“The system right now needs to be fixed,” she said in an address to the Grand Rapids Economic Club Monday. “Currently we’re facilitating the export of our jobs. Greenville and Electrolux are the poster child for what has gone wrong.”
Electrolux’s decision to move its production facility to Mexico in 2005 will eliminate 2,700 jobs in Greenville.
Electrolux is a profitable company and had just recently acknowledged its employees for their productivity, so it wasn’t that the company was losing money, Granholm observed.
It wasn’t the cost of doing business either, she said, because the company was offered zero taxes for 20 years, a new, highly efficient technology-based plant to save on production costs, and the UAW offered an unprecedented level of concessions to the tune of $32 million a year.
What can U.S. companies do to compete with a country like Mexico, where wages average $1.57 an hour?
The state can do its part by creating a regulatory environment that attracts businesses here and doesn’t impede their growth, she said.
Granholm envisions creating a “one-stop shop” where businesses can go to address a variety of needs, such as infrastructure improvements, inspections and air quality permits.
“We want to be the most nimble state in the country for our responsiveness to businesses. I don’t think we want it to be a world where we are paying all of our workers $1.57 an hour and have no benefits. That’s not who we are.”
Trade has to be fair and the playing field leveled, she said, but the playing field is still skewed in favor of foreign competitors.
She promised to push for trade policy reform to even things out.
The governor also vowed to reform Michigan’s Single Business Tax (SBT), a tax she referred to as “lousy.”
Michigan ranks 29th in the country in terms of per-capita taxation, she pointed out.
“The Single Business Tax needs to be revamped. It’s an impediment to growth and to businesses wanting to come here. It is clear that we do not want state costs to be a barrier to economic growth.”
Granholm said the state is assembling a work group to revamp the SBT this year.
To help with rising health care costs, she said the state would offer small businesses the opportunity to participate in Michigan’s “third share partnership” program.
Small businesses often can’t afford to give employees full health-care benefits, yet they want employees to know they are valued, she said.
Under the partnership plan, employees would pay a third of their health-care insurance premium, the employer would pay a third, and the state would pay a third through a tax credit to the business or nonprofit.
The governor underscored that in order for Michigan to diversify and grow in areas that are projected to be growth sectors, it has to focus on small business, create a sense of entrepreneurship, and make sure it has a skilled work force to fill 21st century jobs.
“We also need to consider how we train workers that have lost jobs, for jobs of the 21st century.”
She said that means retraining, forming “skills alliances,” identifying sectors of the economy that are growing, and steering people into those areas.
“Obviously, education is a very big piece of all of this, and to shape the work force you have to start with the youngest,” Granholm remarked.
“To me, economic development starts in schools. We need to be creative to make sure that we really do uplift this next generation of workers. If we don’t focus on those early years, we may be missing the boat.”
Despite the state’s $1 billion deficit, Granholm intends to restore K-12 per-pupil funding to $6,700 for fiscal 2004-05, an increase of $75 per pupil over current funding.
Michigan is lower than average in respect to the number of college graduates compared to other states, she pointed out.
“How can we expect to compete in the 21st century if we’re not growing our intellectual capital? It is critical that we give kids the notion that it is not acceptable for them to just stop their education, whether it’s in high school or the first year of college.”
Michigan has to be a state that generates college graduates, because job providers will go where the smart population is, she added.
Granholm promised Wednesday that she would not recommend to the legislature cuts in funding for Michigan state universities if they don’t raise their tuition past the Consumer Price Index.
Another thing the state has to do to become more “magnetic” to businesses is “to raise up good citizens” that have character in addition to intellect, she said.
Presently, every high school student that passes the MEAP test receives a $2,500 merit scholarship from the state.
Granholm suggested that merit scholarship awards be given to students who pass the MEAP and have performed at least 40 hours of community service on top of that.
“I think it is important that we recognize that merit is more than just test scores. We need to tell young people that we have an expectation that they will serve the community.”
The state of Michigan has been cited as a “high exporter of young people,” which is why the state is focusing on creating “cool cities,” she said.
She believes local communities need to be encouraged to think about what they can do to create vibrant downtowns, maintain well-run schools and provide the kinds of cultural and entertainment venues that will make young professionals want to reside here.
One of the ways to attract young professionals, she said, is to have wired communities that have access to broadband.
Her administration’s plan is for “every corner” of Michigan to be wired for high-speed Internet access by 2007.