Human Capital Initiatives to Promote State Economic Development

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Human Capital Initiatives to Promote State
Economic Development

• March 14, 2008
• Timothy J. Bartik
• Senior Economist, W.E. Upjohn Institute
• for Employment Research
• bartik_at_upjohn.org

Presentation to Conference on Creating a
Brighter Economic Future in Michigan Education,
Talent, and Public Policy.
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Premises of the presentation

• State economic development is about increasing
  state residents earnings.
• State economic development is affected by both
  labor supply and demand. This presentation
  focuses on labor supply.
• Research shows that improving quantity and
  quality of labor supply will improve a states
  economy.
• Given limited resources, need to find policy
  initiatives with high benefit/cost ratios.
• Scale of policies must be sufficient to
  significantly affect states economy.

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Overarching questions

• Should policy emphasize talent development or
  attraction?
• Should policy emphasize targeted human capital
  initiatives, or increasing overall educational
  spending?
• How can more spending on human capital be
  reconciled with encouraging more business demand
  for labor?
• What is appropriate emphasis on spending more
  dollars versus changes in attitudes and
  practices?
• My answers talent development, targeted
  initiatives, higher taxes
• but not on business investment, and spend more to
  change
• attitudes and practices.

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Outline of possible initiatives

• High-quality preschool/early childhood
• Expanded vocational education
• Statewide pull-out math and science centers
• Statewide Kalamazoo Promise
• Expansion of customized job training
• Expansion of entrepreneurial training
• Expansion of industrial extension services
• Expansion of on-the-job training and subsidized
  wages for unemployed

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General Comments

• My number 1 priority would be preschool/early
  childhood, as it has strongest research evidence,
  and is of scale sufficient to affect economy.
• Customized job training, entrepreneurial
  training, and industrial extension services
  should be explored, as these have good research
  evidence, moderate costs, and may leverage
  institutional changes. Are they big enough to
  affect aggregate Michigan economy?
• Expanded voc ed requires change in mind set as
  much as money.

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Financing these programs without damaging the
business climate

• Preschool education may pay for itself, but only
  after 20 years. We should explore creative ways
  of borrowing.
• Customized job training has been financed in
  other states by small increases in unemployment
  insurance tax rate.
• State of Michigan has structural budget deficit
  that has well-known solutions that need not
  burden business cut prison costs, reform public
  employee benefits, move to graduated income tax,
  increase sales tax on services sold to
  households, and reduce favorable tax treatment of
  pension income.
• Business tax reforms can raise same or more
  revenue without reducing business investment by
  redistributing taxes away from businesses that
  invest in Michigan.