth in sustainable living standards.

Since productivity growth is more output per unit of input, it provides benefits to all sections of the societies. Krugman (1992) states that “Productivity isn’t everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.” Increase in productivity means an increase in wages and benefits for labor, more profits and dividends to owners of capital and entrepreneurs, lower price for consumers, more taxes for the government and also more resources for remedying socials imperatives, like reducing income inequalities, and poverty and malnutrition. At the macro level, a country's ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker. Blinder and Baumol (1993) state that

over long periods of time, small differences in rates of productivity growth compound, like interest in a bank account, and can make an enormous difference to a society’s prosperity. Nothing contributes more to reduction of poverty, to increase in leisure, and to the country’s ability to finance education, public health, environment and the arts.

Thus productivity growth over long periods of time, can have a significant impact on the how competitive and prosperous a nation is compared to other countries.

5. Sources of Productivity Growth:

Economists generally agree that technological progress, a new invention, an innovative process, an increase in the skill level of the labor force, institutional efficiency as measured by strong rule of law, well defined property rights and free and competitive markets, flexible labor markets and increased international trade are among some of the factors that influence Total Factor Productivity. A study (UNIDO Oct 2006) shows that increased productivity was due to

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“human and physical capital, infrastructure, financial development, technology transfer through trade and absorptive capacity regarding knowledge creation, privatization and trade liberalization to achieve increased competition and economic institutions.” The same study indicates that research shows a long-term relationship between TFP and spending on research and development (R&D). However, research also shows that the impact of R&D spending is higher in countries with strong institutions. One of the major differences between rich and poor countries is that rich countries have an abundance of skilled work force, better institutional infrastructure and well defined property rights compared to the poor countries. Productivity increases also allow trade between rich and poor countries without lowering of factor incomes in poor countries. Thus US can still participate in mutually beneficial trade under NAFTA, without US wages falling to the level in Mexico because of productivity differences between US and Mexico. In the literature numerous variables have been identified as contributing to productivity. They are broadly classified under four different categories:

a. Economic Factors: such as openness of the economy, the size of the government, the extent of price distortions both in the goods and the labor markets, the size of the government deficit and the savings rate of the economy.

b. Institutions: such as the nature of the legal system, the nature of the political decision making process, and the right to private property.

c. Social Base: such as the extent of ethnic and religious composition of the society, whether there is ethnic and religious harmony and if the country has had a history of colonial exploitation.

d. Physical Base: Such as physical locations, climate, the availability to raw materials and the disease environment.

Not all economists agrees on the proposed categories outlined above: While economists like Jeffrey Sachs argues that physical base does play a direct and important role in the economic performance of a country, economists like Acemoglu Rodrik argue that physical bases play an indirect role in the economic performance of the country through the specifics of the institution. However, in today’s economy an increase in American productivity can be attributed to three additional factors. Increase in productivity has been fueled by increase competition fostered by growth in state, national, and international trade. Increased trade resulted from globalization which resulted in reduction in tariffs and non-tariff barriers to trade. In addition, the revolution in Information and Communication Technology (ICT) paved the way for increased globalization and trade and also increased productivity by increasing total factor productivity. Increased competition, globalization and improvements in ICT helped better allocation of resources through fostering increased competition both internationally and domestically, between different companies and regions.

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6. Measuring Productivity: Any given economy owes a lot of the growth of its economy to increases in productivity. However, two critical issues emerge: (1) what are the determinants of A, and (2) how can the contribution of A be measured? We have already covered what are the factors that are determinants of productivity. So now we can move into measuring productivity growth.

Robert M. Solow (1957) set up the grounds for growth accounting. He considered a neoclassical production function

),( tttt LKFAY =

where tY is aggregate output, tK is the stock of physical capital, tL is the labor force and tA

represents TFP. The letter A measures what we will call productivity. A higher value of A means that the same inputs lead to more output. The central feature of any economy is that economic agents take factor inputs—labor, capital, and raw materials—and convert them into useful products.

To determine efficiency or productivity, one method that is often used is the growth accounting method first used by Robert Solow. In this method we break down the growth of output into the growth of the factors of production; capital and labor and the growth of the efficiency in the utilization of the factors of production. This method if often called the Total Factor Productivity (TFP).

We consider a consider a Cobb-Douglas production function αα −= 1),( tttt LKLKF with 10 << α

Then, taking natural logarithms and differentiating both sides of (1) with respect to time t the growth rate of aggregate output can be expressed as

)/)(1()/(// LLKKAAYY αα −++= (2) Note that the growth rates of physical capital and labor are weighted by α and )1( α−respectively. These weights correspond to the respective shares of rental payments for capital and labor in total income. With available data on α and the growth rates for output, physical capital and labor, TFP growth can be computed from (2) as the residual. Thus growth in productivity is given by

Å/A= )/)(1()/(/ LLKKYY αα −−− (3)

Measuring productivity as a residual involves a “two-stage” methodology; the first being obtaining a reliable estimate of productivity and then analyzing what policy variables has a significant impact on the productivity estimates. Solow suggested that Total Factor Productivity (TFP), which is estimated as a residual, should be the left hand side variable in a cross-country or cross-region analysis of economic performance. This is due to the fact that a number of studies have indicated that TFP rather than factor accumulation is the principal determinant of

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income differences across countries and across regions within the same country. Both the Neo-Classical growth theory and the New Growth Theory allow for this possibility. Both account for the fact that a significant variations in the growth rate across countries can be explained by variations in the growth rate of At.

In this method, the growth in productivity is thus measured as a residual. The percentage changes in state gross domestic product, employment, and organizational births were used to measure the growth rate of output, labor and capital. Thus the growth of productivity is measured as the difference between the growth rate of output and the growth rate of factor inputs.

7. Estimation of Productivity: Once the productivity rate was computed, a series of regression models were estimated, using the productivity growth rate as the dependent variable. All the factors that theoretically influence productivity could be used as independent variables. Some proxy of economic and social infrastructure, R&D spending, spending on higher education, regulatory structure, tax and government spending could be used as the independent variables in the regression equation estimating productivity. In addition, flexibility in the labor market, and the influence of labor unions, and state union participation rate could also be used to access its impact on productivity. In particular, “right to work” legislation could be used as a dummy variable to see if such legislation has any impact on productivity and growth. Economists argue that a business- friendly environment is also critical in productivity growth. So a proxy for business-friendly environment could include but not be limited to the following set of variables: (1) government support for entrepreneurs, (2) reform in “new business” registration process like cost of registration, number of days for registration, (3) whether the states has “one stop business registration centers or not (4) dispute resolution mechanism and (5) bankruptcy procedures.

Empirical Estimates:

The theoretical model used to estimate productivity was empirically used to understand the effects of relevant independent variables on productivity. Specifically data from all fifty states between 2002 and 2010 were used to assess the impact of “Right to Work” legislation, union membership and tax burden on productivity.

Model 1

In the first model growth in GDP was the dependent variable and was regressed against growth in total employment and growth in organizational births. It is important to note that the growth

37

in organizational birth was used as a proxy of growth in capital. This equation was estimated to obtain an estimate of the “residuals,” which in our model is used as a proxy for productivity.

Change in GDP = .614 %*** change in total employment -0.078 % change in organizational births. (*** indicates significant at the 1% level)

It is clear that the growth in employment has a significant positive impact on the growth in GDP. However, the growth in organizational birth is not statistically significant. It is possible that the data set contains data from 2007 to 2010, during which time, due to the great recession, organizational births were almost non-existent. When estimated without using data from 2007-2010, the same equation results show a positive and significant coefficient for the growth in organizational births. So it is important to note that at least during the time of economic slowdown, growth in organizational births may not be a good proxy for the growth in capital.

Using the estimates of the residuals, three separate regressions were run with the estimated residuals serving as the dependent variable. The results are noted in Table 1 on the next page.

38

Model 1 Model 2 Model 3

rtw 6.813*** 3.694*** 3.952***

Per_memtotal (% of employee in union

-0.005 0.628

Tax_burden-er cap (per capita tax burden

.001*** .001

Per_mem private(% of employed in union in private sector

-0.383

Per_mem public(% of employed in union in public sector

0.411

Per_mem private_ manufacturing (% of employed in union in private sector

-0.065

Cor_tax (corporate tax)

-0.129

General_expenditure-Percapita

.000

N 50 50 50

R2 .696 .816 .881

aic 275.248 226.092 220.689

bic 277.160 231.828 235.658

39

It is clear from Table 1 that “Right to Work” legislation is significant in all three models. The empirical results thus suggest that the right to work legislation has a positive and significant impact on productivity. Although the value of R2 is relatively low in model 1, it is acceptable in both model 2 and 3. In model 2, it shows that per capita tax burden also has a positive yet significant impact on productivity. This result is counterintuitive. It is possible that states with high economic growth pay higher taxes and that also helps in productivity growth. It is important to investigate this further. In model 3 we introduced three new independent variables; percentage of union membership in private, percentage of union membership public sector and percentage of union membership in manufacturing sector. All these three independent variables had no statistically significant impact on productivity.

