State Economies Are Improving in the Upper Great Lakes

The Great Lakes states are riding a manufacturing boom, an increasingly right-to-work environment and the business-friendly campaigns and policies of Republican governors. Can they claw their way back into the economic-development derby and spark above-average growth despite a slow national economy?

That’s the conclusion of recent research which, of course, are hailed heartily by the Republican governors of Indiana (Mike Pence), Michigan (Rick Snyder), Ohio (John Kasich) and Wisconsin (Scott Walker). “All four states now rank within the top 20 of the 50 states in our latest economic-growth index,” Graham Toth, head of Growth Economics in Warsaw, Ind., told Chief Executive.

But meanwhile, under Democratic Gov. Pat Quinn, struggling and basically business-hostile Illinois remains an outlier among states that depend a lot on the Great Lakes, despite just-passed reforms of public workers’ pensions. “Chicago, for instance, is holding back the rest of the Midwest right now, and you can’t ignore that,” Toth said.

Another researcher, economist Timothy Nash of Northwood University in Midland, Mich., told Chief Executive that the four states are making “great progress” in economic development while Illinois “is behind.” As “a region,” said the author of an annual study of the five state economies by the Michigan Chamber of Commerce, “they’re doing well.”

Overall, the key to the area’s growing success “in this economy,” Toth said, “is encouraging companies to put their money to work. [CEOs] want to go to states where they can feel confident in investing. And there are good signs for that in the Midwest: Michigan, Ohio, Indiana and Wisconsin have all been making public-policy changes in the areas of taxes and regulation.”

Each state also is able to boast specific positive trends and growing advantages:

Indiana flipped first to right-to-work status, in 2012, and Victor Smith, the state’s secretary of commerce, told Chief Executive that “it has been a huge plus already, with 64 companies having said publicly that they’ve chosen to expand or locate here in Indiana in large part because of the right-to-work legislation.” Indiana also continues to take advantage of the U.S. auto-manufacturing boom; Toyota, for example, just finished a $430-million expansion of its complex in Princeton, Ind., whence the company will begin exporting Toyota Highlander SUVs made there.

Michigan has benefited from a revival of Detroit Three automotive fortunes and Snyder’s elimination of the much-loathed Single Business Tax, of course, and also has gotten itself into more economic-development beauty walks with its new flip to right-to-work. “Michigan was missing out on a lot of opportunities, about 50 percent that we couldn’t be considered for before” right-to- work, Michael Finney, executive director of the Michigan Economic Development Corp., told Chief Executive.

Ohio can claim the largest year-to-year tax cut of the 2013 legislative session with a rollback of $2.7 billion over three years, including specific breaks for SMEs. Meanwhile, Kasich is arguing for 2014 re-election that Ohio has posted the biggest job rebound in the country – although from an employment base that dwindled more quickly than the rest of the U.S. when the Great Recession hit.

Wisconsin is pushing the forefront of water-technology development as Walker continues to hone the state’s specific appeal as the most aggressive regional actor against public-worker unions. He also is barnstorming – including in contiguous states – to promote his new book about that struggle, Unintimidated. “Ninety-four percent of executives we surveyed believed the state is headed in the right direction, up from 10 percent in 2010, Reed Hall, CEO of Wisconsin Economic Development Corp., told Chief Executive.