The Michigan Association of United Ways recently reported that in Michigan’s strong pre-pandemic (2019) economy, 38% of the state’s households were unable to pay for basic necessities.
So, in what many called the best U.S. and Michigan economy ever, nearly four in 10 Michigan households (1.5 million) did not earn enough to pay for housing, child care, food, transportation, health care and a smartphone plan, plus taxes and a miscellaneous contingency fund equal to 10% of the budget.
The United Way’s definition of basic necessities does not include savings, auto repairs, cable service, travel, laundry costs, or amenities such as holiday gifts or dinner at a restaurant that many families take for granted.
What the United Way data makes clear is that Michigan’s two-tier economy predates the pandemic. Even when our economy was strong, those at the top were doing well but way too many Michiganders were struggling.
The United Way data also demonstrates that this is an all-Michigan problem: urban, suburban and rural. Only four Michigan counties have less than 30% of households unable to pay for the basics: Livingston, Barry, Midland and Eaton, with Livingston in the best shape at 24%. Five weighed in with more than 50%: Lake, Alger, Clare, Gogebic and Ontonagan.
In Kent County, 35% of households (86,000) were unable to pay for the basics. That number sat at 30% in Ottawa County (32,000).
And it is a problem across race as well as geography with 60% of Black households, 48% of Latino households, 34% of white households and 28% of Asian households unable to pay for the basics.
The reality is that the 2019 Michigan economy was not one of our best ever. It was a two-tier economy. It is far past time that we agree that when 1.5 million Michigan households cannot pay for the basics, we do not have a good economy, no matter how low the unemployment rate or how high the stock market. The economy that we should all want is an economy that as it grows benefits all.
The pre-eminent reason for our two-tier economy is that the economy is producing way too many low-wage jobs. In the “strong” 2019 Michigan economy, 58% of jobs paid less than $20 an hour.
Clearly the pandemic has made things worse. As low-wage workers and low-income households have borne the brunt of the pain from the economic lockdown, they are almost certainly going to have the slowest recovery as the economy reopens.
The pandemic has made crystal clear that there simply are lots of tasks that need to get done that are structurally low-wage work. Every day, in every community in Michigan, we are confronted with the vast number of low-wage workers in the leisure, hospitality and personal services industries who have lost their jobs and no longer can make ends meet. That also includes those who get us food and prescription drugs and who care for us and are not only putting their lives on the line to serve us but also are struggling to pay for the necessities.
These 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 get up every day 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 — that has too few jobs that pay family-sustaining wages and provide health coverage and paid leave.
This is structural. We are not growing our way out of too many low-wage jobs. The 2019 Michigan economy demonstrated that a low unemployment rate will not drive wages, benefits and hours worked up enough to substantially dent the proportion of struggling Michigan households.
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. 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 this is a problem that will not be fixed when the economy starts to grow again. The second step is to change our definition of economic success from a low unemployment rate to a rising household income for all. And then get to work on developing policies and programming explicitly designed to achieve that mission.
Lou Glazer is president of Michigan Future Inc.