Conclusion

It is important that the reader understands how large and important the Michigan economy still is within the U.S. and global economy. Michigan’s GSP is roughly equivalent to the GDP of the country of Austria, which would make Michigan one of the 30 largest economies in the world if it were a country. This study paints a much rosier picture of Michigan’s competitive position relative to most other U.S. states since our 2012 study was released. Michigan’s ranking on The Northwood University Competitiveness Index of 39 indicates Michigan has tremendous progress over the last few years yet has room for improvement and reason for optimism in the future. The study’s regression analysis indicates that RTW states have positive and statistically significant impact on productivity growth. However, effects of RTW legislation are often hard to isolate and change with economic conditions such as sever recessions. Since RTW states are generally business-friendly, capital formation is higher resulting in higher productivity growth. The study indicates further consideration is needed to better determine the causal relationship between RTW legislation and competitiveness.

The research contained in this study should, however, serve as a guidepost and tool for benchmarking for Michigan public policy leaders. For many years Michigan was the economic catalyst for much of the U.S. economy, Detroit put America and much of the world on wheels, and Michigan was the “Arsenal of Democracy” in WWII. Can Michigan return to the position of greatness it once occupied in the U.S. business structure? The answer is unequivocally yes, but only if we confront the economic reality facing this great state. Michigan must set its sights high and benchmark to the best economic and political practices of this country’s top performing states.

The 2013 Michigan Chamber Foundation Competitiveness Study clearly notes that there has been tremendous economic progress in the state of Michigan over the last few years. RTW legislation has made Michigan a more attractive place especially for manufacturing and

40

construction businesses to locate. Michigan has a very favorable business tax climate and an improving regulatory environment which is also attractive to new and existing businesses. The study data indicate that Michigan has been a regional and national leader in GSP growth, personal income growth, and declining unemployment rates over the last few years. In addition, Michigan’s two largest cities, Metro Detroit and Metro Grand Rapids, have shown strong growth potential over the last two years with Grand Rapids being one of the economically strongest cities in the Great Lakes Region for more than a decade despite the economic conditions in the state of Michigan as a whole. But a few good years of data do not make a trend nor spell “Mission Accomplished.” Michigan is: A) blessed with highly educated and skilled white and blue collar workforces, B) in possession of an improving tax and regulatory environment which is favorable for job creation, C) the epicenter of the world’s largest deposit of fresh water, D) at the epicenter of waterway transportation for the Great Lakes Region, the Mississippi, and to Ontario, Canada, E) a hub for rail, trucking, and air transportation, F) home to many of the world’s leading manufacturing and technology companies, and G) poised to realize an energy boom via safe oil and natural gas recovery if the public is afforded a rational and open debate.

Michigan has made it through the economically difficult first decade of the 21st century and is showing strong signs of an economic turnaround. Michigan is clearly showing that its economic growth and personal income growth is not only outpacing the other Great Lake states, but is a strong example for growth on a national level as well. There is no doubt that Michigan is on a come-back path, but has not arrived yet. Can Michigan return to the position of greatness it once occupied in the U.S. business structure? The answer is unequivocally yes, but only if we continue to adopt growth friendly public policies. Michigan must continue to set its sights high and benchmark best economic and political practices of this country’s top performing states. The good news is that in the last year many good things have happened in Michigan causing other states to benchmark to our progress.

References Acemoglu, D., Johnson, S., and J.A. Robinson. (2001). “Colonial Origins of Comparative

Development: An Empirical Investigation”, American Economic Review, Vol. 91, pp. 1369-1401.

Acemoglu, D., Johnson, S., and J.A. Robinson. (2002). “Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution”, Quarterly Journal of Economics, Vol. CXVII, pp. 1231-94.

Barro, R. (1991). Economic Growth in a Cross-Section of Countries. The Quarterly Journal of Economics 106, No.2, 407-433.no.

Blinder, A. and Baumol, W. (1993). Economics: Principles and Policy, Harcourt Brace Jovanovich, San Diego, p.778.

Easterly, W. and Levine, R. (2001). "It's Not Factor Accumulation" The World Bank Economic Review 15(2): 177-219.

Isaksson, A. and Thiam Hee, N. (2006) “Determinants of Productivity: Cross-Country Analysis and Country Case Studies”, UNIDO.

Jorgenson, D. and Griliches ,Z. (1967). “The Explanation of Productivity Change.” The Review of Economic Studies 34 (2): 249-280.

Klenow, P. and Rodríguez-Clare, A. (1997). “The Neoclassical Revival in Growth Economics: Has It Gone Too Far?” NBER Macroeconomics Annual 1997, 12: 13-103.

Krugman, P. (1992). The Age of Diminished Expectations: US Economic Policy in the1980s, MIT Press, Cambridge, p. 9.

Pritchett, L. (2001). "Where Has All the Education Gone?" The World Bank Economic Review 15(3): 367-391.

Rodrik, D., Subramanian, A., and Trebbi, F. (2002). “Institutions Rule: The Primacy of Institutions Over Integration and Geography in Development,” National Bureau of Economic Research Working Paper No. 9305.

Sachs, J. and Warner A. (1995). “Natural Resource Abundance and Economic Growth”, National Bureau of Economic Research working paper No. 5398, December (1995b).

Sachs, J. and Warner A. (1997). “Fundamental Sources of Long Run Growth”, American Economic Review, May 1997, pp. 184-188.

Solow, R. (1957). “Technical Change and the Aggregate Production Function.” Review of Economics and Statistics 39: 312-320.

Tax Foundation, (2013). 2013 Study of Tax Competitiveness Among States.

U.S. Department of Commerce (2012 and 2013). U.S. Competitiveness and Innovative Capacity Report.

U.S. Bureau of Economic Analysis. (2010). Survey of Current Businesses.

All additional sources of data are referenced on the charts contained in this study.

Exhibits

Exhi

bit 1

: Eco

nom

ic C

ycle

of H

uman

Pro

gres

s

Sour

ces:

Myt

hs o

f Ric

h an

d Po

or (

1999

) an

d W

hen

We

Are

Free

(20

05)

Exhi

bit 2

: Wor

ld E

duca

tion

Rank

ings

200

9

Re

adin

g

Mat

h Sc

ienc

e So

uth

Kore

a 1

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and

2 2

1 Ca

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3

5 5

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n 5

4 2

Net

herla

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7 6

8 Sw

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land

11

3

10

Uni

ted

Stat

es

14

25

17

Germ

any

16

10

9 Fr

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18

16

21

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nite

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20

22

11

Sour

ces:

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Pro

gram

me

for

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rnat

iona

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essm

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A) a

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ECD

, 201

3)

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ces:

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pute

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ata

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onom

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omm

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ort (

1999

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.S. S

tatis

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trac

t and

the

Bur

eau

of E

cono

mic

Ana

lysi

s (2

013)

and

Her

itage

Fou

ndat

ion

(201

3)

2.6%

5.

0%

18.7

%

9.4%

25.3

%

16.2

%

0%2%4%6%8%10%

12%

14%

16%

18%

20%

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28%

Fede

ral

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e/Lo

cal

Fede

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cal

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ral

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e/Lo

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1902

1998

2012

Exhi

bit 3

: Gov

ernm

ent E

xpen

ditu

res

as a

Pe

rcen

tage

of G

DP

0%5%

10%

15%

20%

25%

30%

35%

40%

45%

Aust

ralia

Aust

riaBe

lgiu

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nada

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Chin

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Denm

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nia

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and

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es

Exhi

bit 4

: 201

3 Co

rpor

ate

Tax

Rate

s

2013

2002

Sour

ce: K

PMG

(201

3)

To

p lo

ng-t

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capi

tal g

ains

tax

rate

In

tegr

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ital G

ains

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Rate

Au

stra

lia

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53

%

Aust

ria

25%

50

%

Belg

ium

0%

34

%

Cana

da

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%

Chile

19

%

39%

Cz

ech

Repu

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0%

19

%

Denm

ark

42%

67

%

Esto

nia

21%

42

%

Finl

and

32%

57

%

Fran

ce

33%

66

%

Germ

any

25%

55

%

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ce

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26%

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ngar

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%

35%

Ic

elan

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ly

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%

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way

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land

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ak R

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%

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Exhi

bit 5

: 201

3 Ca

pita

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ns R

ate

By C

ount

ry

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ce: T

ax F

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n (2

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2030

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bit 6

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um's

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rt

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$7,

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$9,

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$10

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,000

$12

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$13

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$14

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$17

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$18

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17761783179017971804181118181825183218391845185218591866187318801887189419011908191519221929193619431950195719641971197819851992199920062013

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bit 8

: Hist

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bit 9

: Fin

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nal D

ebt -

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ta

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84.6

%

Nor

th C

arol

ina

87.8

%

Flor

ida

84.8

%

Nor

th D

akot

a 16

9.5%

Ge

orgi

a 70

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O

hio

45.4

%

Haw

aii

90.5

%

Okl

ahom

a 99

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aho

96.6

%

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gon

96.4

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Illin

ois

62.3

%

Penn

sylv

ania

65

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In

dian

a 65

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Rh

ode

Isla

nd

73.0

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a 81

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uth

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lina

70.6

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Kans

as

79.4

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Sout

h Da

kota

10

2.2%

Ke

ntuc

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60.6

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Tenn

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Lo

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67

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rmon

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assa

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71

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rgin

ia

97.7

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Mic

higa

n 31

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W

ashi

ngto

n 88

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M

inne

sota

79

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W

est V

irgin

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82.2

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Miss

issip

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onsin

63

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M

issou

ri 57

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yom

ing

161.

