To us the data are clear: Michigan has a two-tier economy. This two-tier economy is prevalent across all of Michigan and across all races and ethnicities. And it predates the pandemic, as evidenced by the Michigan Association of United Ways findings that in Michigan’s strong 2019 economy nearly four in ten Michigan households were unable to pay for basic necessities.

The core reason 38 percent of Michigan households cannot pay for basic necessities is that the economy is producing too many low-wage jobs. In the robust 2019 economy 59 percent of Michigan payroll jobs paid less than what it takes to be a three person middle class household ($47,000).

This is structural. Lots of businesses that employ lots of people have business models based on low-wage workers. We are not growing our way out of too many low-wage jobs. The reality is that no matter how strong the economy, there will be lots of low-wage jobs.

The pandemic also made clear that these “essential” workers live paycheck to paycheck not because they are irresponsibly buying “unnecessary” luxuries, but because they are in low-wage jobs that leave them struggling to pay for the necessities. The reality is that most of those struggling economically, in good times and bad, are hard-working Michiganders. Who like us get up every day and work hard to earn a living.

In this post I want to look at what the post-pandemic labor market says about the structural reality of lots of low-wage jobs. The current labor market is experiencing real labor shortages: more demand than supply. Particularly in low-wage jobs.

Economic theory tells us that this should drive up wages. The good news is that it has. The Federal Reserve Bank of Atlanta’s wage growth tracker reports that the 12 month growth in median wages in May 2022 was 5.0 percent for all workers and an even higher 6.7 percent for bottom quartile workers.

The question is with a 6.7 percent increase in wages can low-wage workers pay for basic necessities. A terrific new report by Brookings, entitled Profits and the pandemic: As shareholder wealth soared, workers were left behind, attempts to answer that question.

The report “examines the pay practices and financial outcomes at some of the nation’s best-known companies in sectors spanning retail, delivery, fast food, hotels, and entertainment. Together, the 22 companies employ more than 7 million frontline workers—more than half of whom are nonwhite.”

The 22 companies are: •Albertsons •Amazon •Best Buy •Chipotle •Costco •CVS •Disney •Dollar General • FedEx • Gap •Hilton •Home Depot •Kroger •Lowe’s •Macy’s •Marriott •McDonald’s •Starbucks •Target •UPS •Walgreens •Walmart

The report uses $37,000 as a living wage. A calculation of what it takes a family of two adults and two children to pay for rent, food, child care, health care, transportation, and taxes. (This is a substantially lower threshold than our calculation of $47,000 to be a Michigan middle class family of three.)

Even with that lower threshold Brookings concludes that post pandemic “overall, companies made little progress on meeting the standard of a living wage“. More specifically Brookings found:

Of the 22 companies we analyzed, there are just five companies—Amazon, Best Buy, Costco, Marriott, and UPS—that we can say with a high degree of confidence paid at least half of their workers a living wage as of October 2021, compared to four companies pre-pandemic. We believe Disney and FedEx may also meet that bar, but cannot confirm with the data available. It is very unlikely that any of the remaining 15 companies paid at least half of their workers a living wage.

Because wages are so low, we focus on whether companies pay at least half their workers a living wage. It is notable that despite the fact that more than half of companies increased their minimum wages during the pandemic, not one pays a minimum wage today that meets the living wage standard. In October 2021, $15 per hour is a full $2.70 per hour lower than a living wage. In fact, an hourly worker in October 2021 would need to earn more than $16 per hour just to have the same purchasing power as $15 per hour at the start of the pandemic. (The same worker would need to earn $16.50 in February 2022 to have the same purchasing power.) Only Costco has a minimum wage today ($17 per hour) that is close to a living wage for a full-time worker.

Because they started at a low base, some of the companies with the biggest wage increases still have very low pay today. This is especially true in the fast-food industry. For instance, McDonald’s has garnered positive media coverage for raising pay for employees at company-owned stores by 7% in real terms. In 2021, McDonald’s raised its minimum wage to $11 per hour and its average wage for nonsupervisory employees to $13. The company has pledged to raise average (not minimum) pay to $15 by 2024. At a $13 average hourly wage, a McDonald’s employee working 20 hours per week (most McDonald’s employees work part time) would take home less than $14,000 a year—an income so low it would put a household of two under the federal poverty line.

