Since the turn of the century, our state has experienced a precipitous decline in economic prosperity relative to the rest of the country. In 1999, Michigan ranked 16th in per-capita income. In 2024, we ranked 39th. What we have been doing over the past 25 years isn’t working. We need a new approach.

Yet every year the same topics seem to dominate the agenda in Lansing, many of which have no hope of restoring Michigan to high prosperity.

The latest example is roads.

Road funding is a central topic of discussion in Lansing today. Fixing the damn roads appears to be a priority for both parties. But fixing the damn roads is not at all related to revitalizing the state’s economy.

In today’s economy, the only thing that is predictive of economic growth is the share of adults – and young adults in particular – that have a bachelor’s degree or more. As we often say, if Michigan does not get younger and better educated, we will get poorer.

But when it comes to getting younger and better educated, fixing the damn roads is not the answer.

In a 2023 report, the Citizens Research Council includes a top and bottom ten list of state road conditions compiled by the U.S. Government Accountability Office. The top ten states in order are Nevada, North Dakota, Florida, Georgia, Idaho, South Dakota, Missouri, Indiana, North Carolina, and Utah.

Does Michigan have awful road conditions? Yes, it is ranked the fourth worst. Is fixing the damn roads worth doing? Of course. Does fixing the damn roads have anything to do with reversing Michigan’s decades long brain drain? The evidence says absolutely not.

A 2022 report from the National Bureau of Economic Research (“Grads on the Go”) calculated the number of recent graduates from every state’s two-year and four-year colleges and universities and compared that figure to the number of recent college graduates living in the state. This allowed them to determine which states were net gainers and which states were net losers of college graduates. Here is how the top ten road conditions states perform:

• Nevada -9.4%
• North Dakota -31.6%
• Florida -11.3%
• Georgia +14.5%
• Idaho -30.0%
• South Dakota -17.9%
• Missouri -2.2%
• Indiana -30.4%
• North Carolina -5.5%
• Utah -19.6%

So only one state––Georgia––on the top ten road conditions list is a brain gain state. All the others have fewer recent college graduates living in their state than they have recent graduates from the state’s community colleges and universities.

Michigan is also a net loser of college graduates –– an unacceptable -13.7% percent. Is this because of our poor roads? No. Three other states at the bottom of the road conditions ranking — Washington, Illinois, and New York — are brain gain states. It turns out that despite their poor road conditions, young college graduates still find these states desirable places to be.

The Citizens Research Council report includes another ranking of state roads from the Reason Foundation, which publishes an annual report on the quality of highways across states. The same pattern holds true with these rankings. Georgia is the only brain gain top ten state, while four bottom ten states are brain gain states: Colorado, Washington, California and New York. (Michigan ranks 23rd.)

What does matter in attracting young talent?

So if road conditions have nothing to do with retaining and attracting young professionals, what does? An article on the “Grads on the Go” study from the Washington Post concludes the “winners are primarily states with cities (that are) large, dynamic, and regionally vital…That would include New York, Washington, California, Illinois, Georgia, Texas, Minnesota, and Massachusetts.” (Colorado is the ninth brain gain state, home to the talent-magnet city of Denver).

Exactly! All of the evidence we have seen is what matters most to attracting and retaining young professionals, by far, is transit rich, vibrant central cities. There were 18.3 million 25-34 year olds with a BA or more in the US in 2023. 4.6 million of them live in the central city of the 58 metros with working age populations of 500,000 or more. Of the nine brain gain states in the U.S., all have transit rich, vibrant central cities.

If you care about getting younger and better educated, the top ten list you want to be on is the cities with the most 25-34 year olds with a B.A. or more. That list is: New York, Los Angeles, Chicago, Houston, Austin, San Diego, Philadelphia, Seattle, San Fransisco, and Boston.

Of the 58 regions with working age populations of 500,000 or more Detroit ranks 47th, Grand Rapids 50th. Detroit has 25,000 young professional residents, Grand Rapids 22,000. New York is by far the nation’s leader with 796,000. Chicago is the Great Lakes leader with 323,000.

So state leaders may be right to focus on transportation infrastructure – it’s just that they’re focusing on the wrong kind. The transportation infrastructure that does matter to concentrating young talent is transit. Add to that walkable neighborhoods that give priority to pedestrians, not cars. So infrastructure/the built environment does matter. But it is infrastructure designed for Generation Z.

Fixing the damn roads is just one of many good to do policy ideas that have little or nothing to do with retaining and attracting young talent. If we fix the roads but don’t have vibrant cities, we will not attract young talent at any scale.

