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The good, bad and ugly of income inequality
Metro Grand Rapids’ economy was in the news twice recently. One was a positive story, the other was not. Both are accurate. The differences between the two highlight the importance of how you define economic success.
The positive story comes from Bridge Magazine. It documents the strong job growth metro Grand Rapids has enjoyed. Bridge writes: “But nowhere is Michigan shining brighter than West Michigan, where two counties, Kent and Ottawa, account for one-fifth of all new jobs in the state, despite comprising just one-tenth of the population. In Ottawa, the April jobless rate was 2.7 percent. It was 2.9 percent in Kent. Both are historic lows not seen since 2000.”
Good news indeed.
The not-so-positive story comes from a new study by the Economic Policy Institute, which found Grand Rapids has the worst income equality of any Michigan metropolitan area. The study found the top 1 percent makes 25 times more than the bottom 99 percent. In addition, the average income of the 99 percent in West Michigan is $41,061 compared to a national average for the bottom 99 percent of $45,567.
As the Bridge story alludes to, West Michigan has low unemployment but also low wages. So, if your measure of economic success is how many people are working, metro Grand Rapids is doing well, far better than the rest of Michigan. But if your measure of economic success is how well people can pay the bills, save for their retirement and their kids’ education, metro Grand Rapids is not doing so well.
The Michigan Association of United Ways calculates 39 percent of Kent County households and 34 percent of Ottawa County households earn too little to pay for the basics: housing, child care, food, health care and transportation — the percentage is slightly higher (40 percent) statewide.
At Michigan Future Inc., we believe the goal should be an economy with lots of good-paying jobs, a place with a broad middle class, where there is a realistic chance for families to achieve the American dream. Areas with low unemployment rates, but also lower personal income, aren’t successful to us. Gov. Rick Snyder describes it as more and better jobs. Both matter.
We believe employment earnings per capita is the best measure of how well a state and its regions are doing on Gov. Snyder’s goal of more and better jobs. It measures the combination of how many are working and how much they earn in wages, self-employment income and employer-paid benefits. Metro Grand Rapids ranks 48th out of 52 metros with a population of 1 million or more.
The major reason why Grand Rapids ranks so low is the small proportion of adults with a four-year degree. On that measure, metro Grand Rapids ranks 34th out of 52. College attainment matters because good-paying jobs are increasingly concentrating in knowledge-based enterprises. The professionals and managers who work for those enterprises are the core of the American middle class.
Joe Cortright, in a City Observatory post entitled “Why Talent Matters to Cities,” describes his findings on the alignment between regional per capita income and the proportion of adults with a four-year degree or higher.
He writes “… the most important thing you need to know about urban economic development in the 21st century: If you want a successful economy, you have to have a talented population. Cities with low levels of educational attainment will find it difficult to enjoy higher incomes; cities with higher levels of educational attainment can expect greater prosperity. As Ed Glaeser succinctly, puts it: ‘At the local level fundamentally, the most important economic development strategy is to attract and train smart people.’ And critically, because smart people are the most mobile, building the kind of city that people want to live in is a key for anchoring talent in place.”
Cortright concludes: “Education is a stronger predictor of economic success today than ever before. That’s true for individuals, for private businesses, for communities and for metropolitan economies. … The policy lessons for city leaders are clear: A successful economy depends on doing a great job of educating your population, starting with your children, and also building a community that smart people will choose to live in.”
Lou Glazer is president of Michigan Future Inc.