Both our analysis of the Michigan labor market and this Brookings report should make clear that left on its own the market will not solve the reality that too many jobs do not pay enough for many workers to earn enough to even pay for the basics. That policy change is necessary to have an economy that provides rising income for all. An economy that as it grows benefits all. Brookings gets it exactly right when they conclude:

The growing inequality of the past decades grew out of a power imbalance. As workers’ power declined, they had limited ability to demand fair treatment. Short of threatening to quit, they had to hope that executives would choose to share gains with them and mitigate their losses. But with executive compensation increasingly tied to company performance that is measured quarterly—not for the long term—the system’s incentives discourage investment in workers.

Building a more equitable system will require a more equitable balance of power. Rather than hoping companies will exercise their discretion to benefit workers, the U.S. needs laws, institutions, and policies requiring, pressuring, and incentivizing them to do so. Policy reforms are needed to enable labor to reclaim power. These reforms span labor law, regulation of working conditions (including wages), corporate disclosure, corporate governance, and more.

The post Post pandemic still too many low-wage jobs appeared first on Michigan Future Inc..

We are all told that we need to have savings of 3-6 months to deal with emergencies. One of the lessons we are learning from our pandemic-driven economy is that a lot of workers don’t earn enough to have savings.

Everyday, in every community in Michigan, we are confronted with the vast number of low-wage workers in the leisure, hospitality, retail and personal services industries who have lost their jobs and no longer can make ends meet. As well as those who get us food and prescription drugs and who care for us who are not only putting their lives on the line to serve us but also are struggling to pay for the necessities.

They live paycheck to paycheck not because they are irresponsibly buying “unnecessary” luxuries, but because they are in low-wage jobs that leaves them struggling to pay for the necessities. As we wrote in a previous post:

That reality should now make clear to all of us that a vast majority of those struggling economically and without any safety net to deal with emergencies are hard working Michiganders. Who like us get up every day and work hard to earn a living. That the prime reason for so many struggling is not irresponsible adults coddled by a too-generous public safety net, but rather an economy, even when it is booming, has too few jobs that pay family-sustaining wages and provides health coverage and paid leave.

The Federal Reserve Board of Governors recently released a new quarterly data series that estimates the assets, liabilities, and net worth of American households in total and distributed among four percentile groups. This wealth is not equally distributed.

In 2018 the average net worth of the richest 1 percent of households was $24,561,596; the average net worth of the next richest 9 percent of households (90 to 99th percentile) was $3,371,803; while the average net worth of the 50th to 90th percentile group was $559,601. The poorest 50 percent of American households, however, had an average net worth of only $18,647.

You read the right. Half of American households––in a boom economy––had virtually no, particularly liquid, savings. This, of course, is consistent with the Feds’ finding that 40 percent of households couldn’t pay an unexpected $400 bill.

The Michigan Association of United Way’s basic necessities budget does not include savings. For a single adult the basic necessity threshold is $21,036, for a family of two adults with one infant and one preschooler it is $61,272. As the pandemic is teaching us there just aren’t enough jobs that pay enough to earn beyond those thresholds to be able to save.

Savings, of course, provides far more than the ability to get through an emergency. Everything from buying a house, to paying for education for ourselves and our kids and having a decent retirement depend on savings.

If we are serious about an economy that benefits all, being able to pay the bills during emergencies needs to be included. That means higher wages and better benefits for low-wage workers and/or an expanded safety net.

To their credit––on a bi-partisan basis––in both Lansing and Washington policy have temporarily expanded unemployment insurance and paid leave. Let’s hope that this pandemic-driven economy has taught policymakers that this is not a temporary problem, it is structural. That the need for higher wages and better benefits for low-wage workers and/or an expanded safety net is vital no matter how strong the economy.

The post Pandemic lessons: savings are vital appeared first on Michigan Future Inc..

The call to action we co-authored with economic and community development leaders from across the state was released just prior to the pandemic slamming Michigan. It calls on our state, regional and community leaders to make rising household income for all a preeminent priority of state and local economic policies and programs.

To make the case for a rising income for all as a state economic priority the call for action cites data that, despite a strong economy and historically low unemployment rate, around four in ten Michigan households were struggling economically.

To us the data make clear that the preeminent reason so many Michigan households struggle to pay for basic necessities is that the economy is producing too many low-wage jobs. This is structural. We are not growing our way out of too many low-wage jobs. Lots of businesses that employ lots of people have business models based on low-wage workers.

