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Posted on Fri, Oct 7, 2011 : 5:57 a.m.

For Michigan companies, strong education is more important than lower taxes

By Bill Wagner

Like all businesses, the software development process involves the customer. In that way, business and politics aren’t that disparate; politics, done well, sees constituents as customers.

And we, as small business owners and customers of the political process, are compelled to offer our perspectives on what businesses like ours need to grow and bring valuable jobs to Michigan. What challenges do we have, and how might programs remove those challenges? Spoiler alert: It's not always about reduced taxes.

Our challenges to creating new jobs involve attracting talented staff, and continuing to observe growth in the larger economy of the region. The second one is obvious: the more our region grows, the more potential customers we have, and the more potential growth we have while maintaining a focus in Ann Arbor.

Attracting and retaining talent is where companies like ours need the most government help, but not in the form of reduced taxes. Most importantly, we need a strong and sound educational system from which to recruit. It’s very hard to bring people to this area. Our economic development organizations have acknowledged this with the MichAgain initiative, concentrating their efforts on individuals that already have some ties to the region.

People researching the area are given a very grim picture when they check the news. Municipalities are cutting funding for essential infrastructure. School districts across the state are doing the same. Detroit still graduates an abysmal number of students. Our universities are losing funding and raising tuition as a result. All those impressions add up.

They create a poor overall impression to high-value people who are being recruited by companies across the globe. Our political and fiscal environments continue to make it harder to recruit and retain the very people we need to grow our company, and grow the economy in our region.

Our tax burden is not a barrier to growth, and it never has been. The entire savings from reduced business taxes, including the proposed removal of the personal property tax, nets our company less money than we spent in wages on our summer intern last year. That isn't enough to create a single job for a company of our size.

If this singular focus to lower our tax bill will not help us to create new jobs, what would? Start by examining why the state’s reputation of failing public institutions makes it so hard to compete for talent. Most of the people we hire can live anywhere in the world. They are smart, and look at everything about a region before deciding to make a long-term commitment to relocate, or plant roots.

When they look at Michigan, and focus on our education system, our infrastructure represents large potential costs to them. As public schools face increasing challenges due to budget cuts, our prospective employees consider private school costs for their children. Our state universities (especially the University of Michigan) are much more expensive than those in other states, due to the recent funding cuts.

Our prospective employees factor in those costs when they consider job offers. In the eyes of the high-talent individuals we continue to hire, moving to Michigan represents greatly increased personal cost because of the lack of investment in infrastructure in the forms of education for their children.

In order to reverse this trend, our political leaders need to invest in the critical public infrastructure and educational institutions that attract the workforce small businesses like ours will be hiring. We need to set a trend where young people considering where to live will view Michigan as a place of opportunity for themselves and their children.

Michigan has been in "duck and cover" mode long enough. It's time to embrace the needs of the small businesses by investing in education so that businesses can reward the state with new jobs.

Bill Wagner is co-founder of Ann Arbor-based software firm SRT Solutions.

Comments

Mike K

Tue, Oct 11, 2011 : 12:30 a.m.

I'm late to this discussion, and I doubt this will be read, but I find this smacks of supply side economics - educate that masses and the companies will come. Interesting how some think it works sometimes, and other times not. I'm not buying primarily because I relocated here in 1991 for a job as Michigan represented the BEST opportunity for me in my field back then. The job attracts talent, and education is portable. I and many like me are the examples. Tax cuts help ease of entry into business and support business. No business, no jobs, no tax revenue. Public sector employement cannot and will never drive an economy. An economy of only public sector employees is unsustainable. The drive must be to promote private sector employment. The private sector generates tax revenue; the public sector consumes that revenue. It is that simple.

Dog Guy

Fri, Oct 7, 2011 : 5:37 p.m.

Until I read this essay, I did not know that businesses could not recruit graduates from other states.

xmo

Fri, Oct 7, 2011 : 2:54 p.m.

I guess the critical part of the story is: Does money spent on education equal a good education? Progressives, Teacher Unions etc say yes while a lot of people say NO! Look at Detroit Public Schools: Run by Progressives for over 60 years with lots of money spent yet their school system graduates about 25%. Should we spend more money on a system like that? So, maybe the amount of money spent does not equal a good education?

