Indiana will be the only right-to-work state to be completely surrounded by non-right-to-work states ….I recently talked to my counterpart at the Michigan State Chamber of Commerce on the phone who said if we [Indiana] pass right-to-work you’r going to kill us in the economic development wars.
Effective today (February 1, 2012), Indiana’s new right-to-work law will intensify the age old Michigan vs. Indiana economic development war over new jobs and business investment.
For economic development practitioners it’s time to think about the impact of having the first Midwest right-to-work state at our border to Michigan’s competitive position for creating new jobs and business investment.
Lets first forget the pros and cons of right-to-work; it’s passed and now is part of the new landscape of economic development impacting Michigan.
As someone who has pursued a career in Michigan land use planning and economic development for well over 30-years, its obvious to me that economic development practitioners need to prepare.
Here’s how I expect Indiana’s right-to-work law will impact the practice of economic development in Michigan.
1. Right-to-Work will be a Major Economic Development Conversation Topic
Because Indiana will be the first Midwest State to fully embrace right-to-work, Michigan efforts to equalize this action will intensify
Union busting and deflation of wage rate claims will be countered with population growth and increased state gross income claims. This rhetoric will result in political inaction increasing business economic uncertainty.
Expect Lansing right–to–work rhetoric to escalate resulting in suspension or, in some cases, compete halting of business decision making until certainty is restored.
Expect to be questioned about uncertainty and probable outcomes of debate that may result in Michigan enacting right-to-work legislation.
2. Michigan will Mount a Legislative Rebuttal Seeking Right-to-Work
Forced by Indiana’s action and to mitigate the economic development imbalances that may result, the Michigan legislature will be forced to consider legislation authorizing right-to-work either on a permanent statewide basis or, at minimum, for experimental special purpose sub-state zones.
Expect the legislature to experiment, most likely with special districts where right-to-work can be tied to direct job creation by new businesses locating in the zone – this being Michigan’s historic means of “putting a toe into the water to test the economic and political temperature”.
3. Recognize that Unionization is a Cost of Doing Business in Non Right-to-Work States.
Economic developers will need to acknowledge that unions impose a cost on business.
Even in the most harmonious business-union states, unionized businesses face added administrative expenses – accounting, legal and management time to attend to employer duties of a union shop.
Expect new businesses seeking to locate in Michigan to question the harmony between local business and local unions to identify the true employer cost burden of harmonious and other business-union relations.
4. Right-to-Work to be a “Bargaining Chip” in New Business Site Selection
Let’s face the fact that Indiana’s right-to-work – whether we believe it aids business or not, will be used as a bargaining chip when a business negotiates location incentive packages from Michigan communities.
While claims can be made that right-to-work does not expressly grant a specific job advantage (See Wall Street Journal Article 1.27.2012 ), Michigan economic developers will need to prepare for the request for additional incentives to compensate for perceived or real economic differences between Indiana and other Midwest states.
Expect to be requested to provide additional incentives to over compensate for the “real or perceived” economic differences of a union vs. nonunion state economic environment.
5. MI-IN Border War to Intensify
Indiana is known to take quick action of its economic development superiority as evidenced by the business solicitation billboard erected at the Illinois-Indiana border upon passage of a business tax increase in Illinois in 2011.
Expect to see an onslaught of advertisements and direct business solicitations extolling the virtues of right-to-work in Indiana as one more economic advantage Indiana has over Michigan.
Economic developers must prepared now to identify counter measures to disqualify or mitigate the real or perceived Indiana economic benefits as part of their economic development business retention and attraction strategy.
6. Michigan Economic Development to Become Less Menu Driven and More Sensitive to Business Economics.
As a 35-year veteran in land use and economic development, I have been involved in Michigan economic development since its origination in the early 1970’s.
For the most part, a majority of Michigan economic development practitioners are “menu trained”, that being we are given a menu of state and federal programs and incentives and then told to offer these to new and existing businesses to create jobs and new investment.
Only limited business training is provided on business organization and management or understanding markets and customers businesses serve.
It’s uncommon for economic development practitioners to “drill down” and study markets and customers and to prepare actual business plans to identify cash flow, the vital life blood of any business.
Recently, I came across the phrase” jobs occur where customers appear” while reading The Coming Jobs War by Jim Clifton. It’s a pretty simple message – without customers there is no need for the business and no need for employment. The message in this statement for economic development practitioners is the need for understanding businesses economics and how to increase “customers” for local businesses – this will become part of the skills required of economic developers in the future.
Expect business economic strategies which improve customer counts to be critical ingredients of future economic development strategy.
Undoubtedly Michigan’s economic development platform is poised for change and this change will be effect day-to-day economic development practices.
Michigan economic development practitioners must prepare today to react to these changes.
At no time in my 35-years working in Michigan has there been the opening for such a wholesale change in the way economic development is practiced.
Regardless of your position on right-to-work, the practice of economic development in Michigan is set to change …and the changes will be significant and monumental.
In the future, economic development practitioners will be called upon and “graded” not only on the use of “menu driven” Michigan economic development tools but on the success in expanding and creating new businesses without use of incentives, but techniques that result in increased customers producing business cash flow.