Michigan’s wages and employer paid benefits per capita are 14 percent below the national average. As recently as 2000, Michigan’s wages and employer paid benefits per capita were one percent above the national average.

Sixty percent of Michigan jobs pay less than $20 an hour. A full 40 percent pay less than $15 an hour. A $15 or $20 an hour job may well be fine for young persons working their way through school. However, a majority of Michigan jobs are in occupations with a median wage of less than $40,000 a year for a 40-hour week.

To put $40,000 in context, the Michigan Association of United Ways calculates the cost of paying for basic necessities in Michigan is $61,272 for a family of two adults with one infant and one preschooler.

Then the pandemic and social distancing came to Michigan. You no longer need data to make the case that structurally the Michigan economy has too many of us working in low-wage jobs. Many without health coverage and almost none with paid leave. And because these low-wage workers are struggling to just pay the bills for necessities, most have little or no savings.

Everyday, in every community in Michigan, we are confronted with the reality of the multitude of low-wage workers who have lost their jobs and cannot pay for the basics. And we are all more aware now than ever about how much we depend on low-wage workers to get our food and prescription drugs and other daily necessities. Not to mention all the low-wage workers who are so vital in health care, child care and other caring enterprises.

That reality should now make clear to all of us that a vast majority of those struggling economically and without any safety net to deal with emergencies are hard working Michiganders. Who like us get up every day and work hard to earn a living. That the prime reason for so many struggling is not irresponsible adults coddled by a too-generous public safety net, but rather an economy, even when it is booming, has too few jobs that pay family-sustaining wages and provides health coverage and paid leave.

To their credit policymakers––on a bi-partisan basis––in both Washington and Lansing have responded to our collapsing economy by temporarily expanding unemployment and paid-leave benefits and are providing households with cash and expanded food assistance to help households pay their bills.

All of a sudden off the table are calls to continue to shrink the safety net; impose work requirements to access public benefits; and unemployment benefits that do not cover part-time and gig-economy workers.

We need that bi-partisan consensus to continue once the pandemic has passed. This is the 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.

We can––and should––debate how to achieve an economy that benefits all. And who should pay for the needed policies and programs. What we should not and cannot ignore is that our economy structurally is leaving too many behind.

The first step in solving this problem is to recognize that there is a structural problem that will not be fixed when the economy starts to grow again. 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.

In order for Michigan to succeed, Michigan’s families need to succeed. As is now crystal clear, far too many of our families have not been succeeding for far too many years. If they are not succeeding, our state is not succeeding.

The post Economic lessons from the pandemic appeared first on Michigan Future Inc..

Michigan’s core economic challenge is there are too many low-wage jobs. It is the primary reason for the Michigan Association of United Ways finding that a way too high 43 percent of Michigan households in a strong economy cannot pay for basic necessities.

The reality of too many low-pay jobs is true across the state––nationally too. It gets worse the smaller the region. Nationally 51 percent of jobs are in occupations that pay less than the national median of $38,640. In Michigan it is 58 percent.

To put the national median in context, The Michigan Association of United Ways calculates the cost of paying for basic necessities in Michigan is $61,272 for a family of four (two adults with one infant and one preschooler).

Only two Michigan regions have the portion of jobs in occupations that pay less than the national median below the nation’s. Ann Arbor (46 percent) and Detroit (47 percent). Lansing (52 percent) is the only other region below 60 percent of jobs that are in occupations that pay less than the national median.

The remaining Michigan regions range from 62 percent (Grand Rapids) to 79 percent (Northeast Lower Peninsula). The details:

• between 60 and 65 percent: Grand Rapids, Kalamazoo, Midland, Saginaw
• between 65 and 70 percent: Flint, South Bend (which includes Cass County), Jackson, Battle Creek, Northwest Lower Peninsula, Upper Peninsula, Muskegon
• between 70 and 75 percent: Monroe, nonmetropolitan counties in southern Michigan, Niles-Benton Harbor
• between 75 and 80 percent: Bay City, Northeast Lower Peninsula

Egads! The predominance of jobs that pay below the nation median is way too high everywhere in Michigan. But is astonishingly high in the state’s small- and mid-sized regions and even more so in rural areas. And Michigan’s second biggest metro, Grand Rapids, has a very high rate of jobs in occupations that pay less than the national median for a metro with a population of one million or more.

