Economic Mobility

Issue Areas > Economic Mobility

The Michigan Consensus Policy Project believes that all Michigan citizens should have the opportunity to climb the economic ladder to prosperity. Our discussions about this have been many and varied, often ranging from the detailed to the philosophical, and we have covered a broad landscape of issues.

We have, for example, discussed the fundamental changes that have occurred in Michigan’s economy, noting particularly that manufacturing jobs, long the road to the middle class, are more limited and lower paying than in the past. Michigan lost nearly 423,000 manufacturing jobs in the Great Recession, and while some of those jobs have returned, any others will never come back. Although veteran line workers in the auto industry make more than $28 an hour, entry level workers make just under $16 an hour today.

Many job openings exist in other fields such as information technology, health care, and engineering, but employers often say they have trouble finding truly qualified candidates for these openings.

This demand for new, different, and better skills led to discussions about aspects of Michigan’s education system, including the need for postsecondary education to acquire the skills demanded by employers today. We met with members of Governor Whitmer’s administration to learn about the Governor’s proposal to increase the number of Michigan citizens who have an advanced degree or certificate to 60 percent by 2030 (it is currently 45 percent). The “Michigan Opportunity Scholarship” would provide either two years of tuition-free community college or two years of tuition assistance at a 4-year public or not-for-profit college or university. As part of this discussion, we began debating the relative merits of a two versus four year postsecondary degree.

The need for skilled workers led us to examine workforce participation rates in Michigan, noting that workforce participation rates have been trending downward in Michigan, as it has elsewhere in the United States. With the help of University of Michigan researchers, we examined workforce participation rates among different groups of Michigan’s population and discussed the barriers to work these different groups face in today’s world.

One significant barrier brought to our attention was the need for high quality child care that is both affordable and accessible. We met with representatives of the Michigan League for Public Policy and Michigan Children to discuss policy options that would expand child care options in the state to enable more parents, particularly young women, to enter the workforce.

We have discussed the issue of rising income inequality and stagnant wages for many workers in the economy, noting that the real incomes of the top one percent of American families has risen, while the real incomes of the bottom 99 percent have either plateaued or declined over the past several years. Research done for us by the University of Michigan researchers indicted that wages have stagnated even for some professions that require postsecondary degrees.

All of these discussions have taught us that the issue of economic advancement for all is complicated, involving our education system, cultural expectations about the value of education and work, identifying barriers to work and economic advancement, the role of government, and many others. No one single policy initiative can insure opportunity for all.

To begin, however, we offer the following thoughts on equal opportunity for all citizens, focusing on policy initiatives in the three areas of child care, the Earned Income Tax Credit, and how local schools are funded by the state. Our interest is to focus on how we can change life trajectories for individuals who are, for whatever reasons, predisposed to a life of poverty.

We encourage others to offer suggestions and ideas.

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The Problem

A fundamental American belief is that where you start shouldn’t determine where you end. If you work hard, take advantage of opportunities and persist in the face of obstacles, you should get ahead. But, the fact is that far too many people are stuck on the lower rungs of the economic ladder.

Two economic trends have led to the decline in economic mobility: a reduction in overall economic growth rates and changes in the distribution of that growth (income inequality). Ultimately, upward mobility is driven by the growing income inequality in America. The causes of declining economic mobility and rising income inequality are complex and there is not one simple solution.

Although past attempts to address declining economic and social mobility have resulted in limited success, now is the time for state policy makers to renew their efforts.

Recommendations

Increase child care subsidies

The lack of affordable and accessible childcare is keeping too many individuals – particularly single parents of young children – out of the workforce. This hurts both businesses that need workers and individuals who need the opportunity for escaping poverty that work provides. Although Michigan has a program that helps subsidize childcare costs for families with low incomes, it reaches far too few families today. We should try a new approach in which government spending leverages financial contributions from elsewhere, such as private employers, to increase the income eligibility level.

By increasing eligibility for child care help, more families will have the opportunity to escape poverty and employers will get – and keep – the workers they need.

Expand the Earned Income Tax Credit

Direct public assistance can provide basic necessities for those in need, but the best way out of poverty and up the economic ladder is to work. The federal Earned Income Tax Credit (EITC), initially signed into law by President Ford and later substantially expanded by President Reagan, provides a tax credit for working individuals with low incomes. It rewards work, helps keep families off welfare, and has lifted millions of individuals above the poverty line.

Recognizing the success of the federal EITC, a bipartisan coalition of state lawmakers came together to pass Michigan’s Earned Income Tax Credit in 2006. The Michigan EITC gave tax filers a tax credit on their state income taxes equal to 20% of their federal EITC. Unfortunately, this state tax credit was later reduced. Restoring the Michigan EITC to its initial level would put more money back in the pockets of working Michiganders with low incomes by rewarding work –the key to economic advancement.

Change Michigan’s school funding approach

Education has always been a path to climbing the economic ladder, but this has become even more so in a knowledge-based economy that increasingly demands more advanced skills. Compared to other states, however, Michigan’s levels of education achievement and performance are abysmal, and the levels of achievement for low income students are even worse. While money alone does not drive improvement in learning outcomes, it does matter. Increases in spending have been shown to improve educational attainment and lead to higher wages and reduced poverty in adulthood, particularly for students from low-income backgrounds.

Michigan’s current funding system, however, does not provide funding according to individual student need, but rather provides equal state funds to all students. Children from disadvantaged backgrounds, however, often need more resources to catch up with other children. For example, students from families with low incomes often enter kindergarten classrooms already behind academically and usually require more services to catch up. These students are found in all areas of Michigan – urban, suburban and rural school districts.

A differentiated funding formula – providing more money to educate children from low-income families – is used in high-achieving states like Minnesota and fast-improving states like Florida. It’s also a system that has been pushed by a variety of education and business groups that have studied ways to improve Michigan schools.

Implementing a school funding formula to reflect student need would help start every child on a path to economic prosperity, but it certainly isn’t enough. Given that a four-year, post-secondary degree or its equivalent is increasingly becoming the foundation for achieving a middle-class lifestyle, Michigan also needs a much stronger commitment to a K-16 perspective with its education policy if it truly desires to expand opportunity.

Supporting Materials

(7/7/2020) Michigan Consensus Policy Project - A Chance to Rise: Restoring Economic Mobility in Michigan
(2/26/2020) Michigan Consensus Policy Project - Letter to Legislators: Teacher Shortages in Michigan
University of Michigan Poverty Solutions: Barriers to Work in Michigan (Pinghui Wu)
(6/18/2019) Michigan League for Public Policy - Baby steps: More investments needed to make child care work for Michigan families and children (Pat Sorenson)

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