It's all about human capital, people

"Today, money flows toward people who also have knowledge, advanced skills and the relentless determination to find a better way. Michigan, historically, has not grown enough of this kind of talent. That kind of change will take time and an evolution of our education system."

It’s become embedded in conventional wisdom that the Great Recession is the worst economic calamity since the Great Depression.　Maybe that’s why people aren’t paying much attention to what we’ve learned from it … except for the thousands of Michiganders who are still out of a job.

Consider the data recently assembled by economists at Georgetown University:

* Nationally, people with a high school diploma or less lost 5.6 million jobs during the recession.　The same people also lost 230,000 jobs during the so-called "recovery".

* Those with a community college degree or some college education, lost 1.75 million jobs in the recession, but they also gained 1.6 million jobs during the recovery.

* People who had a college degree or better gained 187,000 jobs during the recession. And those with a BA or better gained 2 million jobs during the recovery!

The conclusions are so stark and so simple it’s a wonder every politician now running for office isn’t jumping up and down: Workers with a high school diploma or less bore the absolute brunt of the recession, while job gains during the recovery were confined to those with education beyond high school.

Here’s another way to look at the same point, thanks to the federal Bureau of Labor Statistics. In Michigan in 2010 (the last year for which I could find data), unemployment among those with no high school diploma was 26 percent, while 18 percent of those with a high school diploma were jobless. Workers with a community college degree showed 10 percent unemployment, while only 5 percent of those with a bachelor’s degree or better were unemployed.

Another way to put it is that there are 77,000 jobs going unfilled in Michigan today because employers can’t find workers with the necessary skills – skills that to not necessarily require a college degree.

I talked with Michigan State University economics professor Charles Ballard about what it takes to attract good-paying jobs to Michigan. Tax breaks? A better business climate?

Nah. "Number one is having skilled workers. Number two is having skilled workers. Number three is having skilled workers."

Although it’s slow, what’s beginning to happen in Michigan is an emerging consensus that the absolute key to our prosperity as a state and security for our people is an unprecedented, focused, long-term emphasis on investing in the human capital of our citizens.　

"Human capital" sounds like a business term, and it is.　

It’s the sum total of the education, skills and talents of people. Investments in capital goods – new plant, equipment, R&D, even human beings – are typically measured by return on investment -- "ROI." This is a number that shows how much a capital investments pay off over their life. A positive ROI is essential; a high ROI is good. The data show conclusively that investments in human capital return higher ROIs than any alternative asset class.

Like many other things, how we describe things goes a long way to how we understand them … and what we do as a result of our understanding.　

Right now, we chop investments in human capital into various artificial categories: Early childhood. Kindergarten through 12th grade. Community college. Four-year college.　Graduate school.　

What’s the difference? They’re all aspects of what should be a seamless web of investments in human capital that begins at birth (better, with good pre-natal care) and ends whenever a person figures he or she has enough skills to proceed through the work force.　

That we have come to denominate various parts of our human capital system according to whichever bureaucracies happen to manage it is a perfect argument against governments running stuff.

Beyond terms, though, the fact is clear: If you don’t have a education and skills beyond a high school diploma, you’re toast.

The question is whether Michigan politicians – and Michigan citizens – recognize indisputable fact and have the guts and the will to do something about it beyond paying lip service in an election year.

Editor’s note: Former newspaper publisher and University of Michigan Regent Phil Power is a longtime observer of Michigan politics and economics. He is also the founder and chairman of the Center for Michigan, a nonprofit, bipartisan centrist think–and–do tank, designed to cure Michigan’s dysfunctional political culture; the Center also publishes Bridge Magazine. The opinions expressed here are Power’s own and do not represent the official views of the Center. He welcomes your comments via email.