Michigan is a low wage state

Michigan was the birthplace of the 20th Century American mass middle class. Largely built on a foundation of high paid blue collar –– mainly unionized factory –– jobs. It is the main reason Michigan was one of the most prosperous places on the planet for nearly a century. But that economy is over. A victim largely of globalization and technology. If Michigan is going to be  prosperous in the future –– a place one again with a broad middle class –– it will be built on a foundation of higher wage knowledge based enterprises.

In an MLive article Rick Haglund reports on how far Michigan has fallen in terms of wages based on work by George Fulton and Don Grimes of the University of Michigan. Since 2000 Michigan has fallen in the private sector from a high to low wage state  Not the way you build a mass middle class.

Haglund writes: “Fulton and fellow U-M economist Don Grimes found that, in the first quarter of 2001, the average annualized private-sector wage in Michigan was $38,532 – almost $1,100 above the national average wage ($37,436). By the first quarter of 2012, however, the state’s average annualized wage of $47,465 had fallen $4,076 below the national average private-sector wage ($51,541).  Adjusted for inflation, annual private sector wages fell $2,488 in Michigan during the period, but rose $3,008 for all U.S. workers.”

Clearly the end of mass high wage auto factory work is a major reason for the collapse in private sector wages in Michigan. That is the old economy foundation that is over. But another reason for the state’s now low average private sector wages is Michigan’s industry mix. The state is under concentrated compared to the nation in the proportion of jobs in the knowledge-based sectors of the economy. Which are now the high wage sectors in the economy. (For details see our latest annual report on the Michigan economy.) As Haglund writes: ” … Michigan now has poorer mix of industries compared to the nation than it did a decade ago. “We have a disproportionately large share of relatively low-wage industries, probably mostly reflecting a relatively small share of the knowledge-economy industries,” Grimes said.”

Michigan will only be prosperous again if our economy moves from factory based to knowledge based.

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