The concentration of low-wage jobs in smaller regions is consistent with the nation. A recent New York Times article by Eduardo Porter entitled Why Midsize Cities Struggle to Catch Up to Superstar Cities lays out the reasons this is occurring. Mainly that high-paid jobs are now concentrated in what we call knowledge-based services (heath care, education, professional and business services, information, and finance and insurance) and knowledge-based services are concentrating in regions with high proportions of adults with a four-year degree or more.

This is the same story as what is happening in Texas that we explored in a recent post. Where nearly all the job growth, particularly the good-paying job growth, is concentrating in the state’s four big regions.

For those of you wanting to learn more about the geographic distribution of better-paid work check out this presentation by MIT economist David Autor. Autor details the decline of middle-skill jobs; the rise of high-skill jobs and their concentration in big metros; and that low-skill jobs, no matter where they are located, are low-wage jobs. Which explains why the low-paid jobs proportions are so high in big metros as well as small population regions.

These realities––way too many low-wage jobs and the difficulty of small population regions to retain and attract high-wage employers––are structural challenges that are not going to fixed by a growing economy. That is why Michigan Future, in our state economic policy agenda, has made our first and foremost recommendation adopting rising household income for all Michiganders as the state’s economic mission. We write:

We are committed to the goal of recreating a high prosperity Michigan. We believe the goal of state economic policy should be raising household income for all Michiganders. High prosperity is different from the most often-used measure for economic success, low unemployment. It is being a place with a broad middle class where wages and benefits allows one to pay the bills, save for retirement and the kids’ education and pass on a better opportunity to the next generation.

… We agree with President Reagan when he said a job is the best social program. To us a good-paying job is the best social program.

The post Low-wage job concentrations by Michigan region appeared first on Michigan Future Inc..

The Michigan Association of United Ways reports that in 2017 43 percent of Michigan households were unable to pay for necessities. Up six 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 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.

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.

To be an ALICE (Asset Limited, Income Constrained, Employed) household in Michigan income needs to be below $61,272 for a family of four (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 she also is prevalent by age, race and ethnicity.

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 household 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. One that starts with making raising household income for all the state’s economic mission. Income––not employment or growth––needs to become the focus of economic policy making.

Increasing education 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 lays out it’s education agenda in our Improving student outcomes from education, 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 economy. So you also need a shared prosperity agenda. We lay 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 income of those not participating in the high wage 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 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.

The post More Michigan households unable to pay for necessities appeared first on Michigan Future Inc..

Terrific assessment of Michigan 2019 by Chad Livengood for Crain’s Detroit Business. (I did a podcast with Chad that accompanies the article.) He writes:

There are potholes in Michigan — and not just in the roads. Potholes in household income. Potholes in the percentage of working adults. Potholes in student achievement and funding for K-12 schools. And potholes in postsecondary educational credentials needed to fill in-demand jobs.

After nine years of economic growth that replaced seven-in-10 of the jobs lost in the Great Recession, there are signs of long-term trouble as
Democratic Gov. Gretchen Whitmer prepares to deliver her first
assessment of Michigan’s standing in a State of the State address Tuesday
to the Republican-controlled Legislature.

Exactly! Michigan 2019 has a low unemployment rate, a growing economy and strong domestic auto industry, but that doesn’t mean its time for celebration or complacency. What matters most is that a lot of Michigan households are struggling. That is the preeminent crisis the state faces. If Michigan’s economy were successful none of the following cited by Livengood should be true in a strong state economy:

• Michigan’s employment-to-population ratio ranks 38th in the country at 57.8 percent
• Per capita wages and employer paid benefits was $29,348, ranking Michigan 33rd in the country
• Michigan ranks 33rd in median household income and 31st in the percentage of adults over age 25 with a bachelor’s degree
• The Michigan Association of United Ways’ most recent study of the state’s workforce showed 62 percent of workers were earning less than $20 per hour in 2015.
• Student achievement is stagnant: 40th and 42nd. Those are the reading and math score rankings for Michigan’s fourth graders in 2017 compared to other states in the annual National Assessment of Educational Progress (NAEP) rankings.
• Michigan’s overall postsecondary education attainment rate of 43.7 percent of adults over age 25 ranks 36th nationally.
• The “damn” roads are getting worse: 79 percent. That’s the percentage of state trunkline roads — freeways, state highways and main thoroughfares like Gratiot, Woodward, Grand River and Michigan avenues — that the Michigan Department of Transportation rates as being in good or fair condition.

