Michigan has an ALICE problem, and it doesn’t discriminate
The Michigan Association of United Ways in “ALICE in Michigan: A Financial Hardship Study” reports that in 2017, 43 percent of Michigan households were unable to pay for necessities. That’s up 6 percent from 2010 when the Michigan economy was just starting to grow after the Great Recession.
How can that be? In an economy that President Donald Trump calls the best American economy ever (it isn't, but it is a strong economy), more Michigan households can't afford to pay for housing, child care, food, transportation, health care, a cell phone and taxes than when the state was just emerging from its so-called “lost decade.”
The simple answer is too many of us work in low-paying jobs with little or no benefits. As the report notes: "Low-wage jobs dominate the employment landscape, with 61 percent of all jobs in Michigan paying less than $20 per hour." More exact, for lower-paid workers, wages and benefits are growing slower than the cost of paying for basic necessities.
ALICE is an acronym for Asset Limited, Income Constrained, Employed. To be an ALICE household in Michigan, income needs to be below $61,272 for a family of two adults with one infant and one preschooler and $21,036 for a single adult. The ALICE calculations are cost of living adjusted and based on household size.
In 2017, 1,664,606 Michigan households were ALICE households compared to 1,569,992 in 2010. ALICE is an all-Michigan problem. There are no counties in the state with less than 30 percent ALICE households. The range is from a low of 30 percent in Eaton County to 61 percent in Lake County. Not only is ALICE geographically diverse, but it also is prevalent in all ages, races and ethnicities.
The ALICE rate for the four counties that make up metropolitan Grand Rapids is 37 percent in Kent, 31 percent in Ottawa, 37 percent in Barry and 49 percent in Montcalm.
What the ALICE data make clear is that this is a structural problem and an all-Michigan problem. We are not going to grow our way out of far too many Michigan households unable to pay for the basics. And a low unemployment rate will not drive wages, benefits and hours worked up enough to substantially dent the proportion of ALICE households.
To substantially reduce the ALICE rate, we need a new economic strategy in Michigan. It should be one that starts with making rising household income for all the state's economic mission. Income — not employment or growth — needs to become the focus of economic policymaking. A low unemployment rate matched with a high ALICE rate should never again be considered a good economy.
Increasing educational attainment is the best way to increase wages and benefits. With every step up the education attainment ladder, people work more and earn more, with a four-year degree being the most reliable path to the middle class. Michigan Future Inc. — the think tank I lead — lays out its education agenda in our “Improving student outcomes, birth to college” report.
The reality is that even with higher education attainment, there still will be lots of low-pay, low-benefit jobs in Michigan. That is a structural reality of today’s — and almost certainly tomorrow’s — economy. So the state also needs a shared prosperity agenda. We laid out our policy recommendations in our “Sharing prosperity with those not participating in the high-wage knowledge-based economy” report.
That report identifies three basic challenges that Michigan must address to increase the income of those not participating in the high-wage portions of the economy:
Help people get back to work through a case management system that provides income supports and services designed to remove whatever barriers are keeping people from working.
Raise employment earnings for those in lower-paid work by some combination of employer mandates and/or an expanded safety net.
Criminal justice reform. Fewer sent to prison, those who are in for less time, and removing barriers to work once they get out.
The first step though is to end the self-congratulations among far too many of Michigan's political and business elites who think just because the unemployment rate is low and they and corporate Michigan are doing well that the Michigan economy is a roaring success. It isn't.
The ALICE data should lead to our elites hearing alarm bells. Until they do — or we insist that they do — it is almost certain that a way too high proportion of Michigan households will continue to be unable to pay for necessities.
Lou Glazer is president of Michigan Future Inc.