Definitively Michigan is not back

This blog––and the work of Michigan Future––has been about the economy primarily and to a lesser degree the policies needed to improve the standard of living of Michiganders, not politics. The results of the Michigan presidential primaries in both parties sent such a clear message about each that I want to get into politics even if its just once.

The clear message from the election is that no Michigan is not back. That despite a surging domestic auto industry, a lower unemployment rate (the lowest in 15 years) and corporate Michigan and its top executives doing very well indeed far too many Michiganders standard of living is declining not growing. As we explored in a series of post (you can read them here, here, here and here) in 2014 this is the exact opposite narrative from what we have been told repeatedly by Michigan corporate, media and political elites. The story of the election––far too many Michiganders not doing well––is the far more accurate narrative of the Michigan economy in 2016. Lets hope that the election results send the message loud and clear to the governing class that now is not the time to celebrate, but rather the time for a fundamental policy change: one that makes a rising standard of living for all Michiganders the goal.

What follows is a post I wrote on the topic in September 2014. Unfortunately a year and a half later almost nothing has changed. Michigan is 35th in 2014 per capita income and 40th in 2015 employment to population. The ALICE study is being updated for release this fall. All the expectations are that the data will be very similar to the first report. Its time we get serious about changing those realities.

Michigan elites––corporate, elected officials and the press––increasingly claim that Michigan is back. Thanks in no small part to the huge federal bailout of the domestic automobile industry and the financial system, corporate Michigan is enjoying skyrocketing profits, stock prices and top executive compensation. So without question Michigan elites are doing very well indeed. The rest of us, not so much.

As we explored previously on the two metrics that matter most to whether Michigan households can pay their bills and save for their retirement and their kids education, per capita income and the employment to population ratio, Michigan is anything but back.

 … On the best measure of employment––the population to employment ratio for those 16 and older––Michigan does a little better, ranking 43rd in 2013. 55.0 percent of Michiganders 16 or older worked in 2013. That is better than the cyclical low of 53.6 percent in 2010. But quite a ways lower than in 2007, the year before the Great Recession, when Michigan’s employment to population ratio was 59.9 percent. In 2013 Michigan was significantly below the national average of 58.6 percent and far behind Minnesota––the Great Lakes leader––at 66.8 percent.

When it comes to employment, Michigan’s travails are structural. Michigan has been declining in both absolute terms and compared to the nation since at least the turn of the century. Michigan in 2000 ranked 23rd and was above the national average in employment to population ratio: 66.5 percent compared to 64.5 percent. If the same proportion of Michiganders were working today as in 2000 there would be 897,000 more Michiganders working today.

The story is basically the same for per capita income. Michigan a top tier state in 2000: ranking 18th. In the preliminary rankings for 2013 we have fallen to 35th. In 2000 our per capita income was about $900 below the national average. In 2007––the year before the Great Recession and the end of Michigan’s so-called single state recession––we were about $5,100 below the national average. In 2013 we have fallen even further to about $5,300 below the national average.

An important new study from the Michigan Association of United Ways provides compelling evidence that Michigan is anything but back. The report is entitled ALICE, which stands for Asset Limited, Income Constrained, Employed. The research for the report was done by researchers at the Rutgers University-Newark’s School of Public Affairs and Administration. It definitely is worth checking out.

The report’s bottom line: 40 percent of Michigan households earn too little to provide for basic needs. This includes 605,210 (16 percent) households below the federal poverty level and 930,503 (24 percent) ALICE households. The ALICE households are calculated based on the average minimum costs for households in Michigan simply to survive – not to save or otherwise “get ahead”. As the report explains:

“The annual Household Survival Budget quantifies the costs of the five basic essentials of housing, child care, food, health care, and transportation. Using the thriftiest official standards, including those used by the U.S. Department of Agriculture (USDA) and the U.S. Department of Housing and Urban Development (HUD), the average annual Household Survival Budget for a Michigan family of four (two adults with one infant and one preschooler) is $50,345, and for a single adult it is $16,818.”

The ALICE households, by and large, have a working adult. But they are in jobs that pay too little to meet the Household Survival Budget. The report’s authors found that 63 percent of jobs in Michigan pay less than $20 per hour, with the majority paying between $10 and $15 per hour. A job that pays $20 per hour full-time totals $40,000 per year, which is about $10,000 less than the Household Survival Budget for a family of four in Michigan.

The authors also found that the safety net available to Michigan households isn’t adequate for the average poor and ALICE household to meet the Household Survival Budget. They found: “The income of ALICE and poverty-level households is supplemented with $30.6 billion in government, nonprofit and health care resources. Despite these public resources, ALICE and poverty-level households remain 13 percent short of the income needed to reach the ALICE Threshold.”

Another major finding is that there are lots of ALICE households in every Michigan county and in every demographic group. This is not just a problem for minority and/or urban households as it is all too often portrayed.

The authors conclude that the answer is the more and better jobs that Governor Snyder has established as the state’s economic goal. They write:

“Reducing the number of ALICE households requires a significant increase in the wages of current jobs or in the number of medium-and high skilled jobs in both the public and private sectors in Michigan. Structural economic changes would significantly improve the prospects for ALICE and enable hardworking households to support themselves.”

As the per capita income, employment to population ratio and ALICE data clearly portray, Michigan is a long ways from being back. Back should mean not just elites doing well, but a Michigan once again with a broad middle class. Where––as was true here for most of the 20th Century––if you are willing to work hard you can earn enough to raise a family and pass on a better opportunity to your children. What we need is not celebration of where we are, but commitment to get back to where we were.

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Lou Glazer

Lou Glazer is President and co-founder of Michigan Future, Inc., a non-partisan, non-profit organization. Michigan Future’s mission is to be a source of new ideas on how Michigan can succeed as a world class community in a knowledge-driven economy. Its work is funded by Michigan foundations.

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