For too long Michigan policymakers have assumed if corporate Michigan was doing well so would Michigan households. Think again! The data Livengood cites make clear that that assumption was wrong. Michigan needs to change course starting with a making a rising household income the mission of state economic policy.

Michigan Future in its A Path to Good-Paying Careers for All Michiganders recommends, first and foremost, that mission change and then lays out the actions needed to achieve it. The levers we identify matter most are: are improving education outcomes from birth through college; creating places where people want to live and work; and sharing prosperity. Each requires new public investments and a way to pay for them. If we want Michigan 2020 and beyond to be a Michigan with far fewer households struggling these are the changes we need to make in Michigan 2019.

The post Michigan 2019: the state of the state appeared first on Michigan Future Inc..

I wanted to look at the new BLS occupational data and apply it to Michigan specifically to make a few more guesses about how our state’s job opportunities will change over the next decade. (Because this is a blog post and not a term paper, I’ve made a few methodologically questionable choices in my analysis, but I’m just trying to get a general picture, so I hope the data nerds out there will please forgive me.)

The ALICE report for 2015 data listed the top 20 most common occupations in Michigan. I used this list as my way into this data. I pulled the expected national growth rates from the BLS data for each of these occupations and applied them to the number of jobs in 2015 in Michigan (essentially pretending that 2015 and 2016 numbers are the same). Then I organized the spreadsheet in different ways—by the usual education requirement, by median income, and by the growth rate. What I found is stark confirmation that we need to stop planning Michigan’s future as though it’s going to look like our past. Here are a few of the things that jumped out at me.

Four of Michigan’s top occupations have negative growth. Three of these occupations are actually listed on the BLS list of “fastest declining occupations.” These are all occupations that don’t require more than a high school degree. In 2015, we had 104,210 team assemblers. In 2026, if you apply the national growth rate, we will only have 91,080.

Only four of Michigan’s top occupations pay a median wage that is close to or above the ALICE “household supporting wage.” I really like this figure because we should be aiming for prosperity—not just for families to live slightly above poverty. Surprise, surprise: all four of these occupations require a bachelor’s degree. Also, all four of these occupations are growing at or above the national occupational growth rate issued by BLS (7.4 percent over the decade).

When I added up the job growth—just out of the top 20 occupations in Michigan—in each educational category, I found that jobs requiring a college degree will grow by 11.0 percent, jobs requiring a high school degree or less will grow by 9.0 percent, and jobs “in-between” will grow by only 4.4 percent. Again, this is only looking at those top 20 occupations—but it mirrors the national figures. The job growth for these occupations, overall, is concentrated in high-skill, high-wage and low-skill, low-wage occupations. Not in the middle-skill and middle-income. (Though let’s be honest: the middle-skill jobs in Michigan aren’t paying a household supporting wage, and one can imagine they will pay even less, relatively, if there are more applicants vying for them.)

This data paints the picture that our policy agenda is trying to respond to. We need to make college education a possibility for far more of our kids; we need to support the vast numbers of people who are going to be working low-wage jobs so that they aren’t living in poverty; and we need to support the creation of communities that can attract talented workers to drive the economy.

If we want Michigan households to grow in prosperity, there are so many things we need to do differently. And we need to start by realizing that the future won’t look like the past—or even the present.

The post Occupations in Michigan: The Future Won’t Look Like the Past appeared first on Michigan Future Inc..

Also understanding that good-paying work today and, even more so, tomorrow looks much different than good-paying work in the past. Trying to turn the clock back to recreate the economy of the past has not worked. Both parties in Michigan have been promising they can do that for decades without success.

Trying to turn the clock back won’t succeed in the future either. The changes in the nature of work are driven by powerful forces––primarily smarter and smarter machines increasingly able to do more and more of the work that humans have traditionally done. But also globalization, changing consumer preferences, and changes in how employers contract for work. This requires state policies that are aligned with––rather than resisting––the new realities of work.