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Sour

ce: C

ompu

ted

with

dat

a fr

om B

urea

u of

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nom

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naly

sis (1

998

– 20

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31.5

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%

78.2

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93.0

%

70.0

%

0%10%

20%

30%

40%

50%

60%

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80%

90%

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Mic

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Sour

ce: B

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nom

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naly

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Exhi

bit 1

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998

Gro

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duct

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ions

of d

olla

rs)

Alab

ama

$106

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onta

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$20,

009

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ka

$23,

306

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$142

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$254

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$350

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$235

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$51,

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th D

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$600

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h Da

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$173

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5.65

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th C

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th D

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4.42

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7.52

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6.94

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5.

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a 4.

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Sour

ce: C

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dat

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000

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8%

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5.83

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5.59

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000-

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) Al

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19

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orth

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In

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33

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Sout

h Da

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11

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Tenn

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uisia

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31

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Vi

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Mic

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n 50

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Sour

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dat

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1)

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Exhi

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9.

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th C

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a 4.

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th D

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11.2

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nsas

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1.

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4.

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-1

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yom

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Sour

ce: C

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dat

a fr

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naly

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000

- 201

1)

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%

3.5%

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)

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dat

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0: U

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r Cap

ita G

row

th (2

000-

2012

) Al

abam

a 48

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M

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na

59.3

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Alas

ka

53.3

%

Neb

rask

a 50

.9%

Ar

izona

36

.8%

N

evad

a 20

.6%

Ar

kans

as

53.8

%

New

Ham

pshi

re

38.0

%

Calif

orni

a 34

.7%

N

ew Je

rsey

38

.7%

Co

lora

do

32.8

%

New

Mex

ico

54.2

%

Conn

ectic

ut

40.5

%

New

Yor

k 50

.5%

De

law

are

35.3

%

Nor

th C

arol

ina

32.8

%

Flor

ida

38.7

%

Nor

th D

akot

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2.8%

Ge

orgi

a 29

.2%

O

hio

36.9

%

Haw

aii

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Okl

ahom

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aho

36.7

%

Ore

gon

35.0

%

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ois

37.3

%

Penn

sylv

ania

44

.8%

In

dian

a 34

.4%

Rh

ode

Isla

nd

52.5

%

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a 54

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So

uth

Caro

lina

36.6

%

Kans

as

47.0

%

Sout

h Da

kota

65

.2%

Ke

ntuc

ky

41.4

%

Tenn

esse

e 41

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Lo

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na

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s 45

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M

aine

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.9%

U

tah

41.1

%

Mar

ylan

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Ve

rmon

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M

assa

chus

etts

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Vi

rgin

ia

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Mic

higa

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W

ashi

ngto

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M

inne

sota

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W

est V

irgin

ia

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%

Miss

issip

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%

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yom

ing

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Sour

ce: C

ompu

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dat

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om B

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000

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2)

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Mic

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r Cap

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Sour

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dat

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om B

urea

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ic A

naly

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011)

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bit 3

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.S. M

edia

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old

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me

(201

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Sour

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Exhi

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013)

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tana

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ka

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5 N

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ska

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izona

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5 N

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Car

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5 Ge

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5 In

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as

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nnes

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aine

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ont

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0 M

assa

chus

etts

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.00

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higa

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ton

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inne

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t Virg

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Sour

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Min

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Sour

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dat

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nom

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2013

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Exhi

bit 3

7: S

tate

and

Loc

al T

ax B

urde

n as

a %

of I

ncom

e (F

Y 20

11)

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ama

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onta

na

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aska

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rask

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7%

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na

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evad

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2%

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ew H

amps

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1%

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exic

o 8.

4%

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%

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law

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N

orth

Car

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ida

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orth

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ota

8.9%

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0%

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7%

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%

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%

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ois

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%

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sylv

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10

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dian

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6%

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e Is

land

10

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wa

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uth

Caro

lina

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Ka

nsas

9.

7%

Sout

h Da

kota

7.

6%

Kent

ucky

9.

4%

Tenn

esse

e 7.

7%

Loui

siana

7.

8%

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s 7.

9%

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ne

10.3

%

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h 9.

3%

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ylan

d 10

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rmon

t 10

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assa

chus

etts

10

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rgin

ia

9.3%

M

ichi

gan

9.8%

W

ashi

ngto

n 9.

3%

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neso

ta

10.8

%

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t Virg

inia

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7%

Miss

issip

pi

8.7%

W

iscon

sin

11.1

%

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ouri

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yom

ing

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Sour

ce: C

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ted

with

dat

a fr

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nom

ic A

naly

sis a

nd A

LEC’

s Ric

h St

ates

, Poo

r Sta

tes (

2013

)

9.8%

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%

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Mic

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Exhi

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8: A

vera

ge S

tate

and

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al T

ax B

urde

n as

a %

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ncom

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Sour

ce: T

ax F

ound

atio

n (2

013)

Exhi

bit 3

9: A

vera

ge S

tate

and

Loc

al C

orpo

rate

Tax

Rat

e (2

013)

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abam

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na

6.75

%

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ka

9.40

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rask

a 7.

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97%

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evad

a 0.

00%

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kans

as

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%

New

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pshi

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%

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00%

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ico

7.60

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9.00

%

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k 7.

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th C

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%

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ida

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%

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th D

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15%

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orgi

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hio

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%

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aii

6.40

%

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7.40

%

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7.60

%

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%

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9.

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In

dian

a 8.

00%

Rh

ode

Isla

nd

9.00

%

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a 12

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uth

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%

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as

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%

Sout

h Da

kota

0.

00%

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ky

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%

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esse

e 6.

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Lo

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na

8.00

%

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aine

8.

93%

U

tah

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%

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ylan

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Ve

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M

assa

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etts

8.

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Vi

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Mic

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W

est V

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7.

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W

yom

ing

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%

Sour

ce: C

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ted

with

dat

a fr

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x Fo

unda

tion

(201

3)

6%

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%

6.52

%

5.42

%

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Mic

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Stat

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W S

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TW S

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Exhi

bit 4

0: A

vera

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tate

and

Loc

al C

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rate

T

ax R

ate

(201

3)

Sour

ce: T

ax F

ound

atio

n (2

013)

Exhi

bit 4

1: A

vera

ge S

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Sal

es T

ax R

ate

(201

3)

Alab

ama

4.00

%

Mon

tana

0.

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aska

0.

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N

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ska

5.50

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Arizo

na

6.60

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ada

6.85

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Arka

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6.

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amps

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00%

Ca

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%

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%

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2.

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N

ew M

exic

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Co

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ticut

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N

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%

Dela

war

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N

orth

Car

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Fl

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N

orth

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Ohi

o 5.

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Ha

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i 4.

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s 6.

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Pe

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%

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Sout

h Ca

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Ka

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uth

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ta

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6.

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Te

nnes

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xas

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ne

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ichi

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%

Was

hing

ton

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%

Min

neso

ta

6.88

%

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6.