Getting younger and better educated requires strengthening and creating more transit rich and vibrant neighborhoods in our central cities and small towns that can attract and retain young talent. These neighborhoods vary in many ways, but all share common characteristics: they are dense, walkable, high-amenity neighborhoods, with parks, outdoor recreation, retail, and public arts woven into residents’ daily lives. And they offer plentiful alternatives to driving.

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Blue collar manufacturing jobs––officially called production jobs––are no longer high paid. In 2024 Michigan had 445,000 production jobs out of 4.39 million payroll jobs. A little more than 10 percent of all Michigan payroll jobs. The median wage for a full time, year round Michigan production job was $45,470 compared to $48,300 for all Michigan workers. The average wage for a full time, year round Michigan production job was $49,730 compared to $63,120 for all Michigan workers. 

Given that Michigan’s core economic challenge is that we don’t have enough high paid jobs, the average wage deficit of more than 20 percent is more impactful/important than the median wage deficit of about 6 percent. Both belie the notion that production jobs are good paying jobs that policymakers in both parties routinely claim.

Turns out the Michigan production workers now earn less than production workers nationally. Something that was unimaginable in the past. The national median for production workers is $45,960. The national average is $50,900.  Production workers are a little less than 6 percent of all national workers. 

At the bottom of this post is a table with 2024 data for the nation, Michigan and the top ten per capita income states. (The Colorado data is from 2023 because the 2024 data is not available.) The table has average wages for production jobs and for all jobs. And the production jobs location quotient (LQ). LQ measures how concentrated in an occupation a state is compared to the nation. If you have the same portion of production jobs as the nation your LQ is 1. Under 1 means you are less concentrated. 

As you can see lots of high wage production jobs have nothing to do with a state being prosperous. The nation’s most prosperous states are under concentrated in production jobs and in each state their average wage of production jobs is lower than the average wage of all jobs, in most of the states substantially below. 

Although Michigan has succeeded in being over concentrated in blue collar manufacturing jobs, production jobs are no longer a big share of Michigan jobs. And more importantly are not a major source of high paid jobs. And the same is true for all prosperous states. Blue collar manufacturing jobs were what made Michigan one of the nation’s most prosperous states in the 20th Century. In the 21st Century lots of production jobs are no longer a path to prosperity.

Michigan is having a hard time learning that lesson. Retaining and attracting production jobs is the core of Michigan’s economic development strategy for both parties. At a cost of literally billions of dollars. The state has been pursuing a retain and attract manufacturing plants first economic development strategy for decades and over that time we have fallen from the 16th most prosperous state in the nation to the 12th poorest state. Sure seems like it is far past time for a new economic development strategy.

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The Working Parents Tax Credit (WPTC) is designed to substantially benefit both parents and employers. It is life-changing for parents and benefits employers by providing a strong incentive to work and work more.

The WPTC would provide Earned Income Tax Credit recipient households with earnings of at least $10,000 from work a fully refundable tax credit of $5,000 per child under the age of three and $2,500 per child over the age of three and under the age of six. No household can receive a tax credit for more than three children.

Six-in-ten Michigan jobs pay less than what is required for a family of three to be middle class. The pandemic made clear that these lower-wage workers live paycheck to paycheck not because they are irresponsibly buying unnecessary luxuries, but because they are in lower-wage jobs that leave them struggling to pay for 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. What these lower-wage workers need most is income, not programs.

Expanded state tax credits for recipients of the federal EITC should be the cornerstone of a transformation in how the state supports working families. We should move away from a program-based support system to an income-based safety net that benefits far more working families than any program can, and provides working families with increased income to pay the bills and save for emergencies, retirement, and the kids’ education.

The WPTC is a fair, efficient, and simple tax policy that would help Michigan parents raising young children to help themselves in providing for their families.

More specifically the WPTC is good for parents because it:

• Combats the benefit cliff
• Helps to defray the high cost of childcare
• Provides parents with a flexible cash resource they can put towards their most pressing priority
• Can reach far more households than any program can
• Is easy to apply for and quality for

Combatting the benefit cliff

The per child credit is an essential feature of the proposal. For most government benefits, including the federal EITC, benefits decline as one earns more income, contributing to the so-called benefit cliff. Our detailed analysis found that households with children realized very little income gain as declining benefits and increasing taxes steeply offset increased earnings. This is particularly true for households with income between $20,000 and $40,000. Where households net as little as 14 cents from each additional dollar earned.

The best antidote for this high tax rate cliff is a flat per child credit that does not decline as you earn more money. The Working Parent Tax Credit is designed so that recipients will be able to keep a substantial proportion of increases in work earnings.