There are five big ongoing changes in the nature of work:

1. Jobs are increasingly service-providing not goods-producing. Goods-producing is primarily work in farming, mining, manufacturing and construction. Now about 20 percent of American employment and continuously declining as a share of national employment. The likely transformation of the auto industry from primarily selling cars to providing mobility will change Michigan’s most important industry from mainly goods-producing to mainly service-providing.
2. Good-paying work is increasingly going to professionals and managers who work in offices, schools and hospitals. It includes the pre- and post-production work of the auto industry and other manufacturing enterprises (engineering, design, logistics, marketing, management, etc.) Yes there are good-paying jobs that do not require a four-year degree. And certainly there are good-paying jobs not done in offices, schools and hospitals. But good-paying work with good benefits is increasingly going to those with a four-year degrees or more and is increasingly concentrated in knowledge-based services.
3. Smarter and smarter machines are accelerating the creative destruction of jobs, occupations and even industries. But which jobs, occupations and industries will be most affected and when is unpredictable. So your job and occupation today are less secure than yesterday and will be even less secure tomorrow than today.
4. Because of smarter and smarter machines, work is increasingly right brain––the skills that are the hardest to automate. Daniel Pink in his book A Whole New Mind posits that new good-paying jobs increasingly will go to people who are creators, empathizers, pattern recognizers and meaning makers.
5. Work is increasingly contingent: more and more jobs will go from stable and life-long––predominantly full time with benefits from an employer––to unstable, occasional, part-time, flex jobs––with far more of us working for ourself where we are responsible for our employment, salary and benefits.

We want to be clear that this description of the changes in the demand for goods-producing and service-providing occupations is not a value judgment on our part. If we had been writing this report at the turn from the 19th to the 20th Century we would have written that the demand for farmers was declining and the demand for factory workers increasing. Then and now we think that farming is an honorable profession. But the trends were clear then that we were going to need far fewer farmers and far more factory workers.

The same is true today. Working in factories and other goods-producing industries is honorable work. And we value those who do those jobs. We need a far better system for helping prepare people who want to work in those occupations and industries. But the reality is that the economy is demanding a smaller and smaller proportion of workers in those occupations and industries.

Another reality is that there is a lot of work that is not good paying. Maybe as much as half the jobs in the Michigan economy today don’t pay enough in wages and benefits to pay for family necessities as defined by the Michigan Association of United Ways. There is no evidence that the proportion of low-paid work, most without benefits, is going to decline going forward.

We are living in a world where the gales of creative destruction blow stronger and faster. In an economy increasingly characterized by rapid and discontinuous change, successful individuals, enterprises, and communities will need to be agile: able to let go of what is no longer working and embrace—or better yet, create—the next wave.

This, of course, is the role Michigan played at the beginning of the Industrial Age. Because we embraced the new—and left behind the old—quicker than anyone else, we became one of the leading-edge communities in the world for most of the Twentieth Century.

We were both the place where entrepreneurs led by Henry Ford invented the next economy and also the place where many people migrated across the landscape and went to a city and/or took a totally different kind of job in the rising factory-based mass middle class. By and large Michiganders who took the risk of leaving the declining farm economy for the rising factory economy did the best.

Once again, success is tied to letting go of the old and embracing the new. Michigan needs to get on a new path if we are to succeed in the knowledge-driven and entrepreneurial economy of the future.

We are not naive. We know that, just as in the Industrial Age, not all of us will be economic winners. We understand that for many Michiganders the transition to a new economy means a reduction in their standard of living. Some will lose their job. Others, who keep their job, will see their wages reduced. Some who lose their job will have a hard time finding a new job, and many will only find new jobs that pay less. A lot of us will have our employer provided health care reduced or eliminated. Most of us will have less job security.

But the mega forces that are transforming the economy trump policy and politics. Rather than pursue a policy agenda that tries to make the old economy work for us again––which has not succeeded the past fifteen years and cannot succeed in the future––in our new report, A Path to Good-paying Careers for all Michiganders, we recommend a state policy agenda designed to help all Michiganders succeed in the economy of today and tomorrow.

The post Transformed work requires transformed policy appeared first on Michigan Future Inc..

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. Michigan’s substantial economic challenges are clearly structural.

In good times and bad far too many Michigan households are experiencing declining or stagnant incomes. Over the last decade and a half––no matter who was in control in Lansing and Washington––Michigan has moved from being a high-prosperity to a low-prosperity state.