00%

M

ississ

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W

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%

Miss

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min

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Sour

ce: C

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ted

with

dat

a fr

om Ta

x Fo

unda

tion

(201

3)

6%

5.95

%

5.06

%

5.49

%

4.73

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Mic

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Uni

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Stat

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W S

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tate

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Exhi

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tate

Sal

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ax R

ate

(201

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Sour

ce: U

nite

d St

ates

Cen

sus B

urea

u (2

010)

Exhi

bit 4

3: P

rope

rty

Tax

Colle

ctio

ns P

er C

apita

Ran

king

(201

0)

Alab

ama

50

Mon

tana

25

Al

aska

9

Neb

rask

a 16

Ar

izona

30

N

evad

a 24

Ar

kans

as

49

New

Ham

pshi

re

4 Ca

lifor

nia

19

New

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ey

1 Co

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do

13

New

Mex

ico

48

Conn

ectic

ut

3 N

ew Y

ork

5 De

law

are

45

Nor

th C

arol

ina

38

Flor

ida

15

Nor

th D

akot

a 35

Ge

orgi

a 33

O

hio

32

Haw

aii

34

Okl

ahom

a 47

Id

aho

40

Ore

gon

26

Illin

ois

10

Penn

sylv

ania

27

In

dian

a 29

Rh

ode

Isla

nd

7 Io

wa

23

Sout

h Ca

rolin

a 36

Ka

nsas

22

So

uth

Dako

ta

31

Kent

ucky

46

Te

nnes

see

42

Loui

siana

43

Te

xas

14

Mai

ne

11

Uta

h 41

M

aryl

and

17

Verm

ont

6 M

assa

chus

etts

8

Virg

inia

21

M

ichi

gan

18

Was

hing

ton

28

Min

neso

ta

20

Wes

t Virg

inia

44

M

ississ

ippi

39

W

iscon

sin

12

Miss

ouri

37

Wyo

min

g 2

Sour

ce: C

ompu

ted

with

dat

a fr

om U

nite

d St

ates

Cen

sus B

urea

u (2

010)

18

20.2

25.5

31.4

20.9

05101520253035404550

Mic

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Uni

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Exhi

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Tax

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apita

Ra

nkin

g (2

010)

Sour

ce: C

ompu

ted

with

dat

a fr

om U

nite

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ates

Cen

sus B

urea

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011)

Exhi

bit 4

5: S

tate

Deb

t As A

Per

cent

of G

SP (2

011)

Al

abam

a 5.

07%

M

onta

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11.3

4%

Alas

ka

12.6

0%

Neb

rask

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48%

Ar

izona

5.

47%

N

evad

a 3.

27%

Ar

kans

as

3.51

%

New

Ham

pshi

re

13.0

0%

Calif

orni

a 7.

68%

N

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rsey

12

.85%

Co

lora

do

6.04

%

New

Mex

ico

9.99

%

Conn

ectic

ut

13.4

2%

New

Yor

k 11

.43%

De

law

are

9.00

%

Nor

th C

arol

ina

4.21

%

Flor

ida

5.75

%

Nor

th D

akot

a 5.

25%

Ge

orgi

a 3.

18%

O

hio

6.31

%

Haw

aii

11.2

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Okl

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a 6.

57%

Id

aho

6.72

%

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gon

6.77

%

Illin

ois

9.65

%

Penn

sylv

ania

7.

82%

In

dian

a 7.

78%

Rh

ode

Isla

nd

18.4

5%

Iow

a 5.

19%

So

uth

Caro

lina

9.08

%

Kans

as

5.12

%

Sout

h Da

kota

8.

57%

Ke

ntuc

ky

8.85

%

Tenn

esse

e 2.

20%

Lo

uisia

na

8.19

%

Texa

s 2.

89%

M

aine

11

.20%

U

tah

5.79

%

Mar

ylan

d 8.

17%

Ve

rmon

t 12

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assa

chus

etts

18

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Vi

rgin

ia

6.03

%

Mic

higa

n 7.

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ashi

ngto

n 7.

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inne

sota

4.

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W

est V

irgin

ia

11.7

8%

Miss

issip

pi

6.96

%

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onsin

8.

95%

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issou

ri 8.

26%

W

yom

ing

3.79

%

Sour

ce: C

ompu

ted

with

dat

a fr

om U

nite

d St

ates

Cen

sus B

urea

u (2

011)

7.88

%

8.11

%

7.99

%

5.24

%

10.1

5%

0%2%4%6%8%10%

12%

Mic

higa

nG

reat

Lak

esRe

gion

Uni

ted

Stat

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tate

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Exhi

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Per

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dat

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ates

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sus B

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011)

Exhi

bit 4

7: S

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Cap

ita (2

011)

Al

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Sour

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orth

Car

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%

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th D

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Ha

wai

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%

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ahom

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%

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gon

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%

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13

9.92

%

Indi

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148.

53%

Rh

ode

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333.

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104.

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So

uth

Caro

lina

199.

56%

Ka

nsas

10

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%

Sout

h Da

kota

25

6.94

%

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14

4.64

%

Tenn

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e 52

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Lo

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Te

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Mai

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160.

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tah

131.

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aryl

and

157.

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Ve

rmon

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9.67

%

Mas

sach

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ts

336.

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152.

10%

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ichi

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131.

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W

ashi

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n 16

1.70

%

Min

neso

ta

68.0

5%

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14

2.13

%

Miss

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103.

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149.

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%

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min

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Sour

ce: C

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with

dat

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Cen

sus B

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011)

131.

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152.

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15

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%

111.

45%

180.

29%

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40%

60%

80%

100%

120%

140%

160%

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Exhi

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even

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Al

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6.75

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5.98

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7.44

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%

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assa

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%

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Cen

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4.84

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Mic

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Exhi

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N

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Cha

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Conn

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732

Flor

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77

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Al

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Conn

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ectic

ut

$133

.40

New

Yor

k $2

20.2

0 De

law

are

$1,6

02.9

0 N

orth

Car

olin

a $1

32.2

0 Fl

orid

a $1

.20

Nor

th D

akot

a $3

0.70

Ge

orgi

a $2

2.00

O

hio

$27.

80

Haw

aii

$32.

60

Okl

ahom

a $3

.90

Idah

o $6

.50

Ore

gon

$13.

60

Illin

ois

$6.5

0 Pe

nnsy

lvan

ia

$20.

20

Indi

ana

$4.4

0 Rh

ode

Isla

nd

$22.

20

Iow

a $2

5.30

So

uth

Caro

lina

$7.3

0 Ka

nsas

$2

.90

Sout

h Da

kota

$2

4.30

Ke

ntuc

ky

$4.6

0 Te

nnes

see

$7.7

0 Lo

uisia

na

$6.1

0 Te

xas

$3.2

0 M

aine

$8

.80

Uta

h $1

44.3

0 M

aryl

and

$3.9

0 Ve

rmon

t $1

.70

Mas

sach

uset

ts

$29.

50

Virg

inia

$2

79.8

0 M

ichi

gan

$405

.70

Was

hing

ton

$7.5

0 M

inne

sota

$6

3.00

W

est V

irgin

ia

$15.

60

Miss

issip

pi

$9.7

0 W

iscon

sin

$18.

30

Miss

ouri

$5.5

0 W

yom

ing

$6.1

0 So

urce

: Com

pute

d w

ith d

ata

from

Pro

publ

ica

(July

201

3)

Sour

ce: C

ompu

ted

with

dat

a fr

om P

ropu

blic

a (Ju

ly 2

013)

$40

5.70

$92

.54

$

69.6

5

$36

.38

$95

.80

050100

150

200

250

300

350

400

450

Mic

higa

nG

reat

Lak

esRe

gion

Uni

ted

Stat

esRT

W S

tate

sN

on-R

TW S

tate

s

Exhi

bit 6

0: B

ailo

ut F

unds

Per

Cap

ita (J

uly,

201

3)

Sour

ce: C

ompu

ted

with

dat

a fr

om B

urea

u of

Eco

nom

ic A

naly

sis (2

013)

Exhi

bit 6

1: A

vera

ge P

rice

of A

nnua

l Car

Insu

ranc

e Po

licy

(201

3)

Alab

ama

$1,6

67

Mon

tana

$1

,914

Al

aska

$1

,455

N

ebra

ska

$1,3

84

Arizo

na

$1,2

27

Nev

ada

$1,3

41

Arka

nsas

$1

,545

N

ew H

amps

hire

$1

,112

Ca

lifor

nia

$1,8

19

New

Jers

ey

$1,6

97

Colo

rado

$1

,271

N

ew M

exic

o $1

,431

Co

nnec

ticut

$1

,723

N

ew Y

ork

$1,3

69

Dela

war

e $1

,586

N

orth

Car

olin

a $1

,085

Fl

orid

a $1

,364

N

orth

Dak

ota

$1,5

01

Geor

gia

$2,1

55

Ohi

o $1

,106

Ha

wai

i $1

,583

O

klah

oma

$2,0

74

Idah

o $1

,133

O

rego

n $1

,387

Ill

inoi

s $1

,322

Pe

nnsy

lvan

ia

$1,6

04

Indi

ana

$1,1

83

Rhod

e Is

land

$1

,735

Io

wa

$1,0

28

Sout

h Ca

rolin

a $1

,288

Ka

nsas

$1

,435

So

uth

Dako

ta

$1,3

97

Kent

ucky

$1

,725

Te

nnes

see

$1,4

08

Loui

siana

$2

,699

Te

xas

$1,5

45

Mai

ne

$934

U

tah

$1,4

38

Mar

ylan

d $1

,528

Ve

rmon

t $1

,176

M

assa

chus

etts

$1

,625

Vi

rgin

ia

$1,3

22

Mic

higa

n $2

,520

W

ashi

ngto

n $1

,226

M

inne

sota

$1

,432

W

est V

irgin

ia

$1,8

16

Miss

issip

pi

$1,3

45

Wisc

onsin

$1

,228

M

issou

ri $1

,638

W

yom

ing

$1,4

96

Sour

ce: C

ompu

ted

with

dat

a fr

om B

urea

u of

Eco

nom

ic A

naly

sis (2

013)

$2,

520

$1,

472

$

1,50

0

$1,

494

$

1,50

5

$-

$50

0

$1,

000

$1,

500

$2,

000

$2,

500

$3,

000

Mic

higa

nG

reat

Lak

esRe

gion

Uni

ted

Stat

esRT

W S

tate

sN

on-R

TW S

tate

s

Exhi

bit 6

2: A

vera

ge P

rice

of A

nnua

l Car

Insu

ranc

e Po

licy

(201

3)

Sour

ce: C

ompu

ted

with

dat

a fr

om B

urea

u of

Eco

nom

ic A

naly

sis (2

012)

and

Car

Insu

ranc

eQuo

tes.

com

(201

3)

Exhi

bit 6

3: %

of H

ouse

hold

Inco

me

to P

urch

ase

Car I

nsur

ance

(201

2 &

201

3)

Alab

ama

3.83

5%

Mon

tana

4.

