Michigan in the bottom ten

No matter who wins next week’s elections for Governor and the state legislature those elected will be taking over a state economy that is a national laggard. The best evidence of that reality comes from the recent release by the U.S. Bureau of Economic Analysis of 2013 state per capita income data. They report that Michigan is 37th in per capita income. And, far more worrisome, 41st in per capita income minus transfer payments.

(Transfer payments are payments made by government to or on behalf of individuals. They include Social Security, Medicare, Medicaid, TANF cash benefits, food stamps, veterans’ benefits, tuition support like Pell grants and subsidies for college loans, the Earned Income Tax Credit, etc.)

You read that right: Michigan is a bottom ten state in per capita income that does not come from government payments and benefits to individuals. Employment earnings (wages and benefits from work) and investment earnings (dividends, interest and rent)––the other two components of per capita income––combined are $6,500 lower per person here than the nation. Eighteen percent below the national average. Michigan ranks last among the six Great Lakes states.

(Transfer payments in Michigan are ten percent above the national average. Total per capita income in Michigan is thirteen percent below the national average. Per person MIchiganders have income $5,700 lower than the national average.)

These results come in the fourth year of a national recovery from the Great Recession. A recovery that includes a relatively robust rebound from near compete collapse and bankruptcy of the domestic auto industry––still the main engine of the Michigan economy. So the reality is Michigan is now a  structural, not cyclical, laggard compared to the country.

During that recovery Michigan’s ranking has barely budged. In 2009––in the depths of the Great Recession and auto industry collapse––we were 38th in per capita income and 42nd in per capita income minus transfer payments. Long gone are the days when Michigan was one of the most prosperous state. Or even, a state that did better than the nation when the domestic auto industry was doing well and fell below the nation when the industry struggled.

As we have explored in my recent Lets hope this isn’t “back” series (here, here and here), in addition to per capita income, Michigan is a national laggard in the proportion of adults working; those unemployed; wages; proportion of citizens and children in poverty; education attainment; k-12 education outcomes and other measures of child well being.

No matter the conventional wisdom from Michigan elites––corporate, elected officials and the press––that Michigan is once again a national economic leader, Michigan is a long ways from being back. Corporate Michigan is enjoying skyrocketing profits, stock prices and top executive compensation. And a more business friendly policy environment (ranking 14th in the Tax Foundation’s 2014 State Business Tax Climate Index).  Michigan elites are doing very well indeed. But the data are clear: the rest of us, not so much.

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 an understanding that Michigan is now one of the poorest states in the country and a 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.

This Post Has 4 Comments

  1. I hope readers understand that when the Earned Income Tax Credit is listed as a transfer payment, that only refers to the portion that exceeds the amount they owed in income tax. The amount they owe for the year in income tax that they get back through the EITC is not a transfer payment but are considered similarly to other income tax credits.

  2. What are your thoughts on the future of knowledge based jobs that are part of the auto industry or other manufacturing businesses in Michigan? I am talking about jobs such as management, engineering, R&D, accounting, finance, marketing etc. Is it feasible for Michigan to retain many of these jobs, even as lower skilled manufacturing moves to other countries or other parts of this country?

    1. Sure. That is an area of potential growth in Michigan in both employment and wages and benefits. The knowledge side of the auto industry is part of the broader knowledge-based sectors which are where both job growth and high wages are prevalent. Michigan’s challenge though is that we are 32nd in 2013 in four year degree attainment. If we don’t get better educated we will not be able to take advantage of the growth opportunities you identify.

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