Paying for childcare

This proposal is targeted at households with young children for a reason. The Michigan Association of United Ways estimates the cost of paying for basic necessities for a two-adult household with no children is $41,106; for a household of two adults and two school age children it is $64,752; and for a household of two adults with two preschool children it is $73,488.

The cost of childcare is the main driver of the increased cost of raising preschool children. The WPTC allows parents to decide what is the best way to provide childcare. It is not limited to sending a child to a formal childcare center or program.

Trusting parents to decide family priorities

The WPTC is flexible. The credit can be used to pay for any and all necessities. It is a based on a belief that parents are the best deciders of what matters most to their family’s wellbeing. For some families it might be childcare, for others it could be housing, food, or transportation.

Assisting far more households than any program can

There is no program/supply side solution the state can afford that can deal with the childcare challenge at scale. The current state childcare subsidy program serves around 30,000 children. The governor’s Tri-Share program – which asks employers, parents, and the state to share the cost of care – serves fewer than 1,000 children. The WPTC will serve around 250,000 children.

Easy to apply for and quality for

The reality is that far too many working households are shut out of benefits they are eligible for by a confusing and limited scale system of safety net programs. All eligible parents need to do to receive the WPTC is file their taxes. If you receive the EITC, have $10,000 in household work earnings, and have children under the age of six, you will receive the full working parents tax credit.

The Working Parents Tax Credit is a win for Michigan families raising young children, employers, and the overall state economy. It meets the criteria of good tax policy. It is fair (targeting relief to those most in need), efficient (tied directly as an incentive to work), and simple (no new bureaucracy). Now is the time to enact a Working Parents Tax Credit.

The post The Working Parents Tax Credit is good for parents appeared first on Michigan Future Inc..

The Working Parents Tax Credit (WPTC) is designed to substantially benefit both parents and employers. It is life-changing for parents and provides at scale, strong incentives to work and work more at a time when employers are having difficulty finding reliable workers.

The Working Parents Tax Credit (WPTC) would provide Earned Income Tax Credit recipient households with earnings of at least $10,000 from work a fully refundable tax credit of $5,000 per child under the age of three and a fully refundable tax credit of $2,500 per child over the age of three and under the age of six. No household can receive a tax credit for more than three children. It is estimated that the WPTC would benefit Michigan households raising 250,000 children under the age of six.

The WPTC benefits employers, by providing an at scale solution to three substantial impediments to working and working more: the difficulty low-wage workers face in paying for childcare, which the U.S. Chamber of Commerce Foundation estimates costs the Michigan economy nearly three billion dollars annually; the benefit cliff; and the reality that far too many working households are shut out of benefits they are eligible for by a confusing and limited scale system of safety net programs.

The Working Parents Tax Credit is only for people who are working – it’s helping people get back in the game, providing an incentive to go to work. That’s why employers like it.

The WPTC is pro work, both an incentive to work and a reward for work. The credit is designed to encourage individuals to enter the labor market. The credit is available only to households with at least $10,000 in work earnings.

Only EITC recipients are eligible for the WPTC. The EITC has a proven track record of pulling people into the workforce. In a comprehensive 2020 study on the employment effects of the EITC Diane Whitmore Schanzenbach and Michael R. Strain found:

The Earned Income Tax Credit (EITC) is the cornerstone anti-poverty policy in the United States. Designed to fight poverty by encouraging and rewarding work, decades of research on the EITC has found that the program meets its goals by increasing employment among targeted women, and by successfully raising their annual incomes, lifting millions of families out of poverty.

The cost and availability of childcare and the real and perceived loss of benefits as one works more are two big impediments to lower-wage workers working. The WPTC is designed to deal with both at scale.

The per child credit is an essential feature of WPTC. Our detailed analysis of the benefit cliff found that households with children realized very little net income gain from increased work earnings, as declining benefits and increasing taxes steeply offset the increase in earnings. This is particularly true for households with income between $20,000 and $40,000, who net as little as 14 cents from each additional dollar earned.

The best antidote for this high tax rate cliff is a flat per child credit that does not decline as you earn more money. The Working Parent Tax Credit is designed so that recipients will be able to keep a substantial proportion of increases in work earnings.

Focusing on households raising young children is also an essential component of the WPTC. The Michigan Association of United Ways estimates the cost of paying for basic necessities for a two-adult household with
no children is $41,106; for a household of two adults and two school age children it is $64,752; and for a
household of two adults with two preschool children it is $73,488.

The cost of childcare is the main driver of the increased cost of raising preschool children. For households raising young children, the Working Parents Tax Credit provides a life-changing boost in income which can help families defray the cost of childcare. And because the credit goes to parents, it allows them to determine the childcare arrangement that works best for them and their children.