245%

Al

aska

2.

286%

N

ebra

ska

2.65

2%

Arizo

na

2.60

8%

Nev

ada

2.83

3%

Arka

nsas

3.

960%

N

ew H

amps

hire

1.

640%

Ca

lifor

nia

3.19

0%

New

Jers

ey

2.54

5%

Colo

rado

2.

220%

N

ew M

exic

o 3.

295%

Co

nnec

ticut

2.

682%

N

ew Y

ork

2.87

1%

Dela

war

e 3.

239%

N

orth

Car

olin

a 2.

611%

Fl

orid

a 2.

961%

N

orth

Dak

ota

2.69

2%

Geor

gia

4.47

8%

Ohi

o 2.

492%

Ha

wai

i 2.

814%

O

klah

oma

4.28

5%

Idah

o 2.

364%

O

rego

n 2.

679%

Ill

inoi

s 2.

555%

Pe

nnsy

lvan

ia

3.09

0%

Indi

ana

2.56

3%

Rhod

e Is

land

3.

095%

Io

wa

1.92

4%

Sout

h Ca

rolin

a 2.

901%

Ka

nsas

2.

870%

So

uth

Dako

ta

2.82

7%

Kent

ucky

4.

198%

Te

nnes

see

3.27

5%

Loui

siana

6.

906%

Te

xas

2.97

5%

Mai

ne

1.90

0%

Uta

h 2.

465%

M

aryl

and

2.12

7%

Verm

ont

2.11

6%

Mas

sach

uset

ts

2.55

3%

Virg

inia

2.

045%

M

ichi

gan

5.03

9%

Was

hing

ton

1.97

1%

Min

neso

ta

2.31

7%

Wes

t Virg

inia

4.

170%

M

ississ

ippi

3.

671%

W

iscon

sin

2.31

4%

Miss

ouri

3.29

2%

Wyo

min

g 2.

601%

Sour

ce: C

ompu

ted

with

dat

a fr

om B

urea

u of

Eco

nom

ic A

naly

sis (2

012)

and

Car

Insu

ranc

eQuo

tes.

com

(201

3)

5.04

%

2.99

%

2.98

%

3.17

%

2.84

%

0%1%2%3%4%5%6%

Mic

higa

nG

reat

Lak

esRe

gion

Uni

ted

Stat

esRT

W S

tate

sN

on-R

TW S

tate

s

Exhi

bit 6

4: %

of H

ouse

hold

Inco

me

to P

urch

ase

Car I

nsur

ance

(201

2 &

201

3)

Sour

ce: U

.S. E

nerg

y In

form

atio

n Ad

min

istra

tion

(201

3)

Exhi

bit 6

5: A

vera

ge R

etai

l Pric

e Fo

r Ele

ctric

ity (c

ents

/kW

h)(2

013)

Al

abam

a $

0.0

739

M

onta

na

$ 0

.071

7

Alas

ka

$ 0

.141

3

Neb

rask

a $

0.0

698

Ar

izona

$

0.0

860

N

evad

a $

0.0

700

Ar

kans

as

$ 0

.064

9

New

Ham

pshi

re

$ 0

.119

7

Calif

orni

a $

0.1

156

N

ew Je

rsey

$

0.1

126

Co

lora

do

$ 0

.079

1

New

Mex

ico

$ 0

.073

8

Conn

ectic

ut

$ 0

.130

9

New

Yor

k $

0.1

260

De

law

are

$ 0

.094

2

Nor

th C

arol

ina

$ 0

.073

7

Flor

ida

$ 0

.085

4

Nor

th D

akot

a $

0.0

695

Ge

orgi

a $

0.0

786

O

hio

$ 0

.076

4

Haw

aii

$ 0

.274

3

Okl

ahom

a $

0.0

664

Id

aho

$ 0

.058

6

Ore

gon

$ 0

.069

5

Illin

ois

$ 0

.070

9

Penn

sylv

ania

$

0.0

806

In

dian

a $

0.0

721

Rh

ode

Isla

nd

$ 0

.107

7

Iow

a $

0.0

634

So

uth

Caro

lina

$ 0

.074

7

Kans

as

$ 0

.080

4

Sout

h Da

kota

$

0.0

748

Ke

ntuc

ky

$ 0

.061

7

Tenn

esse

e $

0.0

751

Lo

uisia

na

$ 0

.066

0

Texa

s $

0.0

730

M

aine

$

0.0

958

U

tah

$ 0

.067

0

Mar

ylan

d $

0.0

934

Ve

rmon

t $

0.1

229

M

assa

chus

etts

$

0.1

177

Vi

rgin

ia

$ 0

.074

1

Mic

higa

n $

0.0

965

W

ashi

ngto

n $

0.0

571

M

inne

sota

$

0.0

796

W

est V

irgin

ia

$ 0

.066

7

Miss

issip

pi

$ 0

.074

4

Wisc

onsin

$

0.0

877

M

issou

ri $

0.0

792

W

yom

ing

$ 0

.063

3

Sour

ce: C

ompu

ted

with

info

rmat

ion

U.S.

Ene

rgy

Info

rmat

ion

Adm

inist

ratio

n (2

013)

$0.0

965

$0.0

807

$0.0

872

$0.0

720

$0.0

991

$0.0

0

$0.0

2

$0.0

4

$0.0

6

$0.0

8

$0.1

0

$0.1

2

Mic

higa

nG

reat

Lak

esRe

gion

Uni

ted

Stat

esRT

W S

tate

sN

on-R

TW S

tate

s

Exhi

bit 6

6: A

vera

ge R

etai

l Pric

e Fo

r Ele

ctric

ity

(cen

ts/k

Wh)

(201

3)

Sour

ce: A

mer

ican

Pet

role

um In

stitu

te (2

013)

Exhi

bit 6

7: 2

013

Tota

l Gas

olin

e Ta

xes

(Per

Gal

lon)

Al

abam

a $0

.39

Mon

tana

$0

.46

Alas

ka

$0.2

6 N

ebra

ska

$0.4

6 Ar

izona

$0

.37

Nev

ada

$0.5

2 Ar

kans

as

$0.4

0 N

ew H

amps

hire

$0

.38

Calif

orni

a $0

.72

New

Jers

ey

$0.3

3 Co

lora

do

$0.4

0 N

ew M

exic

o $0

.37

Conn

ectic

ut

$0.6

8 N

ew Y

ork

$0.6

8 De

law

are

$0.4

1 N

orth

Car

olin

a $0

.56

Flor

ida

$0.5

4 N

orth

Dak

ota

$0.4

1 Ge

orgi

a $0

.47

Ohi

o $0

.46

Haw

aii

$0.6

9 O

klah

oma

$0.3

5 Id

aho

$0.4

3 O

rego

n $0

.50

Illin

ois

$0.5

8 Pe

nnsy

lvan

ia

$0.5

1 In

dian

a $0

.57

Rhod

e Is

land

$0

.51

Iow

a $0

.40

Sout

h Ca

rolin

a $0

.35

Kans

as

$0.4

3 So

uth

Dako

ta

$0.4

0 Ke

ntuc

ky

$0.5

1 Te

nnes

see

$0.4

0 Lo

uisia

na

$0.3

8 Te

xas

$0.3

8 M

aine

$0

.50

Uta

h $0

.43

Mar

ylan

d $0

.49

Verm

ont

$0.5

1 M

assa

chus

etts

$0

.42

Virg

inia

$0

.36

Mic

higa

n $0

.58

Was

hing

ton

$0.5

6 M

inne

sota

$0

.47

Wes

t Virg

inia

$0

.53

Miss

issip

pi

$0.3

7 W

iscon

sin

$0.5

1 M

issou

ri $0

.36

Wyo

min

g $0

.42

Sour

ce: C

ompu

ted

with

dat

a fr

om A

mer

ican

Pet

role

um In

stitu

te (2

013)

$0.

58

$0.

54

$0.

46

$0.

42

$0.

50

$-

$0.

10

$0.

20

$0.

