Sharing prosperity with those not participating in the high-wage economy
Most jobs now and in the future will not be high skill. 
And therefore will not be high paid. That is the fundamental shift that has occurred in our economy over the past several decades. The high-paid, low-education-attainment jobs that were the backbone of Michigan’s mass 20th Century middle class are gone forever.
In their book the Second Machine Age Erik Brynjolfsson and Andrew McAfee project that in an age of brilliant technologies economic growth will accelerate substantially but the distribution of economic gains will concentrate even more than today at the top. So there is little reason to believe going forward that there will be a higher proportion of good-paying jobs.
This means Michigan cannot reach the goal of rising household incomes for all unless it finds ways to increase the amount of work and the pay and benefits of that work for those with low education attainment.
Our recommended policy menu includes expanding the safety net. Michigan has been doing the opposite recently, at least in part due to the belief that a too generous safety net discourages people from working. Minnesota’s experience has been the opposite. As we document in our State Policies Matters report, Minnesota has a far more generous safety net than Michigan. And it is third in the proportion of those 16 and older working, Michigan is 40th. If the same proportion of Michiganders age 16 and above worked as Minnesotans there would be 830,000 more Michiganders working today.
Our agenda for getting more Michiganders working and to make work pay more for those in low wage jobs:
- Helping Michiganders get family supporting employment through a combination of income supports and comprehensive and customized case management. As chair of the House Ways and Means Committee Paul Ryan proposed an opportunity grant system where folks eligible for public assistance would receive benefits and services needed to get on the path to self-sufficiency all coordinated by a case manager. Services could include housing, childcare, transportation, substance abuse support, mental heath, job training, financial education, etc. These services continue beyond a first job.
- Using TANF (Temporary Assistance to Needy Families) funding to help those out of work or underemployed get family supporting jobs. To provide low-income families with a safety net that acts as a trampoline rather than a snare (as described by former Massachusetts Governor William Weld). Michigan instead has been a leader in getting out of the business of providing cash grants or services designed to help people get to self-sufficiency.
- Augmenting wages and benefits through some combination of employer mandates and/or a strengthened safety net. The employer mandate recommendation is the area where we have the most disagreement amongst the Michigan Future Board and staff. But we all recognize that to achieve the goal of getting all Michiganders on the path to good-paying careers that income from work will need to be augmented for many.
- Reforming the criminal justice system: To achieve fewer imprisoned, shorter time spent in prison and barriers to work removed after release.
If we can be successful in raising the percentage of well educated, highly skilled workers, do you think the economic laws of supply and demand would eventually lower the income gap between highly skilled and less skilled workers? For example, would larger numbers highly skilled workers earning and spending more, increase the demand for less skilled workers in restaurants, retail and service jobs, therefore increasing the pay in such jobs? My anecdotal observations are that well educated, highly paid millennials love to spend a lot of money at restaurants and on services that employ a lot of less skilled people.
Good question. So far the answer is more highly paid people create more jobs as you point out in the local economy both in less skilled jobs and in more skilled jobs. But it has not been a recipe for raising the wages of those low skilled jobs. I’m not very optimistic that without government intervention––either through something like higher minimum wage or an increased safety net like the earned income tax credit––that the market is going to provide jobs that you can raise a family on for those with low education attainment. That is why our new state policy agenda includes ideas to share prosperity.
As always, interesting and refreshing blog. A former program that needs to be revised in some form is the Comprehensive Educational and Training Act (CETA). Very popular in late 70’s & early 80’s, I personally know individuals and families that benefitted from this legislation.
Agreed. We are going to detail our ideas for adult training in our detailed share prosperity recommendations that should be published in August. But we do need something like CETA, which if I remember right included government subsidies for jobs along with training. I think we also have learned since then a lot about what works and what doesn’t. Adult training programs don’t have great completion rates and too many graduates end up in low paid work.