DonBee

Fri, Oct 7, 2011 : 7:01 p.m.

John Q - Since there is a floor for spending, it is hard to spend less than the average. There are a few hold harmless districts that get extra money and more than a few who have special ed, sinking funds, bond funds, enhancement millages and other add ons, as well as Title I and Title II money from the Federal Government. I can show you both good and bad districts above the Average (e.g. Detroit and Ann Arbor). I cannot show you what does not exist.

John Q

Fri, Oct 7, 2011 : 3:22 p.m.

The amount of money spent does not guarantee a good education. But every public school district rated as tops in the state spends more than the state average on student education - Birmingham, Bloomfield Hills and Grosse Pointe for example. Can you point to one school district that spends less than the state average that's considered a great school district?

Ron Granger

Fri, Oct 7, 2011 : 1:42 p.m.

Wags is right - it is *very* hard to attract talent to Michigan. Why would anyone come here if they didn't already have strong connections? Southern Michigan especially. It's rather desolate, flat, farmland. Another big problem is the kids are leaving the state when they graduate. Who can blame them? Many Michigan businesses think they can get away with paying less because people here are desperate, maybe trapped. What smart graduate would want to stick around for that when they can go work anywhere, at an apple, google, microsoft, wallstreet, etc? The coasts, europe, asia; they all beckon. If Michigan businesses want to attract top talent, they need to pay more than firms in more desirable locations. Call it Michigan "hazard pay". And many of those established firms not only pay better, they offer real equity that is actually worth something. Not every big startup exit nets the employees a pay out - sometimes the greedy founders keep it all. The income tax in Michigan is a barrier. Numerous states do not have an income tax. I look around Michigan and wonder what I'm getting for my income tax dollars. It surely is not essential infrastructure. I think Snyder's vision of Michigan is a low-wage worker-bee utopia for businesses. It isn't about top talent. It's a tough road ahead, and that road is all crumbly and broken. Why should talent want to sacrifice to fix that road?

DonBee

Fri, Oct 7, 2011 : 1:40 p.m.

If it were true, then Michigan should be growing like topsy. According to NPR there are more graduates of engineering programs in the US who graduated last year working at Walmart, McDonalds, and driving taxi (etc.) than are working in engineering jobs. Michigan has the highest number of unemployed/under-employed engineers in the US both by percentage and by number. Wages for computer programmers and engineers are so low in the state GE and IBM are bring back jobs from India and the Philippines and locating them here in Michigan. Overqualified is the most often heard comment by many people over the age of 50 in the state, who have become 99-weekers. In short, we need jobs, we have qualified and educated people. But Michigan keeps consuming large numbers of H1-B visas. I have to wonder why?

clownfish

Fri, Oct 7, 2011 : 12:41 p.m.

Great article. Written from a business owner perspective, not political pundits. Tax cuts do not create jobs, customers do. Well educated people tend to make good paying customers.

snoopdog

Fri, Oct 7, 2011 : 12:26 p.m.

So what this writer wants us to do is to continue to offer kids a great education so they can earn their degrees and take them to other states that actually have jobs because they have environments that attract business. Staying with the status quo Mr. Bill simply is not working and not a plan for a healthy future in this state. Good Day

Queen of Dragons

Fri, Oct 7, 2011 : 12:52 p.m.

so you would rather we have dumb workers but at least they stay here? cause lets face it Snyder cut education for his lower tax bill. so for him it's one or the other. I also belive that companys have plenty of loop holes and that they will not settle were the populas is not educated.

Silly Sally

Fri, Oct 7, 2011 : 11:34 a.m.