30

$0.

40

$0.

50

$0.

60

$0.

70

Mic

higa

nG

reat

Lak

esRe

gion

Uni

ted

Stat

esRT

W S

tate

sN

on-R

TW S

tate

s

Exhi

bit 6

8: 2

013

Tota

l Gas

olin

e Ta

xes

(Per

Gal

lon)

Sour

ce: U

.S. E

nerg

y In

form

atio

n Ad

min

istra

tion

(201

2)

Exhi

bit 6

9: R

esid

entia

l Nat

ural

Gas

Pric

es (2

012)

Al

abam

a $1

6.35

M

onta

na

$8.1

0 Al

aska

$8

.47

Neb

rask

a $1

0.31

Ar

izona

$1

8.17

N

evad

a $1

0.14

Ar

kans

as

$11.

77

New

Ham

pshi

re

$13.

74

Calif

orni

a $9

.22

New

Jers

ey

$11.

74

Colo

rado

$8

.26

New

Mex

ico

$8.7

5 Co

nnec

ticut

$1

5.98

N

ew Y

ork

$14.

53

Dela

war

e $1

5.24

N

orth

Car

olin

a $1

5.20

Fl

orid

a $1

8.51

N

orth

Dak

ota

$7.4

3 Ge

orgi

a $2

0.14

O

hio

$9.8

4 Ha

wai

i $5

2.86

O

klah

oma

$11.

14

Idah

o $8

.37

Ore

gon

$12.

13

Illin

ois

$8.2

2 Pe

nnsy

lvan

ia

$11.

97

Indi

ana

$10.

33

Rhod

e Is

land

$1

6.28

Io

wa

$11.

28

Sout

h Ca

rolin

a $1

7.13

Ka

nsas

$1

0.18

So

uth

Dako

ta

$8.4

2 Ke

ntuc

ky

$10.

26

Tenn

esse

e $9

.98

Loui

siana

$1

1.70

Te

xas

$10.

90

Mai

ne

$15.

63

Uta

h $9

.09

Mar

ylan

d $1

4.44

Ve

rmon

t $1

6.73

M

assa

chus

etts

$1

3.51

Vi

rgin

ia

$12.

52

Mic

higa

n $9

.96

Was

hing

ton

$11.

89

Min

neso

ta

$7.9

7 W

est V

irgin

ia

$10.

88

Miss

issip

pi

$11.

14

Wisc

onsin

$9

.23

Miss

ouri

$12.

31

Wyo

min

g $8

.43

Sour

ce: C

ompu

ted

with

dat

a fr

om U

.S. E

nerg

y In

form

atio

n Ad

min

istra

tion

(201

2)

$9.

96

$9.

52

$12

.74

$

12.2

0

$13

.16

$-

$2

$4

$6

$8

$10

$12

$14

Mic

higa

nG

reat

Lak

esRe

gion

Uni

ted

Stat

esRT

W S

tate

sN

on-R

TW S

tate

s

Exhi

bit 7

0: R

esid

entia

l Nat

ural

Gas

Pric

es (2

012)

Sour

ce: U

.S. E

nerg

y In

form

atio

n Ad

min

istra

tion

(201

2)

Exhi

bit 7

1: C

omm

erci

al N

atur

al G

as P

rices

(201

2)

Alab

ama

$ 12

.71

Mon

tana

$

7.9

9 Al

aska

$

8.2

5 N

ebra

ska

$ 6

.17

Arizo

na

$ 9

.68

Nev

ada

$ 7

.43

Arka

nsas

$

7.8

9 N

ew H

amps

hire

$

11.9

5 Ca

lifor

nia

$ 7

.13

New

Jers

ey

$ 8

.57

Colo

rado

$

7.4

4 N

ew M

exic

o $

6.3

1 Co

nnec

ticut

$

8.4

2 N

ew Y

ork

$ 7

.50

Dela

war

e $

13.3

1 N

orth

Car

olin

a $

8.5

6 Fl

orid

a $

10.3

7 N

orth

Dak

ota

$ 6

.08

Geor

gia

$ 9

.64

Ohi

o $

7.1

4 Ha

wai

i $

47.0

3 O

klah

oma

$ 8

.95

Idah

o $

7.4

5 O

rego

n $

9.4

1 Ill

inoi

s $

7.7

9 Pe

nnsy

lvan

ia

$ 10

.21

Indi

ana

$ 7

.72

Rhod

e Is

land

$

13.5

6 Io

wa

$ 7

.13

Sout

h Ca

rolin

a $

8.7

1 Ka

nsas

$

8.8

1 So

uth

Dako

ta

$ 6

.45

Kent

ucky

$

8.2

6 Te

nnes

see

$ 8

.32

Loui

siana

$

8.1

5 Te

xas

$ 6

.86

Mai

ne

$ 10

.59

Uta

h $

7.0

2 M

aryl

and

$ 10

.15

Verm

ont

$ 12

.09

Mas

sach

uset

ts

$ 10

.37

Virg

inia

$

8.8

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$ 9

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neso

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$ 6

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ce: C

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2)

Sour

ce: U

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form

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min

istra

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2)

Exhi

bit 7

3: In

dust

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as P

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(201

2)

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rask

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Nor

th C

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th D

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dust

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ce: U

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011)

Exhi

bit 7

5: In

sura

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t Exp

endi

ture

s Pe

r Cap

ita (2

011)

Al

abam

a $6

37

Mon

tana

$8

23

Alas

ka

$1,4

95

Neb

rask

a $3

48

Arizo

na

$632

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evad

a $9

95

Arka

nsas

$5

92

New

Ham

pshi

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$527

Ca

lifor

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$1,1

99

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Colo

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$1

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40

Conn

ectic

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68

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k $1

,105

De

law

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$720

N

orth

Car

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a $7

83

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ida

$572

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orth

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ota

$613

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orgi

a $6

45

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wai

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52

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ahom

a $6

40

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o $6

77

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44

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ois

$1,0

26

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sylv

ania

$1

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dian

a $5

81

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e Is

land

$1

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wa

$729

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uth

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lina

$737

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nsas

$6

53

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h Da

kota

$4

59

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ucky

$9

33

Tenn

esse

e $4

44

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$8

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88

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$712

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tah

$552

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and

$667

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78

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sach

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$5

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higa

n $9

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000-

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abam

a $4

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28

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na

$438

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evad

a $5

57

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$4

16

New

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pshi

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$356

Ca

lifor

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$794

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ew Je

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$1

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$682

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16

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$832

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ew Y

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$791

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$520

N

orth

Car

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09

Flor

ida

$388

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orth

Dak

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$481

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orgi

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27

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wai

i $7

06

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ahom

a $5

02

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87

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$1,0

45

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ois

$664

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nnsy

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ia

$715

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60

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e Is

land

$9

50

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01

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62

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uth

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ta

$358

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$648

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$297

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$616

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$439

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aine

$5

18

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11

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$395

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assa

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etts

$7

54

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53

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20

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$845

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inne

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$7

14

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t Virg

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$6

51

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$503

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$749

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81

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ce: C

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3)

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bit 7

9: N

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in th

e To

p 50

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tinat

ions

(201

3)

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ama

0 M

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a 17

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34

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330

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370

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520

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320

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270

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th C

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260

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360

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190

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400

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a 31

0 Id

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410

Ore

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220

Illin

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220

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sylv

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20

0 In

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a 26

0 Rh

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nd

200

Iow

a 21

0 So

uth

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360

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230

Sout

h Da

kota

27

0 Ke

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380

Tenn

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0 Lo

uisia

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400

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0 Pe

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(201

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th C

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19

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16

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18

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(201

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th C

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%

New

Mex

ico

-27.

13%

Co

nnec

ticut

-2

1.29

%

New

Yor

k -5

.47%

De

law

are

-26.

15%

N

orth

Car

olin

a -1

3.66

%

Flor

ida

-4.9

0%

Nor

th D

akot

a -7

.44%

Ge

orgi

a -1

9.62

%

Ohi

o -3

0.02

%

Haw

aii

-23.

79%

O

klah

oma

-22.

84%

Id

aho

-13.

34%

O

rego

n -1

3.27

%

Illin

ois

-16.

08%

Pe

nnsy

lvan

ia

-22.

19%

In

dian

a -3

0.10

%

Rhod

e Is

land

-1

5.57

%

Iow

a -2

3.50

%

Sout

h Ca

rolin

a -2

0.08

%

Kans

as

-29.

48%

So

uth

Dako

ta

-19.

73%

Ke

ntuc

ky

-24.

28%

Te

nnes

see

-24.

71%

Lo

uisia

na

-20.

40%

Te

xas

-13.

64%

M

aine

-2

0.99

%

Uta

h -6

.09%

M

aryl

and

-20.

53%

Ve

rmon

t -1

9.39

%

Mas

sach

uset

ts

-22.

71%

Vi

rgin

ia

-17.

24%

M

ichi

gan

-29.