The WPTC is also flexible, so that it allows parents to pay for other necessities that is keeping them from work

There is no program/supply side solution the state can afford that can deal with the childcare challenge at scale. The current state child care subsidy program severs around 30,000 children. Tri-share fewer than 1,000. The WPTC will serve around 250,00 children.

The WPTC also benefits local businesses. The WPTC will primarily be spent buying goods and services from local businesses. Research indicates that families mostly use the EITC to pay for necessities, repair homes, maintain vehicles that are needed to commute to work, and in some cases, obtain additional education or training to boost their employability and earning power. Because the WPTC provides a flexible cash resource to families, that they can spend on whatever need is most pressing for their household, these dollars will be spent in much the same way. The credit will pump up to $935 million into local economies statewide.

The Working Parents Tax Credit is a win for Michigan employers, families raising young children, and the overall state economy. It meets all the criteria of good tax policy. It is fair (targeting relief to those most in need), efficient (tied directly as an incentive to work), and simple (no new bureaucracy).

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If Michigan had the same share of middle-class jobs as Massachusetts, it would be the equivalent of adding nearly 800,000 middle-class jobs to the state economy. Michigan––a state that once attracted people from across the planet to get high-wage jobs––is now a state where seven in ten Michigan jobs pay less than middle-class wages ($65,000 and above). In Massachusetts five in ten jobs pay middle-class wages.

What accounts for this 800,000 high-wage jobs gap? Overwhelmingly it is a much higher B.A. attainment rate. High prosperity states and regions, first and foremost, are places with a high proportion of adults with a bachelor’s degree or more.

Massachusetts is the nation’s most prosperous state primarily because it has great schools and a talent magnet city. The best K-12 system in the country, great four-year universities, plus a city where recent college grads want to stay and come from elsewhere to live after college.

Schools and cities are the foundation of prosperous states and regions. This is an economy where college educated talent attracts capital. And vibrant cities attract college educated talent. Michigan unfortunately has neither and it has become one of the nation’s poorest states.

Where talent––particularly young talent––goes, high-growth, high-wage, knowledge-based enterprises follow, expand, and are created. Because talent is the asset that matters most to high-wage employers and is in the shortest supply, the new path to prosperity is concentrated talent.

All the traditional items we consider to be vital to economic development and state and regional prosperity––business taxation, the regulatory regime, business assistance programs and incentives, entrepreneurship and growing business supports, technology transfer, sub B.A. post secondary training, on and on and on––are not what distinguishes Massachusetts from other states.

What does distinguish Massachusetts from us and other states is the proportion of adults––particularly young adults––with a B.A. or more. Massachusetts is first in the nation in both categories. In Massachusetts, 47.8 percent of adults over the age of 25 have a bachelor’s degree or higher. In Michigan 32.7 percent. This picture gets worse when you look at young people. 57.2 percent of 25-to-34-year-olds in Massachusetts have a bachelor’s degree or higher. In Michigan 37 percent. The B.A. attainment gap between the two states is widening, not shrinking.

This large B.A. attainment gap leads to a large prosperity gap. In Massachusetts the per-capita income is $93,927. In Michigan, a low B.A. attainment and low-prosperity state, the per-capita income is $63,221––a full $30,000 lower than Massachusetts.

In 1980, the two states had roughly the same per-capita income. But a large prosperity gap grew over time, both because the B.A. attainment gap between the two states grew, and because the B.A. wage premium has grown.

The lesson Massachusetts should teach us is if Michigan does not substantially increase its B.A. attainment rate––particularly among non-affluent students––and create talent magnet cities, we will continue to get poorer compared to the nation no matter how good everything we label economic development is. Schools and cities are the foundation of prosperous places, everything else at best is icing on the cake. 

What we have been doing to increase the economic well-being of Michiganders has not worked. A small course correction will not be sufficient––transformational change in our approach to the economy and education is required if we are to achieve an economy that as it grows benefits all.

To create a high-wage Michigan economy we, first and foremost, need to strengthen and create more vibrant neighborhoods in our cities that attract and retain young talent and we need great schools explicitly designed to increase the share of young Michiganders who pursue and complete a four-year degree.

All of this adds up to the reality that there are two high-impact levers available to state policymakers to reverse Michigan’s decades-long economic well-being decline:

• First, create transit-rich, vibrant central cities that are competitive with America’s young adult talent magnet regions.
• Second, create schooling from birth through college that substantially increases Michigan student’s four-year degree attainment.

If Michigan does not concentrate college educated Generation Z here, and does not substantially increase four-year degree attainment of Michigan students––our state will continue to get poorer compared to the rest of the nation.

