At Michigan Future Inc. — the nonpartisan think tank I lead — we believe the once-in-a-generation American Rescue Plan funding should be used to pivot to a new economic development strategy. One with a mission of rising income for all.
The need for a new economic strategy is clear. In 2019, with a robust economy described by many as the best ever, nearly 4 in 10 Michigan households could not pay for basic necessities. And nearly 6 in 10 Michigan payroll jobs paid less than what a family of three needs to be middle class.
Michigan has a two-tier economy and a two-tier labor market. Our two-tier economy and labor market are prevalent across all of Michigan and across all races and ethnicities. And our two-tier economy and labor market are structural: existing when the Michigan economy is expanding as well as when it is contracting; when unemployment is low as well as when it is high; and when the stock market is booming as well as when it is collapsing.
The prime economic challenge of our time is 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.
It is imperative that we figure out how you get a capitalism that as it grows benefits all. Now is the time for a transformative redesign of our approach to the economy. We need one that starts with changing the definition of economic success from a low unemployment rate and a growing economy to one that is based on rising income for all.
Achieving rising income for all requires both raising income of low-wage workers and growing high-wage jobs.
A preponderance of low-wage jobs is structural. Lots of businesses that employ lots of people have business models based on low-wage workers. Neither a strong economy nor a high-prosperity state change the reality that there will be lots of low-wage jobs.
Along with increasing low-wage workers’ income, the state needs to grow high-wage jobs. Every Michigan region needs more high-wage jobs. This is an economy where talent attracts capital. Preparing, retaining and attracting talent must become the centerpiece of Michigan’s economic development strategy.
American Rescue Plan funding offers a once-in-a-generation opportunity to lay the foundation for a transformative redesign of economic policy. Specifically, we recommend using American Rescue Plan funds to:
Greatly expand the Earned Income Tax Credit. The EITC is pro work and an incentive to go back to work. The pandemic made clear 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 hard-working, lower-wage workers need most is income, not programs. As an example of doing something substantial, $1 billion annually would expand the average state EITC benefit to $1,500 from a current average of $150.
Provide an annual government payment, above and beyond current education funding, for each child 0-21 growing up in a nonaffluent household. We strongly believe Michigan underinvests in its children, particularly its nonaffluent children. We believe that under investment starts at birth and continues through college. So, we propose Michigan substantially increase its investment in the education of every child growing up in a household struggling to pay for basic necessities each year from birth through college. These payments would be both pro-growth and pro-shared prosperity.
We recommend providing an annual state payment directly to nonaffluent households for each child from 0-21. Think of this as something that operates like a health savings account where parents and students have the resources to make their own education spending decisions. Include the option of utilizing those funds for extracurriculars and out-of-school programming.
As an example of doing something substantial, assuming 1 million children in nonaffluent households, $1 billion a year would provide a $1,000 payment per child.
Provide a state match for regional American Rescue Plan spending on retaining and attracting talent. Our economic development priority should be high-wage job growth. Labor markets are regional, and talent now is what attracts capital. The way to achieve high-wage job growth is by creating regions where high-skill, working-age adults choose to live, play and work.
We propose the state offer matching funds to provide local governments a substantial incentive to use their American Rescue Plan funds, and other new revenue, to develop and implement regional strategies to retain and attract talent. Funding can be used for all modes of transportation; water and sewer; broadband; housing; parks and outdoor recreation; and arts and culture.
Lou Glazer is president of Michigan Future Inc.