fedgazette

The Upper Peninsula must seize control of its own economic future

William E. Vandament

Published October 1, 1995  |  October 1995 issue

This column is excerpted from an address Vandament delivered at a Michigan Jobs Commission regional forum earlier this fall in Escanaba, and is another in a series of guest columns focusing on the problems and solutions facing Ninth District rural regions.

Although all of us believe the Upper Peninsula (U.P.) is a place like no other—and in many ways it truly is—I do believe the challenges that exist in the U.P. economy are similar to those in other rural regions. The two challenges I would like to discuss are an over-reliance on resource-based employment and economic control by outside forces.

The downside of low value-added, resource-based employment is in the forefront of my mind. As we all know, income from our natural resources has become limited. Since 1979, this and other factors have resulted in the disappearance of approximately 54 percent of the U.P.'s mining jobs. The recent announced closing of the Copper Range Co.'s mine at White Pine will now bring the total job loss to 70 percent as 1,000 additional jobs disappear.

It is becoming increasingly costly to extract both iron and copper here and, consequently, more difficult for U.P. mines to remain competitive. There may be some future set of circumstances under which iron and copper could become so scarce that the market would support expanding mining activity. But, as the Copper Range president said in announcing the White Pine closure, "Don't bet on it."

We must admit the handwriting is on the wall. The reaping of natural resources for export to the outside world—with little value added—is no longer a reasonable economic alternative for the U.P.

In retrospect, it also has been somewhat shortsighted to rely so much on investments from outside the U.P. economic base. Consider the tremendous fortunes made during the heyday of mining and logging, primarily by companies and people with roots elsewhere. Only a fraction of the profits from these natural resources were reinvested in the region's economy.

The closures of White Pine mine and K.I. Sawyer Air Force base are examples of how decisions made by outside forces have recently played havoc on the U.P. economy. They will result in a combined loss of nearly 8,000 jobs—proving once again that economic decisions made by people who don't call the U.P. home can have impacts that are risky at best and devastating at worst.

Occasionally outside forces can provide opportunities for job creation—such as establishment of a prison. But it's impossible to plan for a future that is being controlled elsewhere. That's why I strongly believe that more control of the U.P. economy must be transitioned to local and regional sources—built increasingly on the strength of employers in the U.P. I'm not saying we should be hostile to outside investors and large corporations. We want them to thrive here. But we must develop the size and scope of our regional employers.

Increasing local control isn't something that can happen overnight. Changing the economic fabric of a region requires that a variety of players within the economy work together to design a system focusing on the needs of the "home team" the job creators in the Upper Peninsula.

The challenges are several. We must encourage investment and reinvestment in enterprises that bring wages and profits into the area. To accomplish this there must be ready access to venture capital. Area technical expertise must also exist in such areas as marketing, product design and production, and distribution. We must have a productive regional workforce, also with state and local governments that create a favorable business environment.

We're fortunate in Michigan now that major initiatives are under way to promote a healthy state business climate. The formation of the Jobs Commission, which integrates state services and programs previously fragmented, is a great help.

I have been particularly encouraged by recent reports that the Jobs Commission and Doug Rothwell, its CEO, are working to see more venture capital is available in rural areas of the state. In the U.P., we've been working for some time to improve the availability of venture capital through programs offered through Northern Initiatives, an organizational affiliate of Northern Michigan University (NMU) and Shorebank of Chicago, and Northcoast BIDCO, a division of Shorebank. It's long been our view that several area pieces must fit together if regional economic development is to be achieved: venture capital, technical expertise and a strong and responsive education network-as well as governmental policy.

At first glance, the kind of partnerships that we are forming between the profit and non-profit, or public, sectors may seem strange. But, we as a public university are concerned primarily about the quality of life in our region, and our primary role is to prepare citizens for full participation in a high quality life through education. Although we as colleges and universities aren't motivated by profit in the usual sense, we recognize that one basis for maintaining a high quality of life comes in the form of financial investments that create high-paying and interesting jobs for the citizens of our region.

To encourage investments one must be sensitive to the underlying motive that drives investment-profit. People with resources to invest have a variety of options. We want them to choose options that improve the quality of life for people in this region, and we want them to succeed so that reinvestments will continue to be made here.

NMU is involved in this change in several ways (including our involvement in the Upper Peninsula Consortium for Workforce Development). About three years ago, I and some of the U.P.'s six other two- and four-year institutions began talking and developing a shared recognition that we needed to work as a group of institutions to play a significant, more consistent role in addressing the needs of our regional employers. Our interests were partly self-motivated. With combined enrollments of 22,000 students—70 percent coming from the U.P.—we knew that generating the consistent student volumes and revenues needed to keep our institutions viable requires a stable economy. We also recognized that the less direct contact we had with regional employers, the more we were contributing to the "brain drain" and migration of potential employees from the area.

At NMU, we were confronted with an interesting paradox, or perhaps more accurately, a pair of colliding objectives. We've traditionally been a university of opportunity for the young people of the U.P. However, for the very talented students graduating from NMU, the only viable career alternative has often been to relocate to areas outside the U.P. where opportunities are greater. ...

At the same time, we found that some of our regional employers were having a difficult time finding and retaining workers with appropriate skills. In short, while many of our more talented young people could be characterized as "over trained" for jobs available here, many of those left behind didn't appear prepared adequately for a place in today's sophisticated work force. It was vital for us to understand the types of skills regional employers needed in their workforces—and get to the task of providing them.

We began an intensive series of meetings with regional employers and found that one of the most difficult variables for employers to control in remaining competitive is to find and develop skilled employees. We enlisted the participation of private industry councils, intermediate and K-12 school districts and Gov. Engler's Northern Michigan Office, and with the staffing of Northern Initiatives, we formed the U.P. Consortium. ...

While we were continuing to study personnel needs of our region's employers, we undertook a set of projects directed toward the improved preparation of those high school students who weren't preparing for university study. Across the U.P., universities and community colleges joined forces with intermediate school districts and secondary schools to develop tech prep curriculums. We undertook this with the firm belief that the 50 percent or more of students who aren't in college prep programs should have the technical literacy and basic skills to be productive members of a sophisticated job force. Gradually, this curriculum in our region's high schools is replacing general diploma programs that left many high school graduates unprepared for college work or for skilled positions.

The Consortium has also tried to raise the level of customized training for employers seeking to improve their competitive positions. During the past two years, member institutions have provided workforce training and related services to more than 40 firms, involving approximately 800 employees. ...

Two new training programs ... will result in the development of up to 160 new jobs for low- and moderate-income individuals in the region. Other programs of this nature are in the pipeline and should be in effect within a few months. It's important to note that our primary goal is to work with businesses to create more productive, better-paid employees who have greater job satisfaction and help improve employers' profit positions.

Whenever possible, we attempt to achieve economies of scale by working with groups of employers because we believe that our regional economic future rests with our ability to develop small businesses that are largely home grown. We aren't suggesting that plans for relocation of major companies to the U.P. will be discouraged. But we believe we should continue to work to develop a cadre of small, agile, value-added companies. ...

The days and months ahead in the Upper Peninsula will be as challenging as any we have faced thus far. Building local control in a rural, resource-based economy takes time and requires an ongoing commitment from all of the players in the economy. As a group of educational institutions, we still have work to do in rethinking our roles in this economy. But, we've made progress—and we are firmly committed to the long-term investment.

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