In or Out? How is Michigan Doing Among Other States?

For years Mackinac Center analysts have written about the subject of interstate migration. We view it is as arguably the best metric for measuring quality of life issues among many important tradeoffs.

Each year, one source of data Mackinac Center scholars look to for insight is the annual United Van Lines (UVL) National Movers Study. This study tracks relatively closely with actual census data that won’t be released for nearly a year, making UVL data something of a leading migration indicator. This year’s survey reports good and bad news for Michigan. Policymakers in Lansing should do more to improve the state’s prospects.

The 2014 UVL study examines where the company moves its clients to and from in the continental United States, including Washington, D.C. It was just released this morning (Jan. 2, 2015) and it indicates that Michigan is back in the study’s “high outbound” column, a position the state held for more than a decade.

Last year UVL specifically noted that “… after 16 years at or near the top of the outbound list, Michigan appeared in the balanced category for 2013.” Between 2006 and 2009 Michigan was number one for outbound moves. That is, of all UVL Michigan-related client traffic the percentage of customers leaving their state was highest in the nation.

In 2014, 55.4 percent of all the Wolverine State moves handled by UVL were outbound. That is not good news because, year-over-year, we moved in the wrong direction, ever so slightly, from the “balanced” column (53.8 percent outbound) back into the high outbound one.

There is a silver lining, however. Since 2009, Michigan improved in comparison to other states. We have been moving down the state rankings, from first in outbound traffic that year to 14th. In other words, despite higher outbound traffic Michigan still did better relative to some sister states.

As an aside, UVL has published this research every year going back to 1977. In 2009 Michigan hit a record high in outbound traffic with 68 percent of UVL’s Michigan moves being outbound.

Before critics dismiss UVL data as an unrepresentative sample, consider that the Mackinac Center has done a statistical analysis comparing years of the company data to actual migration statistics published by the United States Census Bureau and found the two to be highly correlated.

Migration is important because people move to places where there is opportunity. Ball State University Business Economist and Mackinac Center Adjunct Scholar Michael Hicks in 2010 used a model to find out what may be driving people between states. His conclusion was that people were moving to states with more flexible labor climates, more days of sunshine and lower taxes.

Specifically, Hicks found that for every 10 percent increase in personal taxes, Michigan loses 4,700 people each year afterward. In other words, the 11.5 percent personal income tax increase imposed on the Great Lake State in 2007 may have already chased away more than 35,000 of our fellow residents.

Michigan also isn’t helped by its cold and long winters. Scholar Jordan Rappaport found that an increase of average January temperatures from 29 degrees to 59 degrees “is associated with faster [population] growth of 1.3 percent a year." He attributed population growth in Michigan’s climate from between -1.5 percent to 0.0 percent from 1970 to 2000.

Since we can’t compete with our southern sister states on weather, we must swamp their natural advantage with other policy levers that are within our control. That means much lower tax burdens, continued labor reforms and a willingness to rein in the expensive and unnecessary parts of the state’s regulatory apparatus.

What exactly does that mean?

First and foremost, Michigan residents need and are owed a tax cut. We were promised that the 2007 personal income tax hike would be only temporary, but most of it remains intact. At a minimum it should be rolled back to 3.9 percent, if not to further to say, 3.75 percent in 2015.

Second, the state should repeal its archaic and expensive Prevailing Wage law which mandates higher than necessary wages on government financed construction projects. Doing so might save $224 million per year on school construction costs alone.

Lastly, the state — which has made some progress on the unnecessary regulation front—needs to cut its regulatory red tape. At a minimum it should look to eliminate some of its occupational licensing requirements.

Michigan remains a high outbound state despite solid reforms in areas of business taxes and labor reform but there is much work to be done. The new legislature should start with solid cuts to the personal income tax. That will make Michigan more attractive to those who have long paid full freight and those considering a move to the Great Lake State.