Getting younger and better educated requires making bold public investments in place and education––the drivers of today’s economy. The alternative is clear: Michigan will continue to get older and poorer.

The post How to close the 800,000 high-wage jobs gap appeared first on Michigan Future Inc..

For nearly two decades we have recommended that Michigan make Minnesota the model for its economic policy. We chose Minnesota because year after year after year it is the most prosperous Great Lakes state. It not only is a neighboring state, it also is a cold weather state and a non-costal state.

The recently released 2023 state per capita income data makes clear once again that Minnesota has the economy Michigan should want to have. Michigan is 39th in per capita income at $61,144, 12.4 percent below the national average. Minnesota is 12th in per capita income at $72,557, 3.9 percent above the national average. All a Great Lakes state best.

The two Great Lakes states that policymakers of both parties almost always compare Michigan to––Ohio and Indiana––are also low-prosperity states. Ohio is 37th in per capita income at $61,495, 11.9 percent below the national average. Indiana is 38th in per capita income at $61,243, 12.3 percent below the national average.

Minnesota also is the Great Lakes state with the highest proportion of adults with a B.A. or more. It is 11th in the nation. Michigan is 34th, Ohio is 37th, Indiana is 42nd. The proportion of adults with a B.A.or more is probably the best predictor of a state’s per capita income. Because college-educated talent is the asset that matters most to high-wage employers.

What has Minnesota done to become the Great Lakes’ most prosperous state? In 2014 we asked Rick Haglund to answer that question. His report, State Policies Matter: How Minnesota’s Tax, Spending and Social Policies Helped it Achieve the Best Economy Among Great Lakes States, is as valid today as it was a decade ago. Yes the data in the report needs updating, but Rick’s description of the path Minnesota has taken for more than five decades is still accurate today.

Rick’s conclusion:

Lawmakers and governors in many states, including Michigan, have focused primarily on cutting taxes and shrinking the size of their governments as the path to prosperous economies. As this report has shown in detail, Minnesota has traveled a different path. There is no question Minnesota is a high tax state—as stated earlier, its residents paid $2,309 (updated for 2023) more than Michigan residents in state taxes alone.

But it has largely invested that additional revenue in services and investments that matter in a knowledge-based economy. An educated workforce, efficient transportation systems, vibrant cities and metropolitan areas, and a secure safety net for those making the transition to a global economy all matter in creating a prosperous state.

Minnesota has made those necessary investments and enacted policies making the state welcoming to all. It really shouldn’t be surprising, then, that it has the strongest economy in the Great Lakes region and one of the most vibrant in the country.

Maybe most important is what isn’t part of the Minnesota playbook:

• Minnesota did not lower taxes. In fact as Rick documents, in 2013 when Michigan was slashing business taxes, Minnesota raised taxes on companies and the wealthy. In 1980 Minnesota had the 6th highest state taxes per capita in the country. Michigan ranked 13th. Minnesota’s state taxes per capita were 122 percent of Michigan’s. In 2023 Minnesota had the 8th highest state taxes per capita in the country. Michigan ranked 34th. Minnesota’s state taxes per capita were 162 percent of Michigan’s.
  
• Minnesota did not slash its safety net. As Rick wrote: “Many states have cut benefits to the poor and unemployed in the belief that these payments dissuade people from looking for paid work. Minnesota takes a different view. It has created one of the strongest safety nets in the country, spending generously on benefits to help those who have lost jobs or been stricken by poverty get back on their feet. That protective net has not trapped Minnesotans and turned them into a bunch of government-dependent slackers. Far from it.”
  
• Minnesota does not offer big incentives for economic development projects. Read the Minnesota Economic Development Resource Guide and you will not find any big incentive program like SOAR, Michigan’s new billions of dollars business incentive program.
  

Michigan has, of course, done the exact opposite. On a bipartisan basis accepting that high taxes, particularly on businesses are job killers, the state has anchored its economic development playbook on cutting taxes for at least three decades. And, also on a bipartisan basis, enacting one version after the other big economic development incentive programs. As well as slashing the state’s safety net in part on the belief that a more generous safety net discourages people from working.

At its core the Minnesota playbook for economic success has been higher taxes used for public investments to compete for talent by offering good schools from birth through colleges and
creating places where people want to live by offering high quality basic services, infrastructure and amenities.

Minnesota focus on making public investments in education from birth through college and creating high quality of living communities combined with being welcoming to all is the foundation for its economic well-being success. Minnesota has developed a policy playbook that makes preparing, retaining and attracting talent its economic development priority one. That is exactly what is needed in today’s economy where talent attracts capital.