91%

W

ashi

ngto

n -1

4.30

%

Min

neso

ta

-22.

68%

W

est V

irgin

ia

-33.

86%

M

ississ

ippi

-2

8.23

%

Wisc

onsin

-2

6.85

%

Miss

ouri

-17.

99%

W

yom

ing

-27.

59%

Sour

ce: C

ompu

ted

with

dat

a fr

om U

nite

d St

ates

Sm

all B

usin

ess A

dmin

istra

tion

(201

3)

-29.

91%

-26.

59%

-19.

96%

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8.70

%

-20.

95%

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ichi

gan

Gre

at L

akes

Regi

onU

nite

d St

ates

RTW

Sta

tes

Non

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Sta

tes

Exhi

bit 8

8: G

row

th in

Bus

ines

s Birt

hs (2

002-

2010

)

Sour

ce: C

ompu

ted

with

dat

a fr

om U

nite

d St

ates

Sm

all B

usin

ess A

dmin

istra

tion

(201

3)

Exhi

bit 8

9: G

row

th in

Bus

ines

s De

aths

(200

2-20

10)

Alab

ama

-6.9

7%

Mon

tana

3.

39%

Al

aska

-1

5.72

%

Neb

rask

a -1

5.62

%

Arizo

na

18.8

6%

Nev

ada

24.6

0%

Arka

nsas

-1

1.51

%

New

Ham

pshi

re

-7.9

8%

Calif

orni

a 1.

54%

N

ew Je

rsey

-1

.83%

Co

lora

do

5.72

%

New

Mex

ico

-4.8

7%

Conn

ectic

ut

-10.

36%

N

ew Y

ork

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2%

Dela

war

e -4

.87%

N

orth

Car

olin

a 1.

56%

Fl

orid

a 15

.04%

N

orth

Dak

ota

-17.

92%

Ge

orgi

a 5.

14%

O

hio

-15.

47%

Ha

wai

i -1

.78%

O

klah

oma

-9.3

6%

Idah

o 16

.57%

O

rego

n -1

.90%

Ill

inoi

s -6

.73%

Pe

nnsy

lvan

ia

-10.

90%

In

dian

a -1

3.11

%

Rhod

e Is

land

-1

.23%

Io

wa

-19.

74%

So

uth

Caro

lina

0.38

%

Kans

as

-18.

38%

So

uth

Dako

ta

-10.

46%

Ke

ntuc

ky

-11.

37%

Te

nnes

see

-11.

24%

Lo

uisia

na

-12.

28%

Te

xas

-7.2

2%

Mai

ne

-13.

10%

U

tah

23.1

5%

Mar

ylan

d 2.

13%

Ve

rmon

t -1

8.78

%

Mas

sach

uset

ts

-26.

86%

Vi

rgin

ia

4.91

%

Mic

higa

n -1

6.73

%

Was

hing

ton

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7%

Min

neso

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-10.

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W

est V

irgin

ia

-21.

46%

M

ississ

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-1

4.29

%

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-1

3.08

%

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-2.1

6%

Wyo

min

g 7.

26%

Sour

ce: C

ompu

ted

with

dat

a fr

om U

nite

d St

ates

Sm

all B

usin

ess A

dmin

istra

tion

(201

3)

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-1.7

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3%

-18%

-16%

-14%

-12%

-10%-8

%

-6%

-4%

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Mic

higa

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gion

Uni

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Exhi

bit 9

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row

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2-20

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Sour

ce: M

ains

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(201

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Exhi

bit 9

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appi

ness

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2)

Alab

ama

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Mon

tana

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ka

31

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N

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N

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Car

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19

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Sour

ce: C

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with

dat

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36.0

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05101520253035404550

Mic

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50.0

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3 Ge

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9 Id

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14

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49

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ce: C

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47.0

0

35.6

0

25.5

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31.5

0

05101520253035404550

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41

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8 N

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34

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29

Nor

th D

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9 O

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25

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49

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13

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18

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26

Penn

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30

In

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Rh

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50

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So

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32

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7

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Te

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16

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42

Te

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31

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Mas

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Sour

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with

dat

a fr

om C

NBC

(201

2)

33.0

0

23.0

0 25

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18.1

8

31.2

1

05101520253035404550

Mic

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Exhi

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9: B

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s Ran

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s (20

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Alab

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21

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14

N

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11

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31

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29

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N

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12

Ca

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24

New

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47

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6

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17

Nor

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26

Flor

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25

Nor

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27

Ohi

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Ha

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O

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45

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O

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Ill

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Pe

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39

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Rhod

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44

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3 W

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28.0

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33.4

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25.5

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1

05101520253035404550

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20

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27

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N

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46

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19

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18

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47

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35

Nor

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7 Fl

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N

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Dak

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5 Ge

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34

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32

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11

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36

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44

Penn

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38

In

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Rh

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49

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17

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6

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3 Lo

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M

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Vi

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Mic

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Miss

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(200

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36

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051015202530354045

Mic

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kfor

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ank(

2013

) Al

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33

Alas

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Ar

izona

13

N

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Ar

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6 N

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11

Ca

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40

New

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Colo

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14

N

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Co

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38

N

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49

Dela

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N

orth

Car

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Flor

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3 N

orth

Dak

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27

Geor

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9 O

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41

Haw

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Okl

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Id

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16

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37

Illin

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Penn

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44

In

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Rh

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32

Iow

a 29

So

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4 Ka

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12

So

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7 Ke

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ky

26

Tenn

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Loui

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8

Texa

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M

aine

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U

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Mar

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Ve

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Vi

rgin

ia

5 M

ichi

gan

43

Was

hing

ton

46

Min

neso

ta

36

Wes

t Virg

inia

39

M

ississ

ippi

10

W

iscon

sin

34

Miss

ouri

28

Wyo

min

g 31

Exhi

bit 1

04: N

U In

dex

- Wor

kfor

ce C

ompo

sitio

n an

d Co

st

Rank

(201

3)

43

39

25.5

15.3

5

34.1

5

05101520253035404550

Mic

higa

nG

reat

Lak

esRe

gion

Uni

ted

Stat

esRT

W S

tate

sN

on-R

TW S

tate

s

Exhi

bit 1

05: N

U In

dex

– Re

gula

tory

Env

ironm

ent (

2013

) Al

abam

a 42

M

onta

na

16

Alas

ka

18

Neb

rask

a 4

Arizo

na

39

Nev

ada

28

Arka

nsas

24

N

ew H

amps

hire

47

Ca

lifor

nia

20

New

Jers

ey

38

Colo

rado

8

New

Mex

ico

7 Co

nnec

ticut

40

N

ew Y

ork

41

Dela

war

e 48

N

orth

Car

olin

a 33

Fl

orid

a 44

N

orth

Dak

ota

1 Ge

orgi

a 37

O

hio

22

Haw

aii

50

Okl

ahom

a 27

Id

aho

9 O

rego

n 30

Ill

inoi

s 15

Pe

nnsy

lvan

ia

35

Indi

ana

12

Rhod

e Is

land

49

Io

wa

10

Sout

h Ca

rolin

a 31

Ka

nsas

19

So

uth

Dako

ta

5 Ke

ntuc

ky

14

Tenn

esse

e 21

Lo

uisia

na

23

Texa

s 11

M

aine

45

U

tah

3 M

aryl

and

36

Verm

ont

43

Mas

sach

uset

ts

46

Virg

inia

29

M

ichi

gan

26

Was

hing

ton

34

Min

neso

ta

6 W

est V

irgin

ia

25

Miss

issip

pi

13

Wisc

onsin

17

M

issou

ri 32

W

yom

ing

2

Exhi

bit 1

06: N

U In

dex

– Re

gula

tory

Env

ironm

ent R

ank

(201

3)

26

18.4

25.5

20.2

29.8

05101520253035

Mic

higa

nG

reat

Lak

esRe

gion

Uni

ted

Stat

esRT

W S

tate

sN

on-R

TW S

tate

s

Exhi

bit 1

07: N

U In

dex

- Sta

te D

ebt a

nd T

axat

ion

Rank

(201

3)

Alab

ama

6 M

onta

na

36

Alas

ka

48

Neb

rask

a 3

Arizo

na

8 N

evad

a 5

Arka

nsas

2

New

Ham

pshi

re

44

Calif

orni

a 31

N

ew Je

rsey

46

Co

lora

do

22

New

Mex

ico

30

Conn

ectic

ut

47

New

Yor

k 45

De

law

are

43

Nor

th C

arol

ina

7 Fl

orid

a 11

N

orth

Dak

ota

21

Geor

gia

10

Ohi

o 19

Ha

wai

i 42

O

klah

oma

20

Idah

o 17

O

rego

n 29

Ill

inoi

s 40

Pe

nnsy

lvan

ia

28

Indi

ana

26

Rhod

e Is

land

49

Io

wa

16

Sout

h Ca

rolin

a 24

Ka

nsas

15

So

uth

Dako

ta

38

Kent

ucky

25

Te

nnes

see

1 Lo

uisia

na

34

Texa

s 4

Mai

ne

39

Uta

h 18

M

aryl

and

37

Verm

ont

41

Mas

sach

uset

ts

50

Virg

inia

23

M

ichi

gan

14

Was

hing

ton

35

Min

neso

ta

13

Wes

t Virg

inia

32

M

ississ

ippi

9

Wisc

onsin

33

M

issou

ri 27

W

yom

ing

12

Exhi

bit 1

08: N

U In

dex

– St

ate

Debt

and

Tax

atio

n Ra

nk

(201

3)

