Michigan – the state associated more than any other with manufacturing’s heyday and with the scars of deindustrialization – was one of the last to recover from the Great Recession, according to Gilda Jacobs, CEO of the Michigan League for Public Policy.
Since then, the state has played catch-up. Between 2009 and 2018, Michigan’s gross domestic product grew 22 percent per capita, as compared to 14.5 percent nationally. Only North Dakota and California saw a greater change over that period.
But the benefits of that growth have not been evenly distributed, and the state remains one of the most susceptible to another recession, according to Jacobs. High poverty rates persist among racial minorities and in rural areas. While those at the bottom are seeing higher incomes than they had previously, they are falling further behind their peers in relative terms. From 2009 to 2018, the poorest 20 percent of households saw their income increase by 6 percent to $12,921 on average when accounting for inflation. Over the same time, however, the top five percent of households saw an increase in income of 20 percent to $346,000, a rise more than three times as fast.
In addition, large and troubling racial disparities remain for those experiencing extreme economic hardship. About 27 percent of the state’s African-Americans, almost 20 percent of indigenous people, and 19 percent of Latinos lived below the extremely low federal poverty threshold of $20,780 for a family of three in 2018. That contrasts with 11 percent of whites and 13 percent of Asians, according to the U.S. Census Bureau. The state’s poverty rate, 14 percent, is about a percentage point above the nation’s. “Michigan has the lowest ranking in the Midwest for child well-being and is 32nd in the country,” says Jacobs.
Rural parts of Michigan are not experiencing the same economic recovery as the more urban areas. The Detroit Free Press described rural counties as being “stuck in a trap — not enough jobs that pay well to attract young college graduates and not enough college graduates to attract good jobs.” An estimated one-quarter of residents are expected to be over 65 in as many as 40 percent of counties in the state by 2025, according to demographers. Most of that graying will occur in rural counties, notes the Detroit Free Press.
But it’s not just the more vulnerable Michiganders falling further behind their better-off peers—the state’s middle class is falling behind overall. According to an analysis last year in Bridge Magazine, “In 2005, Michigan’s median income was equal to the rest of the Midwest and the U.S. as a whole. Today, it’s 5 percent below the rest of the Midwest and close to 10 percent below the nation.”
One reason economists worry about Michigan is its reliance on the manufacturing sector, which can be sensitive to consumer demand. Michigan’s auto industry has recovered from its brush with bankruptcy, but it still makes up about eight percent of the state’s economy. Nationally, the U.S. expects to see car sales tick downward in the coming years, and that’s assuming a relatively healthy national economy. Should that picture change, Michigan may feel a disproportionate impact. As Charles Ballard, a Michigan State University economist, told Crain’s Detroit Business, “If times are hard, you can’t put off buying groceries, but you can put off buying a car.”
“Our heavy reliance on manufacturing and the auto industry make our workforce particularly vulnerable to automation and the changing economy,” adds Jacobs.
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