The post Michigan in 39th, Minnesota is 12th appeared first on Michigan Future Inc..

Thank you Chair Irwin and members of the Senate Housing and Human Services Committee for the opportunity to talk to you about child care and our working parents tax cut recommendation.

Thank you Senator McDonald Rivet for your leadership on the issue.

For more than three decades, Michigan Future, Inc. has championed common sense and forward-looking policy initiatives grounded in data analysis, rather than ideology. Our primary objective is the restoration of Michigan’s status as a high-prosperity state with a thriving middle class.

Central to our mission is the establishment of a market economy that benefits all Michiganders. We are dedicated to developing an economy where every worker in Michigan enjoys wages and benefits that allow them to meet their financial needs, save for the future, and invest in their children’s education. Michigan’s success is dependent on ensuring our residents can thrive. As Michigan’s economy grows, so should the income of Michigan workers. It’s that simple.

To help meet that goal three years ago, the Michigan Future Board proposed that the state expand its Earned Income Tax Credit (EITC) tenfold. Going from a six percent match of the federal credit to sixty. The rationale for this transformational recommendation was our belief that Michigan needed a completely new approach to improving the economic well-being of working families. That far too many struggling working families was an ongoing reality of the Michigan economy.

Nearly six-in-ten Michigan jobs pay less than what is required for a family of three to be middle class. These low-wage workers live paycheck to paycheck not because they are irresponsibly buying “unnecessary”luxuries, but because they are in lower-wage jobs that leave them struggling to pay for necessities. The reality is that most of those struggling economically––in good times and bad––like us get up every day and work hard to earn a living.

At Michigan Future we believe the best way to help these hard-working Michiganders is with income, not programs. Parents are the best decision makers for what is best of their families and their children.

2023 saw a historic expansion of the state’s match of the federal EITC with the enactment of the Working Families Tax Credit. The Working Families Tax Credit is a huge first step in moving to an income-based support system for Michigan’s working ALICE households.

But there is more that needs to be done. The data are clear: you cannot have an economy that benefits all without increasing the income of lower-wage workers––particularly those raising young children––in their current jobs.

As a next step, we recommend enactment of a life-changing working parents tax cut: a substantial fully refundable tax credit for each child under the age of six for EITC recipient households.

A per child tax cut is the only way to help Michigan families raising young children at scale. A per child credit up to age six would help Michigan families raising approximately 250,000 children. By comparison the state’s current child care subsidy serves around 40,000 Michigan children. The tri-share program is currently serving around 700.

And it is the best way to confront three seemingly intractable challenges that have bedeviled policymakers for decades: the benefit cliff, the difficulty of lower-wage workers to pay for child care and far too many working households shutout of benefits they are eligible for by a confusing, bureaucratic system of safety net programs.

Our detailed analysis of the benefit cliff found that many households with children realized very little income gain as they earn more at work as declining benefits and increasing taxes steeply offset increased earnings. This is particularly true for households with income above $20,000. Where households net as little as 14 cents from each additional dollar earned.

The best antidote for this high tax rate cliff is a flat per child credit that does not decline as you earn more money. The working parents tax cut is designed so that recipients will be able to keep a substantial proportion of increases in work earnings.

Focusing on households raising young children is also an essential component of the proposal. The Michigan Association of United Ways estimates the cost of paying for basic necessities for a two-adult household with no children is $38,508; for a household of two adults and two school age children it is $62,928; and for a household of two adults with two preschool children it is $72,792. The cost of childcare is the main driver of the increased cost of raising preschool children.

And unlike benefit programs, the working parents tax cut will be easy to qualify for and apply for.

Expanded state tax credits for recipients of the federal EITC should be the cornerstone of a transformation in how the state supports working families. Moving away from a program-based support system to a cash-based safety net that benefits far more working families than any program can and that provides working families with increased income to pay the bills and save for emergencies, retirement, and the kids’ education.

The working parents tax cut would be life changing for households raising young children. Our recommendation encourages work and provides a significant boost in income. Unfortunately, the challenge that has long faced too many working Michigan families is not bad decision-making, but the lack of sufficient income that can open doors of opportunity. A working parents tax cut would empower parents to spend the money however best meets the needs of their family. It will be easy to apply and qualify, and a tax cut will benefit far more working families than any program could.

The working parents tax cut also benefits employers both by pulling more parents into the labor market and by increasing hours worked. The economic benefit is huge: the U.S. Chamber of Commerce Foundation estimates the difficulty of lower-wage workers to pay for childcare costs the Michigan economy three billion dollars annually.