Change in real median Household Income by county, 1999-2014

As the map from the Harvard Business School depicts every county in Michigan has suffered a major decline in median household income over the past fifteen years. In terms of per capita income––the best measure of economic well being––Michigan has gone from two percent below the national average in 2000––the last time the domestic auto industry was booming––to eleven percent below in 2015.

Most concerning, the Michigan Association of United Ways found that 40 percent of Michigan households do not have sufficient income to pay for the necessities: primarily housing, childcare, food, health care and transportation. Their report makes clear that 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

More broadly our challenges in Michigan are similar to those Robert Putnam documented in his book, Our Kids: that the top quarter of American households are doing well and the other three quarters are struggling to keep up, many falling farther and farther behind. On measure after measure of economic and social well-being of households and their children Putnam presents charts that look like open scissors with those in the top quartile advancing and those in the bottom three quarters declining.

Once again 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.

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But the income level by which someone is declared either in or out of poverty is a fairly arbitrary number, based on a “basket of goods” that doesn’t align with current consumption patterns and wasn’t all that generous in the first place.

A far better measure of how well Michiganders are doing can be found in the Michigan Association of United Ways’ ALICE report, which came out last week. ALICE stands for Asset Limited, Income Constrained, Employed. It looks at the percentage of Michigan families – including those led by a working adult – who can’t afford their most basic needs. They calculate their income threshold by looking at the actual costs of housing, child care, food, health care, and transportation, across the state and for different types of families. Their threshold for a family of four is roughly $56,000, more than double the poverty threshold.

While 15% of Michigan households were in poverty in 2015, a full 40% of Michigan households struggled to pay for basic household necessities. This is the number we should be paying attention to.

A big reason why such a high proportion of Michiganders are struggling is because they work in low-wage jobs. The ALICE report finds that 62% of all jobs in the state pay less than $20 an hour, with roughly 40% paying less than $15 an hour.

We at Michigan Future believe that increasing higher education attainment in Michigan is critical both for producing and attaining higher wage work. More education means higher wages for individuals, and high wage knowledge-economy businesses increasingly move to areas with high concentrations of talent.

But by and large, it’s also true that many of these lower-wage jobs are here to stay.

A shifting picture of the working class

In an article in the New York Times Magazine, Binyamin Appelbaum wrote about the changing nature of what we think of as the “working class,” largely shifting from blue-collar workers to a broad service-sector. As I wrote about in an earlier post, fewer and fewer people in America today work in farms and factories. In 1967, 35% of the workforce was in agriculture and manufacturing, today just 15%.

As Appelbaum explains, this is largely a result of automation. Farms and factories became more efficient, and now produce more goods with less people than ever before. This also means those goods can be produced – and purchased – far more cheaply than they used to be. This has led Americans to increase the share of their money they spend on services over goods, and led to a far larger share of Americans employed in both high and low-skill service work.

And amidst widespread fear that robots will take all our jobs, many service-sector jobs appear safe from automation. Services that require face-to-face interaction, empathy, customization, are pretty tough to automate. These are jobs that author Dan Pink calls “high-touch.”

High-touch, low-wage work – specifically jobs like home health aides and nursing assistants in the health care sector – is plentiful and only expected to grow. There are almost 50,000 nursing assistants and almost 70,000 personal care and home health aides in Michigan, and these occupations are expected to grow between roughly 20 and 40 percent by 2024. They all earn under $30,000 at the median.

And it’s not just in health care. Customer service representatives, janitors, landscapers also perform tasks that have proven hard to automate, are plentiful, and are low-wage.

While many imagine low-wage work as a temporary condition, Appelbaum writes “The reality is that these are the kinds of jobs millions of Americans hold for their entire working lives.” And relying on market forces alone, there’s nothing that will turn these low-wage jobs into living-wage work: they’re not “high-skill” and labor supply is plentiful. The economy is simply set up such that, absent government intervention, a large proportion of the labor force won’t be able to provide basic necessities for their families.

The question, as always, is what to do? Raising Michigan’s state EITC, and expanding it to cover a greater range of incomes, is one approach to help make work pay. Increasing the state minimum wage would raise wages not just for those at the minimum, but likely throughout the low-wage workforce. And public investments that make it easier to afford necessities like housing, transportation, and child care – for all families – are also important.

The bottom line is that no matter how much the economy on the whole improves, there will be plenty of low-wage work available, and hundreds of thousands of Michigan families will depend on that work to support their families. Under the right policies, we can ensure that they can have an easier time doing that.

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