Guest Column

State’s economy leaves too many behind

July 6, 2018
| By Lou Glazer |
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The Michigan Association of United Ways’ ALICE report is the best calculation of the proportion of Michigan households that cannot afford basic necessities. The report makes clear that this is an all-Michigan problem: in every county, among all races and all ages.

United Way’s ALICE is an acronym for Asset Limited, Income Constrained, Employed.

That 40 percent of Michigan households — in a strong economy — can't pay for basic necessities should be sending off alarm bells among policymakers that the Michigan economy is leaving far too many Michiganders behind.

What the ALICE report doesn't allow us to do is compare Michigan to the nation and other states. Nor does it allow us to determine the long-term trend. Is the proportion of ALICE households growing or shrinking compared to the last time Michigan had a strong economy at the turn of the century?

Using 2016 American Community Survey data and the 2000 Census, we calculated the proportion of Michigan households with incomes of two times the federal poverty level or below for all states and the nation. Two times the federal poverty level is a lower income level than ALICE. For a family with two adults and two children it’s about $48,000 in household income compared to an ALICE level of about $56,000. (Unlike the ALICE data, the poverty level is not cost-of-living adjusted by county.)

In 2016, 32.6 percent of Michigan households had income equal to or below two times the federal poverty level. This compares to 26.4 percent in 1999 — the last time Michigan had a strong economy and strong domestic auto industry.

Nationally, 31.8 percent of households in 2016 had income equal to or below two times the federal poverty level, which is up from 29.7 percent in 1999. So Michigan has moved from 3.3 percentage points fewer lower-income households to 0.8 percentage points more lower-income households compared to the nation since the turn of the century.

What about Minnesota, the Great Lakes’ most prosperous state? In 1999, 21.6 percent of Minnesota's households had income equal to or below two times the federal poverty level. In 2016, that had risen to 24.3 percent. So the proportion of lower-income households in Michigan compared to Minnesota has grown from 4.8 percent to 8.3 percent more.

Why has the proportion of Michigan households with income equal to or below the federal poverty level grown since 1999 and risen faster here than the nation or Minnesota? Two chief reasons:

1. Too many of us are not working. In 2000, Michigan was 2 percentage points above the national average in the proportion of those 16 and older working; in 2017, the state was 1.5 percentage points below. If the same proportion of Michiganders worked as Minnesotans there would be 725,000 more Michiganders working.

2. Too many Michiganders working in low wage and benefit jobs. In 2000, Michigan was 1 percent below the national average in employment earnings (wages and employer-paid benefits) per capita; in 2017, the state was 12 percent below. Minnesota is 11 percent above, or $7,000 higher than Michigan.

This, of course, is more evidence that now is not the time for celebration as way too many of our political and business leaders are doing.

To meet this challenge requires the transformation of state economic policy. We should start with a new mission: raising household income for all. It should now be clear that having a growing economy, or a low unemployment rate, or being business friendly — all of which have been the goals of state policymakers now and in the past — does not lead to an economy that benefits all.

We need state economic policies that both create more good-paying (wages and benefits) jobs and prepare far more of us for the good-paying jobs of today and tomorrow. And because no matter how strong the economy is, there are going to be lots of low-paying jobs — 40 percent of current jobs in Michigan pay less than $15 an hour — we need to make shared prosperity an economic priority.

We also need to figure out how to get the far too many Michigan adults who have dropped out of the labor market back to work. That means helping people deal with all the barriers to employment, including mental and physical health, transportation, child care, addiction, housing and the criminal justice system. Let’s not assume that a too generous safety net is the prime cause of folks not working. Minnesota has a much more generous safety net than Michigan and, as we have seen, a much higher proportion of adults working.

Lou Glazer is president of Michigan Future Inc.

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