New report: the Michigan economy

By • on November 2, 2012

As poor as the national economy was this past decade, Michigan was worse. Basically at or near the bottom on all the metrics covered in our new annual report.

During the national expansion, many referred to Michigan’s economy as a single-state recession. We believe that Michigan’s experience during the 2001–2007 expansion is far better characterized as a single-industry recession. Or more accurately, a single portion of an industry recession. Despite all our efforts for decades to diversify, the domestic auto industry was––and still is––the engine that drives the Michigan economy.

Almost for sure, the low point for Michigan for the foreseeable future will be 2009, the year of the collapse of the domestic auto industry. As the auto industry restarts, we likely will do somewhat better than the nation for a few years, but the old pattern of a prosperous Michigan driven by good times for the Detroit Three are gone. A growing domestic auto industry alone will not return Michigan to high prosperity.

Employment and Wages

In 2010 there were 3.77 million jobs in Michigan, a decline of 706,000––an unprecedented 15.8%––from 2001. Just like the nation, underneath the terrible jobs record of the decade is the continuing divergence between the high and the low education attainment sectors. Michigan employment in the high education attainment was 1.6 million in 2010, a decline of 96,000 jobs (-5.7%) from 2001. In the low education attainment sectors employment was 2.2 million in 2010, a decline of 610,000 jobs (-21.9%) from 2001. The loss of jobs in the knowledge-based industries we believe is due in large part to the decline in employment in the knowledge-based portions of the domestic auto industry. In health care and education––where the national high education attainment job growth was concentrated–– job growth in Michigan was around 40,000, an increase of 5.4% between 2001 and 2010.

The average wage in Michigan followed the same pattern as the nation: high education attainment industries growing and low education attainment industries declining. The average wage for all jobs in Michigan in 2010 was $44,439, a decline of 1.3% from 2001. In the high education attainment sectors the average wage was $55,840, a gain of 2.9%. In the low education attainment sectors the average wage was $36,115, a decline of 8.4% from 2001.

The gap in the average wage between the high and low education attainment sectors grew from $14,882 in 2001 to $19,725. In 2010 the average worker in the high education attainment sectors had wages more than 1.5 times that of the average worker in the low education attainment sectors. Michigan’s low education attainment industries—which include most of factory work—have wages that are now just 4% above the national average. In 2001 they were about 13% percent above.  The high-paying, low-skill jobs which have been the backbone of middle-class Michigan are now gone, almost certainly for good. By comparison in the high education attainment industries, Michigan’s wages are 10 percent below the national average. So in the knowledge-based sectors of the economy—where most of the job growth and good-paying jobs are—Michigan is a low wage state.

Personal Income

Per capita income in Michigan in 2010 was $34,714, a loss of $1,434 (-4.0%) from 2001. But, even more so than for the nation, the underlying sources of state’s personal income is very worrisome, with a huge decline of real private sector employment earnings per capita from 2001 – 2010 masked by the large income gains from government––either government employment earnings or, most importantly, transfer payments.

  • Private sector employment earnings per capita in 2010 was $20,058 a loss of  $4,282 (-17.6 %) from 2001
  • Government employment earnings per capita in 2010 was $4,128 a gain of $392 (10.5 %) from 2001.
  • Personal income per capita from interest, dividends and rent was $5,094, a loss of $808 (-13.7%) from 2001.
  • Transfer payments per capita in 2010 were $8,233, a gain of $2,996 from 2001 (56.3%).

The dramatic growth in transfer payments was accompanied by a sharp increase in the share of the population who were poor or nearly poor.  In 1999, 17.7% of the Michigan population had an income that was less than 1.5 times the poverty level.  By 2010, this value had increased to 26.3%. We have become increasingly poor and more dependent upon transfer income, not a good start to the 21st Century.

How Michigan in 2010 compared to the country

Employment rate: 46th/90.0% of US
Average wage: 18th/95.1% of US
Average wage in high education attainment industries: 20th/90.0% of US
Average wage in low education attainment industries: 12th/104.0% of US
Proportion of wages from high education attainment industries: 29th/90.8% of US
Proportion of adults with a four year degree: 34th/89.7% of US
Households with income 1.5 times the poverty rate or less: 32nd/105.1% of US

Households with income 4 times the poverty rate or more: 29th/91.3% of US
Per capita income: 39th/86.9% of US
Private sector employment earnings per capita: 36th/84.6% of US

Government employment earnings per capita: 46th/77.7% of US
Interest, dividends and rent per capita: 43rd/76.1% of US
Transfer payments per capita: 8th/111.0% of US

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