We fully understand the implications of a big new tax credit. At its core, the state budget is a statement of our values. We believe that the state’s core economic value should be rising income for all: an economy that as it grows benefits all. We value work and we value work where anyone who works hard earns enough to pay for the basics and to save for emergencies, retirement, and the kids’ education.

By both incentivizing working and rewarding work, a working parents tax cut is a win for Michigan families raising young children, employers, and the overall state economy. Our recommendation would help fill jobs, boost small businesses, expand our economy, and give a chance for hundreds of thousands of Michigan parents to make a better life for themselves and their children.

A working parents tax cut meets all the criteria of good tax policy. It is fair (targeting relief to those most in need), efficient (tied directly as an incentive to work), and simple (no new bureaucracy).

The post My Senate child care hearing testimony appeared first on Michigan Future Inc..

Conventional wisdom has it that there are myriads of high-wage jobs that don’t require a B.A. but do require something more than a high school degree. These jobs are labelled middle-skills jobs. The claim of so many high-wage middle-skills jobs is a central component of the you don’t need a B.A. messaging that students––particularly non-affluent students––are constantly bombarded with.

It is important to note that the Bureau of Labor Statistics (BLS) determines educational attainment required for each occupation based on the level of education achieved by workers who are employed in the occupations. So whether employers require a B.A. or not in posting a job is not a factor at all in the BLS education requirement determination.

Turns out the claim of many high-wage middle-skills jobs is greatly exaggerated. Only about one in ten 2023 Michigan jobs that pay at least $65,000 are in occupations that require more education than a high school degree, but less than a B.A. (About three in ten Michigan jobs pay at least $65,000.)

Completely contrary to conventional wisdom, there are far more Michigan jobs that pay at least $65,000 that require a high school degree or less that there are high-paid middle-skills jobs. About one in four Michigan jobs that pay at least $65,000 require a high school degree or less.

The details of the education attainment distribution of Michigan jobs that pay at least $65,000 is:

• 65.7 percent require a B.A.or more
• 2.4 percent require an apprenticeship
• 3.2 percent require an associate degree
• 4.2 percent require more that a high school degree, but not an apprenticeship or associate degree
• 24.5 percent require a high school degree or less

Of the 1,329,406 Michigan jobs that pay at least $65,000:

• 872,867 require a B.A. or more
• 32,530 require an apprenticeship
• 42,194 require an associate degree
• 55,817 require more that a high school degree, but not an apprenticeship or associate degree
• 325,530 require a high school degree or less

It also turns out that most middle-skills jobs don’t pay at least $65,000:

• 43.9 percent of jobs that require an apprenticeship pay at least $65,000
• 44.4 percent of jobs that require an associate degree pay at least $65,000
• 15.1 percent of jobs that require more than a high school degree, but not an apprenticeship or associate degree pay at least $65,000

The very small percent of jobs that require more than a high school degree, but not an apprenticeship or associate degree should call into question the constant promotion of non-degree credentials and certificates. They simply are not a reliable path to high-paid jobs.

The bottom line is clear: the most reliable path to a high-wage job is getting a four-year degree. End of story! We simply have got to stop delivering the opposite message to students.

The post The paucity of high-wage middle-skills jobs appeared first on Michigan Future Inc..

The Bureau of Labor Statistics each year publishes a chart that details the unemployment rate and median weekly earnings by education attainment for those 25 and older who work full time. Here is the data for 2023.

Year after year after year the same story. Pre pandemic and post pandemic the same story. Each time the update is published the question that comes to mind is “how can the data be misinterpreted?”. Seems like the conclusion is crystal clear: higher education attainment means the more you work and the more you earn. This is particularly true for those with a B.A. or more.

And yet we continue with a public conversation that increasingly questions the value of getting a four-year degree or more. The reality is––as these data depict––that a four-year degree or more is the most reliable path to a middle class or better career. End of story!

Part of the public conversation now is that the B.A. wage advantage is disappearing for recent college graduates. Not true! If anything the B.A. wage advantage is growing post pandemic.

A recent Pew Research Center report titled Is College Worth It? documents that the conventional wisdom of the lack of value in obtaining a B.A. post pandemic is the exact opposite of reality.

Median work earnings for full-time/year-round workers between the ages of 25 and 34. All figures are in $2022, so they are inflation adjusted.

• Median earnings for males in 2023 is $77,000 for those with a B.A.; $50,000 for those with some college but less than a B.A.; and $45,000 for those with a high school degree. 
• Median earnings for females in 2023 is $65,000 for those with a B.A.; $40,000 for those with some college but less than a B.A.; and $36,000 for those with a high school degree. 

How does this compare to a decade ago?

