Guest Column

State’s economic policy should involve raising household income

December 13, 2019
| By Lou Glazer |
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Gov. Gretchen Whitmer recently announced both an expansion of access to food assistance, cash assistance and state emergency relief, and an increase in the number of workers eligible for overtime pay. She framed her announcements in terms of helping Michigan’s ALICE households. (ALICE is the acronym the Michigan Association of United Ways uses for those households unable to pay for basic necessities.)

This is the approach to economic policy that Michigan most needs now, one that is focused on raising household income for all. The simple reality is you do not have a good economy when 43% of Michigan households cannot pay for basic necessities.

The ALICE rate for the four counties that make up metropolitan Grand Rapids is 37% in Kent, 31% in Ottawa, 37% in Barry and 49% in Montcalm. In the region, there are 392,000 ALICE households.

The state’s and the region's economic focus needs to shift from a low unemployment rate and measures of economic growth to a focus on whether Michigan households can pay the bills, save for their retirement and the children’s education. This is the primary economic challenge of our times: creating an economy that as it grows benefits all. 

Despite a low unemployment rate and decent economic growth, Michigan has had anything but an economy that is benefiting all. Between 2006 and 2017, average household income adjusted for inflation for the bottom 60% of Michigan households has been flat. For those between the 61st and 80th percentile, real average household income is up 2.6%. For those in the top 20% of Michigan households, real average household income is up 10.7%. Clearly, not an economy that, as it grows, is benefiting all.

With 60% of Michigan jobs paying less than $20 per hour and 40% paying less than $15 per hour, there is no way to substantially lower the ALICE rate from a way too high 43% without boosting wages and benefits for those in lower-paying jobs. Yes, we need better education and training to help people take advantage of the better-paying jobs that are available. But there just are not enough of those jobs so that you can’t educate your way out of a high ALICE rate.

Michigan’s core economic challenge is there are too many low-wage jobs. The reality of too many low-pay jobs is true across the state — nationally, too. Nationally, 51% of jobs are in occupations that pay less than the national median of $38,640. In Michigan, it is 58%. In metropolitan Grand Rapids, it is 62%.

To put the national median in context, The Michigan Association of United Ways calculates the cost of paying for basic necessities (housing, child care, food, transportation, health care, a cell phone and taxes) in Michigan is $61,272 for a family of two adults with one infant and one preschooler.

The governor’s actions use the two main levers for meeting the goal of a rising household income for all: expanding the safety net and employer mandates. Gov. Whitmer’s actions to expand access to safety net benefits by allowing lower-income households to save more without losing benefits and to require overtime pay for those making substantially more than federal law requires are important components of a rising household income for all state economic policy.

And the evidence is that you don’t sacrifice a prosperous economy and a high proportion of adults working with an expanded safety net and employer mandates. Minnesota has the most expansive safety net in the Great Lakes and is the Great Lakes’ lowest-ranked state in the Tax Foundation’s 2020 State Business Tax Climate Index and it has, by far, the best economic outcomes across the board of the Great Lakes states. Sixty-eight percent of Minnesotans age 16 and above work, compared to 59% of Michiganders. Median household income in Minnesota is $71,817 compared to $60,449 in Michigan.

Gov. Whitmer’s focus on improving the economic well-being of Michigan’s ALICE households is the focus that we need from all state policymakers. We can debate how to achieve an economy that benefits all. What we should not do is celebrate an economy that is leaving so many behind. 

Lou Glazer is president of Michigan Future Inc.

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