Economic policy’s main goal: boosting household income
In the seventh year of a national economic expansion — and an even stronger rebound from near bankruptcy of the domestic auto industry — too many Michigan households are struggling. Michigan’s substantial economic challenges clearly are structural.
The Michigan Association of United Ways recently found 40 percent of Michigan households do not have sufficient income to pay for the necessities: housing, child care, food, health care and transportation. In the four metro Grand Rapids counties, the proportion of households that can’t pay for the basics are: Kent, 38 percent; Ottawa, 36 percent; Montcalm, 48 percent; and Barry, 36 percent. Muskegon County has 40 percent of its households unable to pay for basics, and in Kalamazoo County, the number is 36 percent.
The report makes it clear this is an all-Michigan problem: in every county, among all races and all ages. Why?
- Not enough of us work: Michigan is 40th in the proportion of adults who work. There are 400,000 fewer Michiganders working today than in 2000.
- Not enough of us work in good-paying jobs: 16 percent below the national average in wages and benefits per capita. In 2000, Michigan was 1 percent below.
- Too low education attainment: Michigan is 32nd in the proportion of adults with a four-year degree or more and even lower in all the rankings of K-12 student outcomes.
This pattern is true regardless of race. Racial discrimination is an ongoing reality in employment, education, housing and the criminal justice system, but class is now the main dividing line in the American economy, and increasingly, class is defined by college attainment.
The pre-eminent challenge of our times is figuring out how to reverse what is being called the Great Decoupling. Even when the economy is growing — as it has been in Michigan, particularly West Michigan, since the end of the Great Recession — only those at the top are benefiting from that growth. The policy priority needs to be re-establishing an economy where as the economy grows, all Michigan households enjoy rising incomes.
It should now be clear having a growing economy, or a low unemployment rate, or being business friendly — all of which have been goals of state policymakers present and past — does not lead to an economy that benefits all. It is far past time we make it explicit the goal of state economic policy is a rising household income for all Michiganders.
Good-paying jobs and careers are the keys to an economy with rising household incomes for all. It’s about where careers will be in 40 years, not a first job. The prime focus of economic policy must be helping people have a career of good-paying work. The key to a good-paying career is substantially increased college attainment.
But about half of today’s jobs in Michigan are not high skill and, therefore, are not 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 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 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.
The agenda for getting more Michiganders working and to make work pay more for those in low-wage jobs is this:
- Help 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, child care, transportation, substance abuse support, mental health, job training, financial education, etc. These services continue beyond a first job.
- Use Temporary Assistance to Needy Families (TANF) 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 Gov. William Weld). Instead, Michigan has been a leader in getting out of the business of providing cash grants or services designed to help people get to self-sufficiency.
- Augment wages and benefits through some combination of employer mandates and/or a strengthened safety net. To achieve the goal of getting all Michiganders on the path to good-paying careers, income and benefits from work will need to be augmented for many.
- Reform the criminal justice system to achieve fewer imprisoned, shorter time spent in prison and barriers to work removed after release.
Lou Glazer is president of Michigan Future Inc.