14

26.4

25

.5

14.5

35

0510152025303540

Mic

higa

nG

reat

Lak

esRe

gion

Uni

ted

Stat

esRT

W S

tate

sN

on-R

TW S

tate

s

Exhi

bit 1

09: N

U In

dex

- Lab

or a

nd C

apita

l For

mat

ion

Rank

(201

3)

Alab

ama

26

Mon

tana

9

Alas

ka

13

Neb

rask

a 2

Arizo

na

36

Nev

ada

47

Arka

nsas

20

N

ew H

amps

hire

5

Calif

orni

a 50

N

ew Je

rsey

42

Co

lora

do

31

New

Mex

ico

16

Conn

ectic

ut

27

New

Yor

k 48

De

law

are

12

Nor

th C

arol

ina

43

Flor

ida

49

Nor

th D

akot

a 1

Geor

gia

41

Ohi

o 37

Ha

wai

i 8

Okl

ahom

a 10

Id

aho

22

Ore

gon

35

Illin

ois

45

Penn

sylv

ania

34

In

dian

a 32

Rh

ode

Isla

nd

40

Iow

a 7

Sout

h Ca

rolin

a 39

Ka

nsas

11

So

uth

Dako

ta

3 Ke

ntuc

ky

29

Tenn

esse

e 30

Lo

uisia

na

17

Texa

s 46

M

aine

18

U

tah

14

Mar

ylan

d 23

Ve

rmon

t 4

Mas

sach

uset

ts

25

Virg

inia

21

M

ichi

gan

44

Was

hing

ton

38

Min

neso

ta

15

Wes

t Virg

inia

19

M

ississ

ippi

33

W

iscon

sin

24

Miss

ouri

28

Wyo

min

g 6

44.0

36.4

25.5

23

.8

26.8

05101520253035404550

Mic

higa

nG

reat

Lak

esRe

gion

Uni

ted

Stat

esRT

W S

tate

sN

on-R

TW S

tate

s

Exhi

bit 1

10: N

U In

dex

- Lab

or a

nd C

apita

l Fo

rmat

ion

Rank

(201

3)

Exhi

bit 1

11: N

U In

dex

– G

ener

al M

acro

econ

omic

Env

ironm

ent R

ank

(201

3)

Alab

ama

7 M

onta

na

11

Alas

ka

48

Neb

rask

a 33

Ar

izona

9

Nev

ada

22

Arka

nsas

5

New

Ham

pshi

re

39

Calif

orni

a 34

N

ew Je

rsey

45

Co

lora

do

37

New

Mex

ico

8 Co

nnec

ticut

50

N

ew Y

ork

47

Dela

war

e 44

N

orth

Car

olin

a 21

Fl

orid

a 17

N

orth

Dak

ota

43

Geor

gia

13

Ohi

o 20

Ha

wai

i 35

O

klah

oma

18

Idah

o 4

Ore

gon

28

Illin

ois

36

Penn

sylv

ania

27

In

dian

a 15

Rh

ode

Isla

nd

30

Iow

a 29

So

uth

Caro

lina

3 Ka

nsas

26

So

uth

Dako

ta

32

Kent

ucky

6

Tenn

esse

e 14

Lo

uisia

na

25

Texa

s 10

M

aine

16

U

tah

12

Mar

ylan

d 42

Ve

rmon

t 24

M

assa

chus

etts

49

Vi

rgin

ia

41

Mic

higa

n 31

W

ashi

ngto

n 38

M

inne

sota

40

W

est V

irgin

ia

2 M

ississ

ippi

1

Wisc

onsin

23

M

issou

ri 19

W

yom

ing

46

31.0

25.0

25

.5

19.6

30.1

05101520253035

Mic

higa

nG

reat

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gion

Uni

ted

Stat

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W S

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Exhi

bit 1

12: N

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acro

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En

viro

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k (2

013)

Exhi

bit 1

13: A

n Ec

onom

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naps

hot o

f Key

G

reat

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es R

egio

n Ci

ties

Met

ro

Com

poun

ded

Annu

al G

DP

Gro

wth

Rat

e (2

000-

2011

)

Met

ro

Com

poun

ded

Annu

al G

DP

Gro

wth

Rat

e (2

008-

2011

)

Met

ro

Com

poun

ded

Annu

al G

DP

Gro

wth

Rat

e (2

009-

2011

)

Met

ro

GD

P (2

011)

Ran

k M

etro

G

DP

Num

ber o

f Em

ploy

ers

City

Po

pula

tion

(City

Pro

per)

(2

012)

City

Med

ian

Hou

seho

ld

Inco

me/

Stat

e (2

011)

Chi

cago

, IL

0.64

-0.1

52.

26$4

77 B

325

5,50

22,

714,

856

$47

,371

/$56

,576

Cle

vela

nd, O

H-0

.15

-0.9

71.

97$9

3 B

2726

,208

390,

928

$27

,470

/$48

,071

Col

umbu

s, O

H0.

53-0

.28

1.64

$94

B32

56,9

5780

9,79

8$4

3,34

8/$4

8,07

1

Det

roit,

MI

-1.1

2-1

.25

4.45

$176

B14

50,5

8870

1,47

5 $

27,8

62/$

48,6

69

Gra

nd R

apid

s, M

I0.

100.

634.

05$3

4 B

6615

,528

190,

411

$38,

731/

$48,

669

Ind

iana

polis

, IN

1.14

-0.3

21.

81$9

0 B

2863

,808

834,

852

$42

,704

/$48

,393

Milw

auke

e1.

100.

141.

91$7

7 B

3531

,769

598,

961

$35

,851

/$52

,374

U.S

.Met

roA

reas

1.48

0.24

2.34

$11.

8 T

Exhi

bit 1

14: S

tate

Bus

ines

s Tax

Clim

ate

Inde

x 20

13

Stat

e O

vera

ll In

dex

Rank

Co

rpor

ate

Tax

Indi

vidu

al

Inco

me

Tax

Sale

s Tax

U

nem

p.

Insu

ranc

e Ta

x Pr

oper

ty

Tax

Wyo

min

g 1

1 1

12

29

35

Sout

h Da

kota

2

1 1

33

35

20

Nev

ada

3 1

1 42

41

16

Al

aska

4

27

1 5

28

13

Flor

ida

5 13

1

18

10

25

Was

hing

ton

6 30

1

48

18

22

New

Ham

pshi

re

7 48

9

1 42

43

M

onta

na

8 16

20

3

21

7 Te

xas

9 38

7

36

14

32

Uta

h 10

5

14

22

20

3

Gre

at L

akes

Reg

ion

Indi

ana

11

28

10

11

11

11

Mic

higa

n 12

7

11

7 44

31

Illin

ois

29

47

13

34

43

44

Ohi

o 39

22

42

29

12

34

Wisc

onsin

43

32

46

15

23

33

So

urce

: Tax

Fou

ndat

ion

(201

2)

Exhi

bit 1

15: C

ompa

rison

of K

ey M

ichi

gan

Data

from

201

2 an

d 20

13

Stud

ies

2012

Stu

dy

2013

Stu

dy

Aver

age

Pers

onal

Inco

me

Per C

apita

Gro

wth

20

00-2

010

2000

-201

2 20

.30%

27

.50%

Gros

s Sta

te P

rodu

ct G

row

th

1998

-201

1 19

98-2

012

26.5

0%

31.5

0%

U.S.

Pop

ulat

ion

Net

Mig

ratio

n 20

01-2

010

2001

-201

2 -5

54,3

74

-590

,635

U.S.

Em

ploy

men

t Gro

wth

20

01-2

010

2001

-201

1 -1

6.90

%

-13.

90%

Tota

l Gov

ernm

ent E

mpl

oyee

s Per

10,

000

Peop

le

2010

20

12

657

618

The

Kauf

fman

Inde

x of

Ent

repr

eneu

rial A

ctiv

ity

2011

20

12

220

180

Indu

stria

l Nat

ural

Gas

Pric

es

2010

20

12

$8.2

3

$7.4

2

Med

ian

Pric

e of

Ann

ual C

ar In

sura

nce

Polic

y 20

12

2013

$4

,490

.00

$2

,520

.00

Nor

thw

ood

Uni

vers

ity C

ompe

titiv

enes

s In

dex

2012

20

13

47

39

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2013 michigan economic competitiveness study - northwood

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