Rick Haglund: ‘Eds and meds’ gives Michigan an economic shot in the arm

Move aside, manufacturing. Michigan’s signature industry, led for more than a century by automaking, is taking a back seat to the accelerating “eds and meds” sector.

Manufacturing is still a huge part of the state’s economy, employing about 608,000 workers in factories and tens of thousands more in offices and technology centers. Michigan manufacturers turned out $100.3 billion in goods last year, the highest output of any employment sector in the state.

But employment in higher education and health care — the eds and meds sector — has surpassed manufacturing and promises to be an increasingly important area of future job growth.

Health care also is seen as one of the most desired employment areas for new college graduates. More opportunities in the sector could help Michigan attract desperately needed young talent and grow the state’s population.

U of M economists say U.S. recession unlikely in next two years, Michigan economy expected to grow

Private education and health services employed 700,000 workers in February, the second largest employment category in the state, behind the trade, transportation and utilities sector with 818,000 jobs. That broad category included 457,000 retail jobs.

Twenty-thousand jobs have been created in private education and health care over the past 12 months, 54% of the 37,000 total jobs added in Michigan in that period. Conversely, there were 7,000 fewer manufacturing jobs in the state in February than in the same month a year ago.

But higher ed and health care jobs likely far exceed the numbers reported in the private education and health care category. That’s because many of those jobs are counted in other sectors, including professional and business services, and government.

The University of Michigan, for example, employs a total of nearly 55,000 people in university operations and its health care system. They’re counted as government workers.

A study last year by the Michigan Health & Hospital Association claimed that nearly 20% of all payroll jobs in the state in 2021 were in health care and health care-related positions.

Health care employers paid out $46 billion in wages and benefits to 567,957 workers in 2021, or an average $80,992 per employee, according to the study.

The eds and meds sector also has proven to be somewhat recession proof in a Michigan economy that has often been roiled by a highly cyclical auto industry. 

That could be happening again. Detroit’s automakers are retrenching as they navigate what’s turned into a difficult transition to electric vehicles.

Ford has scaled back projected jobs and investment at its Marshall battery plant. General Motors has delayed a $4 billion plan to convert its Orion assembly plant to build electric trucks until 2025. And Stellantis recently laid off 400 engineers, citing “unprecedented uncertainties” in the auto business.

One prominent Federal Reserve leader described hospitals and universities as “anchor institutions” that can provide economic stability to communities in tough times.

“Unlike corporate headquarters, manufacturing facilities, or sports teams that can pick up and move … higher education institutions and hospitals stay where they are,” Patrick Harker, president of the Federal Reserve Bank of Philadelphia, said in a 2022 speech.

Billions of dollars in eds and meds investment in Michigan are helping some communities recover from the devastating disinvestment by automakers and other businesses.

Saginaw, which has lost nearly half of its manufacturing jobs over the past 35 years, is working to build a $100 million medical hub, called the Medical Diamond, on the city’s riverfront. It would include investments from the state, the city’s hospital systems and Central Michigan University’s medical school.

Last month, the University of Michigan purchased part of the former Kmart headquarters in Troy for an outpatient medical center. The defunct retail giant’s sprawling headquarters, which once employed 5,000 workers but has been vacant for 18 years, was recently demolished.

And there’s so much eds and meds spending underway in Detroit that visitors might someday wonder why it was called the Motor City.

Henry Ford Health is building a $2.2 billion hospital to replace its aging facility in Midtown, part of a $3 billion development that will include a Michigan State University research center and housing.

MSU last year bought a majority ownership stake in the historic Fisher Building, where it plans to open a business incubator. The lavish art deco structure was built in the 1920s by the Fisher brothers, who got rich through the sale of their auto body business to General Motors.

Not to be outdone, U of M broke ground last month on its $250 million Center for Innovation, which will offer graduate degrees, job training and certificate programs. University officials said they believe the center will become a statewide economic development catalyst.

The eds and meds sector is not without risks. New technologies, demographic shifts and increasing costs are putting pressure on hospitals and universities. Remote learning and telehealth could result in these anchor institutions becoming “a little less anchored,” Harker said.

But the need for more health care and higher education is increasing in Michigan, which has an aging population and relatively low educational attainment.

And growth in the eds and meds sector can help inoculate the state’s economy from the ill effects of manufacturing’s occasional heartburn.