• Median earnings for males in inflation adjusted dollars is up $9,500 for those with a B.A.; $900 for those with some college but less than a B.A.; and $5,700 for those with a high school degree.
• Median earnings for females in inflation adjusted dollars is up $9,800 for those with a B.A.; $2,300 for those with some college but less than a B.A.; and $5,100 for those with a high school degree.

Who knows this story better than anyone else? Parents with a four-year degree. The Federal Reserve in its 2019 Report on the Economic Well-Being of U.S. Households measured well-being by education attainment. They found that 72 percent of those 22-29 with at least one parent with a bachelor’s degree have a B.A. This compares to 35 percent with a B.A. of those 22-29 with at least one parent with some college but neither with a bachelor’s degree and 19 percent of those with both parents having a high school degree or less.

So when elites tell you that you, your kids or grandkids are better off not pursuing a four-year degree remember that, by and large, they are doing the opposite with their children.

The post Education pays: the 2023 update appeared first on Michigan Future Inc..

Over three decades of rigorous data analysis has taught us one fundamental lesson: This is an economy where talent attracts capital. Where young talent goes, high-growth, high-wage, knowledge-based enterprises follow, expand, and are created. The new path to prosperity is concentrated talent.

After being one of the most prosperous places on the planet for most of the 20th Century Michigan is now a low-prosperity state. Thirty ninth in per capita income. The main reason is that too many Michigan jobs are low wage. Six in ten Michigan jobs pay less than what it takes to be a middle class household of three. Michigan needs a new high-wage economic development strategy.

That is why the new Michigan Talent Partnership program is so important. It is a paradigm-altering approach to economic development. The initiative–almost certainly for the first time ever in Michigan–is explicitly designed to grow Michigan high-wage jobs by creating places where young talent wants to live.

Michigan Future has long advocated for placemaking as an economic development priority. Why? Because high per capita income states are characterized by being over-concentrated in both knowledge-based industries and adults with a B.A. or more. The two go together because college educated talent is the asset that matters most to knowledge-based employers.

Talent attracts capital and quality of place attracts talent. Attracting and retaining highly-educated young people is the state’s primary economic imperative – both keeping the young talent that grows up here, and then attracting young talent from any place on the planet.

This requires economic development policies squarely focused on creating the kinds of places where highly-educated young people want to live and work. The data show that highly-educated young people are increasingly concentrating in regions that are first and foremost transit rich and offer multiple vibrant central city neighborhoods that are high-density, high-amenity, walkable and have an active street life

In the Great Lakes Chicago is, by far, the leading young talent magnet city. 309,050 25-34 year olds with a B.A. call Chicago home. Chicago anchors a high-prosperity, knowledge economy concentrated region. (Combined the cities of Detroit, Grand Rapids, Ann Arbor and Lansing have 65,501 25-34 year olds with a B.A.)

And many of the Chicago young professionals live in the kind of transit-rich, high-amenity neighborhoods the Michigan Talent Partnership is designed to create. Chicago has 69 census tracts with at least 1,000 young professional residents. And another 396 census tracts with between 250 and 1,000.

By contrast combined the cities of Detroit, Grand Rapids, Ann Arbor and Lansing have no census tracts with 500 or more young professional residents. And only four with more than 250.

The Michigan Talent Partnership will provide grants to support the development of talent-magnet neighborhoods in Michigan’s central cities. The initiative has the twin goals of:

• Addressing the economic development imperative of increasing Michigan’s population of young talent by creating transit-rich, high-density, high-amenity, walkable, vibrant street life neighborhoods or districts.
• Creating business ownership opportunities for local residents.

The $25 million dollar initiative will fund transformational public space development projects in central city neighborhoods or geographically concentrated districts. Grants will be substantial to support transformational efforts and will require significant matching support from local sources.  

Grant funds must be spent in a concentrated geographic area and the funds are for the public spaces in the neighborhood, not buildings.  The focus of these projects is walkable urban design, centered on creating vibrant street life. Projects supported by this fund will be comprehensive neighborhood/district-wide plans, rather than discrete initiatives centered on a particular building or parcel, designed for walkability, density, vibrant street life and business opportunities for local residents.

Eligible projects must assist and support existing businesses, seek to protect existing local business investment and provide opportunities for local residents to start new ventures.

The Michigan Talent Partnership is a breakthrough first step in creating the kind of places that concentrate young talent. Over the long term the goal should be, that in addition to funding from this grant program, grant winners have access to funding from other state departments and agencies with built environment funding programs. Providing substantial funding for public spaces that include walkable streets, parks and outdoor recreation and the arts––particularly arts on the street.

The post Michigan Talent Partnership: placemaking as high-wage economic development appeared first on Michigan Future Inc..