Opinion: Michigan residents are 'struggling'

Sandy Baruah, Dave Meador and Lou Glazer

We support a market economy. Over the arch of human history, no other social and economic system has improved societal living standards and lifted more families out of poverty than the market economy. Michigan, with its history of hard work and innovation has long been a beneficiary of the market economy system. The American middle class was created by Michigan’s hard work and innovation.  

The Great Recession hit Michigan harder than most. The recovery in the intervening decade has been impressive. Michigan, and its signature automotive industry, are in exceptionally better condition than anyone would have forecasted in 2008. There is much to celebrate.

Despite the inherent superiority of the market system — and the tremendous economic progress since the Great Recession — there is a chilling data point that undermines traditional metrics of economic success. Despite strong numbers in unemployment levels and poverty numbers, the truth is that even with this strong economy, four in 10 Michigan households can't afford to pay for basic necessities.

A majority of jobs in Michigan pay less than $40,000 a year for a 40-hour week, which is not enough to sustain a family of four, according to calculations by United Way.

The economic development ethos that “rising tides lifts all boats” is not as true as it once was. Something has changed. The overall success of an economy does not translate as easily to all sectors of society as it once did. 

This realization led us to join with 20 other economic and community development leaders from around the state to better understand that in addition to traditional metrics of economic performance, we must make a rising income for all a priority. We ask our fellow practitioners to join us, and for state economic policymakers, on a bipartisan basis, to make rising income for all a state economic priority.

We share a common concern that far too many Michigan residents are struggling — and no region or county is exempt. A 2017 Michigan Association of United Ways report uncovers that 43% of Michigan households were unable to pay for housing, childcare, food, transportation, health care, phone and taxes. That is 1.66 million households. This 43% of Michigan households fall under United Way’s Asset Limited, Income Constrained, Employed — known as ALICE — standard. Despite most having a working adult, these families lack the resources to meet basic needs. The United Ways calculate that the cost of necessities — the ALICE level — for a family of four with two adults and two preschoolers is $61,272.

The many business closings due to the coronavirus outbreak will only exacerbate the economic struggles of these ALICE households, most who live without paid leave and without savings to cover necessary expenses over an extended period. They are likely to go from struggling to pay the bills to simply unable to do so. Safety net programs are difficult to qualify for quickly. Unfortunately, until businesses reopen, this will be the depth of the challenge experienced by far too many Michigan residents in low-pay, low-benefit, unstable jobs.

This shows that strong economic performance and low unemployment still leaves far too many of our neighbors in challenged economic conditions. Our strong economic growth — a record decade long — failed to reach 43% of Michigan households.

It’s an urban problem (Wayne County, 56%) and a rural problem (Lake County, 61%). Even prosperous Oakland County has an ALICE rate of 32%. The best performing Michigan county has an ALICE rate of 30%, our worst 61%. This problem crosses all ages, races and ethnicities.

Despite low unemployment rates, the United Ways calculate that the cost of necessities for a family of four with two adults and two preschoolers is $61,272, a cost that four in 10 Michigan households can not afford.

Let that sink in for a minute. Even in the most prosperous counties, around 1 in 3 households are struggling to meet basic family needs. This in a strong state and national economy with record low unemployment.  

Maybe most concerning is that the problem is getting worse over time. Since the turn of the century, no matter who was in control in Lansing and Washington, more and more Michigan households have struggled to make ends meet.

This is because that while our economy is creating jobs, too many of them are low wage jobs. Michigan's wages and employer paid benefits per capita is now 14% below the national average. As recently as in 2000, Michigan’s wages and employer paid benefits per capita was 1% above the national average.

Today, 60% of Michigan jobs pay less than $20 an hour. A full 40% pay less than $15 an hour. A $15 or $20 an hour job is fine for young people working their way through school, or for other types of work. There is a role for jobs that pay at this level. However, a majority of jobs in this state pay less than $40,000 a year for a 40-hour week; compared to the ALICE standard of $61,272.

This is a prime economic challenge of our times: having an economy that provides family-sustaining jobs –– not just any job –– so that all working Michigan households can raise a family and pass on a better opportunity to their children. To accomplish that, we need state and regional economic development, community development, housing and workforce development policies and programs that lead to

an economy that both grows and benefits all.

The business community realizes this is an important issue — and must be a part of creating solutions.  As the Business Roundtable recently stated, companies need to be focused on broader stakeholder value, not exclusively shareholder value.

We can –– and should –– debate how to achieve an economy that as it grows benefits all. What we should not do is ignore that our economy is leaving too many behind. The first step in solving this problem is to recognize that there is problem. The second step is to expand the metric of our economy’s success beyond the unemployment rate. It must also include a focus on a rising household income for all.

For Michigan to succeed, Michigan’s families need to succeed. Today, 43% of our families are not succeeding and if they are not succeeding, our state is not succeeding. 

Sandy Baruah is president and CEO of the Detroit Regional Chamber.

David Meador is vice chairman and chief administrative officer of DTE Energy.

Lou Glazer is president and co-founder of Michigan Future Inc.