Economic Development and Human Resources

Leaders emphasize need for rising income

Percentage of households unable to meet cost of basic necessities is trending up.

March 8, 2020
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At least 30% of people in every Michigan county have trouble paying for housing, child care, food, transportation, health care and other necessities. Courtesy Michigan Future

A large group of economic and community development leaders from around Michigan are urging economic policymakers and practitioners to make rising income for all a state economic priority.

The leaders who authored this call to action came together because of a common concern that despite a strong Michigan economic recovery, far too many are struggling economically.

The Michigan Association of United Ways reports that in 2017, 43% of Michigan households met ALICE (Asset Limited, Income Constrained, Employed) criteria, meaning they were unable to pay for housing, child care, food, transportation, health care, phone and taxes.

A striking state map covered in various shades of red shows at least 30% of people face these issues in every county in the state. And, the data show the problem affects people of all ages, races and ethnicities.

Perhaps most alarming, they say, is Michigan is experiencing population growth in what is widely viewed as one its best economies ever. Since the turn of the century, however, no matter who was in control in Lansing and Washington, more and more Michigan households struggle to make ends meet.

Nearly four dozen leaders from such organizations as The Right Place, Lakeshore Advantage, Michigan Future, DTE Energy and chambers of commerce say it’s time to apply more weight to these stats in economic development efforts.

“Although my contention is that if we make income a priority and if we use the ALICE rate as a measure, it's going to change both economic policy and practice,” said Lou Glazer, president of Michigan Future, a nonprofit that works to elevate the state’s economy.

“It's a very fundamental shift in how we think about the economy. I think everybody that signed the document, we're all agreed that it's a change that we need to make.”

A common misconception is that a low unemployment rate equates to economic success, they said. Rather, it’s important to look at labor participation rate, which is the rate of people working who are able to work.

At around 63% nationally, that number is lower than it’s been in decades. It’s “okay” in Grand Rapids but gets worse in surrounding rural communities, said Birgit Klohs, president and CEO of The Right Place, an economic development organization based in Grand Rapids.

“So there are people sitting on the sidelines, even though everybody's screaming at us that they can't find anybody,” Klohs said.

And, just because someone has a job, that doesn’t mean it’s a well-paying job — something else the unemployment rate measure misses.

For the first time, The Right Place added an hourly rate goal of $26.65 to its recently announced three-year strategic plan to help combat the issue, at least for the industries the organization works with.

Perhaps because of a talent shortage, some companies have raised their minimum pay rates. Fifth Third Bank, for example, recently announced a minimum pay rate of $18 per hour.

“I'm not sure it's a trend yet, but we know that the companies we are talking to are all looking at how do we keep talent,” Klohs said.

Companies also are realizing it may make more sense to invest in their employees and promote internally, given the high cost of hiring someone new.

“We're having more of those conversations than we used to,” Klohs said.

Of course, ensuring manufacturing jobs pay well does not help the many people who work in the hospitality industry. Because of their nature, some of those jobs just aren’t well-paying. Because working at a fast food restaurant is no longer considered simply a starter job, something else may have to be done to assist those people, Glazer said.

“The main question is whether you want to expand the safety net or not, particularly the earned income tax credit,” Glazer said. “Or you're going to have to accept the high ALICE rate. Those are the only choices.”

Glazer said this group of leaders came together just to portray the importance of changing the way economic success is measured. Beyond what each of them can do in their operations, much of the work going forward will be up to policymakers, he said. To get there, though, the idea needs to be part of the conversation.

“At the moment, it’s not on the table,” Glazer said.

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