The ALICE Report: A deeper look at Michigan's economic landscape

The updated ALICE report makes clear that Michigan is facing severe structural economic challenges. 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.

 

Forty percent of Michigan households do not have sufficient income to pay for the necessities: primarily housing, childcare, food, health care, taxes and transportation. More than 1.5 million Michigan households are without adequate income to pay for basic necessities. As the report makes 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. 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 one percent below.
  • Too low education attainment. 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 irrespective 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 preeminent challenge of our times is figuring out how to reverse what is being called the Great Decoupling. Where even when the economy is growing––as it has been in Michigan since the end of the Great Recession––only those at the top are benefiting from that growth. The policy priority needs to be reestablishing an economy where as the economy grows all Michigan households enjoy rising incomes.

 

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. Michigan has been making progress on all three since the end of the Great Recession. It’s far past time that we make explicit that the goal of state economic policy is a rising household income for all Michiganders.

 

The key to having an economy with rising household incomes for all are good-paying jobs and careers. Where careers are for forty 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. Good-paying jobs increasingly are concentrating in professional and career occupations that require four-year degrees or more. And those with four-year degrees consistently are better at transitioning to the next good-paying job in an economy where jobs, occupations and enterprises are increasingly less stable in large part due to automation.

 

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 that 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 that there will be a higher proportion of good-paying jobs.

 

The ALICE data––the sheer scale of those in economic stress––should make clear to all that the prime cause for so many households struggling to make end meet is not people unwilling to do what is necessary to obtain available family-supporting work, but rather that the economy is not producing enough family-supporting jobs.

 

Nor is it that we have a too generous safety net that discouraged people from working. As Michigan Future, Inc––the think tank I lead––documented in our State Policies Matters report Minnesota has a far more generous safety net than Michigan. And it is third in the proportion of those 16 and older working, Michigan is 40th. If the same proportion of Michiganders age 16 and above worked as Minnesotans there would be 830,000 more Michiganders working today.

 

Michigan cannot substantially reduce the proportion of households that cannot pay for basic necessities unless it finds ways to increase the amount of work and the pay and benefits of that work for those with low education attainment. That means a public policy that makes a priority of tackling the multiple barriers to work that households face: housing, childcare, transportation, substance abuse, physical and mental heath in addition to job training. And public policy designed to raise the returns from work 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.


Lou Glazer is President and co-founder of Michigan Future, Inc., a non-partisan, non- profit organization. Michigan Future’s mission is to be a source of new ideas on how Michigan can succeed as a world class community in a knowledge-driven economy. Its work is funded by Michigan foundations.