Detroit Dreaming

President Trump boasts that this is the strongest American economy ever. Many Michigan political and business leaders are celebrating the strength of the state’s economy. One problem: this is the first time ever that Michigan has been a low-prosperity state with a strong domestic auto industry.

From 1929, when the federal government started calculating state economic well-being, through 2000 (the last time Michigan had a strong domestic auto industry), every year Michigan was a top 20 state in per capita income. No more!

As the slides that accompany this column depict, Michigan is 31st in per-capita income; an even lower 33rd in employment earnings (wages and employer paid benefits) per capita; 38th in the proportion of those 16 and older who work; and 31st in the proportion of those 25 and older with a four-year degree.

The gap between Michigan and top ten states is substantial on each measure: Nearly $11,000 in per capita income; nearly $7,800 in wages and employer paid benefits; 6.0 percentage  points (483,000 Michigan residents) in the employment-to-population ratio; and 6.9 percentage points (470,000 adults) in college attainment.

Yes, you read that right. If the same proportion of Michiganders worked as the 10th-ranked state, there would be nearly a half million more Michiganders working today. So not enough Michiganders working is one of the main reasons that Michigan is a low-prosperity state today. Another major reason is too many of us work in low-wage jobs.

Of the 4.21 million payroll jobs (those working for an employer) in Michigan, 2.34 million are in occupations with median wages below $37,690 (the national median wage). By contrast, only 950,000 Michigan jobs are in occupations with a median wage of $61,110 (national 75th percentile wage) or higher.

Of the jobs in occupations with median wages of $61,110 or higher, 77 percent are in occupations that require a four-year degree or more. Another 16 percent are jobs in occupations where work experience - doing well in a previous job - earns one a promotion.

So along side not enough of us working and too many of us in low-paid jobs, the third major reason Michigan is a low-prosperity state in a strong economy is low four-year degree attainment. The single best predictor of state per-capita income is the proportion of adults with a four-year degree or more. The only exceptions are states with lots of oil and natural gas like Alaska and Wyoming.

Given how often we are told by political and business leadership that one can do just as well with an Associate’s degree or occupational certificate as a four-year degree, it is worth pointing out that the data do not support that claim. There are 735,000 Michigan jobs in the highest-pay category in occupations that require a four-year degree. That compares with just 58,000 Michigan jobs in the highest-pay category in occupations that require something more than a high school degree, but not a four-year degree.

Maybe the most concerning measure of the economic well-being of Michigan households in a strong economy is the Michigan Association of United Ways report that in 2017, 43 percent of Michigan households were unable to pay for housing, child care, food, transportation, health care, a cell phone and taxes. That’s up 6 percent from 2010 when the Michigan economy was just starting to grow after the Great Recession.

How can that be? The simple answer is that - even in a strong economy - 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.

In 2017 1.66 million Michigan households were ALICE (Asset Limited, Income Constrained, Employed) households compared to 1.57 million in 2010. There are no counties in the state with less than 30 percent ALICE households. Not only is ALICE geographically diverse, it also is prevalent across age, race and ethnicity.

What the ALICE data make clear is that this is a structural 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 policymaking.

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.