Top States for Business

From rough ride to respectable: Michigan wins for most improved

Key Points
  • Michigan has seen the most improvement of any U.S. state over the 11-year history of CNBC's Top States for Business.
  • When the inaugural Top States launched in 2007, state unemployment was the highest in the nation, at 7.1 percent.
  • Dramatic measures in the turnaround included the bankruptcy of Detroit and, in a state synonymous with labor unions, passing "right to work" legislation.
  • Today Michigan's auto industry is powered by technology, and the state boasts one of the nation's highest concentrations of science, technology, engineering and math (STEM) workers.

One year does not a trend make. But 11 years? That is a different story. And when it comes to our America's Top States for Business rankings, the story for Michigan is one of startling transformation. Over the course of our 11 years, no state has shown greater improvement in our rankings. In fact, no state has even come close.

The Wolverine State finishes No. 11 this year, down slightly from its all-time high No. 7 finish last year. But that still represents a 30-place jump from its No. 41 finish in our inaugural study in 2007.

Other big gainers over time include this year's Top State — Washington — which finished No. 21 that first year. No. 16, Ohio, is up from No. 30 in 2007, while No. 14 Indiana and No. 21 Wisconsin each rise 12 spots from their 2007 finishes. Each state managed to shrug off at least some of its old economy heritage to improve its competitive position. But none managed to do so as thoroughly as Michigan.

When we launched our first study in 2007, Michigan was mired in economic malaise with no clear path out of it. Unemployment in July of 2007 hit 7.1 percent, the highest in the nation, at a time when the national unemployment rate was just 4.7 percent. The state's most important industry then and now, autos, seemed relatively healthy on the surface with more than 16 million units sold. But storm clouds were growing.

Ford trucks parked in a lot in 2008 when U.S. automakers were hit by plummeting auto sales.
Spencer Platt | Getty Images

In 2007, for the first time in history, the U.S. market share of the Big Three automakers — General Motors, Ford and Chrysler — fell below 50 percent. Toyota surpassed Ford as the No. 2 automaker in the U.S. and was nipping at the heels of market leader GM. And GM, long the economic bellwether for Michigan and the U.S. manufacturing sector in general, was a mess.

GM sales fell more than 6 percent for the year. Struggling to come to grips with crippling health care costs, the company endured its first nationwide strike by the United Autoworkers in 37 years. The company was a mishmash of often overlapping brands, including Chevrolet, Cadillac, Buick, Pontiac, Saturn, GMC and Hummer. Things were not much better at rivals Ford and Chrysler.

Michigan's No. 41 ranking in our first America's Top States for Business study included a No. 46 finish in the Economy category and a No. 36 finish for Workforce, bogged down by the state's heavy and unwieldy union presence. Things would get worse before they got better.

America's Top States for Business 2017

Pushed over the edge by the nationwide financial crisis, GM and Chrysler went into bankruptcy, prearranged with the new Obama administration, in 2009. Ford managed to stay solvent, but just barely. By the time we rolled out our Top States rankings that year — with Michigan again finishing No. 41 — unemployment in the state had climbed to a frightening 14.9 percent. But as it turns out, that is when the state hit bottom.

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GM would emerge from bankruptcy within six weeks as a much smaller, streamlined company, with only four core brands — Chevrolet, Cadillac, Buick and GMC. Also gone were nearly $80 billion in debt, as well as a dozen U.S. plants and some 22,000 U.S. employees. Chrysler would emerge from Chapter 11 soon after, under the ownership of Italy's Fiat. As painful as the process was, and would continue to be, it would position the U.S. auto industry for a return to profitability, and Michigan for a return to competitiveness. In 2011, the state jumped to No. 34 in our rankings, and continued to climb. That same year, Republican venture capitalist Rick Snyder, a former president of Gateway Computer, took office as Michigan's 48th governor.

Snyder would engineer the next steps in Michigan's transformation, including the historic 2013 bankruptcy filing by the city of Detroit, the largest municipal bankruptcy in U.S. history, allowing the city to get out from under $18 billion in debt. Snyder also pushed through a change that once would have been unheard of in the birthplace of the United Autoworkers, as Michigan became a right-to-work state. In Top States 2013, Michigan rose to No. 29 overall.

Chrysler Jefferson North Assembly Plant in Detroit, Michigan
Bill Pugliano | Getty Images

Today Michigan's workforce, despite still being heavily unionized, ranks a respectable No. 13. Powered by the technology sector supporting the auto industry, Michigan boasts one of the nation's highest concentrations of science, technology, engineering and math (STEM) workers. And with unemployment now below the national average, Michigan's economy ranks No. 9.

The state still faces serious challenges, however. The same municipal crisis intervention efforts by Gov. Snyder that helped put Detroit on a path to recovery have been disastrous in Flint, where cost-cutting measures resulted in widespread lead contamination in the city's drinking water. As many as 12,000 children were poisoned; 15 people have died, and 9 officials face criminal charges. Michigan's infrastructure ranks No. 19 overall this year. But with estimated 20-year repair needs of nearly $14 billion, Michigan's water infrastructure is among the worst in the nation.

States suffering big declines

Still, Michigan has come a long way since 2007.

Along with tracing Michigan's historic comeback, our Top States studies document some serious declines as well.

These are America's worst states for business
These are America's worst states for business

Chief among them is No. 34 Kansas, which tumbles 18 spots from its inaugural No. 16 ranking in 2007. What was billed as a bold experiment in conservative economics has failed miserably in the Sunflower State. Tax cuts championed by Republican Gov. Sam Brownback have left the state with serious budget gaps. The Kansas economy ranks No. 46 this year. In 2007, it was roughly in the middle of the pack at No 28.

Also posting a sharp decline is New Jersey, which finishes No. 32 this year compared to No. 15 in 2007 when Democrat Jon Corzine was governor. Under Republican Chris Christie, who took office in 2010, New Jersey's economy has fallen to No. 31 from No. 22 in 2007, and infrastructure has plunged to No. 46 from No. 30. Also in 2007, in a finding that confounded many at the time, including us, we ranked New Jersey's quality of life as the best in the nation. This year it is No. 13.