Bill Wagner is comparing apples to oranges. He is focusing on what attracts an individual, while high corporate taxes discourage a larger company from setting up a factory here. There is a reason why ALL of the foreign auto companies have not established assembly plants in Michigan. The Tier one firms are here only to service the big three. Toyota, Hundai, Nissan and others have tech centers to glean technology from the engineers of the big 3. THere are different things that attract a high wage earner to an area, besides a job, vs a firm lookng to relocate or establish a factory that employs local workers. WHile some firms such as Mr. Wagners may want a highly educated work force, others do not.. Rural China and Mexico are attractive to companies and they do not. Sure, Detroit has a very bad reputation; a friend almost never came to Michigan due to it. The silly headhunter said the job was in Detroit, when it was 20 miles west. Ann Arbor and the surrounding area has a fine reputation. If its schools are lacking, it is not for money but other social reasons. Saline and Dexter are perceived by many to be better. This area has excellant universities, UM, EMU, Wayne State, Mich State, community colleges, Concordia, and many others. Its very easy to go to college or return for grad school. True, we should not cut taxes so low as to ruin local infrastructure such as libraries, roads, schools, etc. One tax thas should remain for now is the 4% personal income tax. But the business tax is different. Opinions such as Mr. Wagners are to toss many Michigan workers who are not highly educated (abnd never will be) onto the trash heap in favor of highly educated workers. Gov Grandholm made this mistake and it got us nowhere.

Lolly

Fri, Oct 7, 2011 : 4:48 p.m.

Maybe you could give the article another look. Mr. Wagner's central point is that when a company is deciding where to locate a business, the ability to recruit a talented workforce is a more important consideration than taxes. He then goes on to describe the typical individual that a company wants to hire. I second his description, having worked with hundreds of such people from all over the world when they moved to Ann Arbor (helping to find housing). He then states that the money saved on the business tax is trivial to his company (but in the aggregate it makes less money available for our schools and infrastructure). We can agree that Ann Arbor is already an attractive place to live (and it is important to struggle to maintain our ability to attract). See today's online article (for Sunday) in the New York Times that celebrates our city. Here is link to the slideshow and related article. <a href="http://www.nytimes.com/slideshow/2011/10/09/travel/20111009-hours-annarbor.html" rel='nofollow'>http://www.nytimes.com/slideshow/2011/10/09/travel/20111009-hours-annarbor.html</a> I love showing Ann Arbor to prospective employees for the University and other employers, but I, too, am concerned that reports of state cuts to schools, second-rate road-building policies, and inattention to infrastructure begin to have an effect on people's decisions to come here. Even if we are able (locally) to remain attractive as one region in the state, Mr. Wagner's perspective should inform our discussion of policy statewide.

InsideTheHall

Fri, Oct 7, 2011 : 11:16 a.m.

First, Bill does not speak for ALL small business owners in Michigan. Secondly, taxes do matter along with regulations, and the endless amount of bureaucratic forms. The fact is local governments have not managed money wisely over the years and we have let the MEA co-opt public education. We have seen the results. Throwing more moeny their way will not solve the problem. Bill knows this. He is competing against China, Brazil, and India not some utopian US city. The fact is for many people manual labor is the only path to a job. Not everyone will have the intellectual capability to write and produce software. To compete for &quot;mass&quot; jobs we indeed need lower taxes, less regulations, etc. so that we as employers can pay more than the minimum wage to our associates and STILL compete against China, Mexico, Brazil, and India.

Ahmar Iqbal

Fri, Oct 7, 2011 : 11:08 a.m.

Bill Wagner makes a worthwhile point on how education quality plays into attracting employees. When I was recruited to join a Finnish based company back in 1996, the European head office was shifted to London rather than Helsinki. Reason being, the Finns did not feel Helsinki would be attractive to overseas employees in terms of culture, language, lifestyle, education, etc. A lot of it also has to do with perception. Even though my daughter was only 6 months old at the time and hence school was not an immediate consideration, I had lived and visited London several times. I had never been to Finland. Of course now Helsinki stands on its own. It is important for Michigan to offer a complete quality of life package to attract talent.

RayA2

Fri, Oct 7, 2011 : 11:05 a.m.

Someone tell me how I can forward this article to slick.

Mike K

Tue, Oct 11, 2011 : 12:34 a.m.

Cut and paste............................. I emailed the Governor showing him all the &quot;for rent&quot;, &quot;for sale&quot; and &quot;available&quot; signs in our industrial parks with the point of no business = no tax revenue. You'll get a canned reply, but if it makes you feel good..............