Lopsided income growth hurts Michigan

Added January 26th, 2015 by Judy Putnam | Email This Entry Email This Entry
Judy Putnam

The top 1% in Michigan earned 25 times the income of the bottom 99%, a new report from Economic Policy Institute concludes.

The report ranks Michigan as the 15th most unequal state in the country and offers new evidence on why Michigan policymakers should refuse more tax cuts so that they can invest in building the skills of a 21st century workforce.

In Michigan, inequality looks like this:

•    $942,993 a year on average for the top 1% of taxpayers.
•    $37,324 average annual income for the rest.

And what does it take to be a top 1% in Michigan? An income of $300,570 lets you in. It’s much harder to get to the very top – 0.01%. For that, you have to have income of nearly $7 million a year or more.

The report for the Economic Analysis and Research Network looks back to 1917 to find that income inequality – measured from the top to the bottom – is as large has it has been since 1928.

Since the Great Recession ended, incomes for the top 1% grew faster than the incomes of the bottom 99% in every state except West Virginia. In Michigan, the top 1% percent captured 82% percent of income growth in the period following the Great Recession.

“This is clear evidence why the economic recovery has not been felt by all  families in Michigan — only those who were already doing well,’’ said Gilda Z. Jacobs, president and CEO of the Michigan League for Public Policy, an EARN affiliate, said in today’s news release on the report. “Our lawmakers should look to this as they create the next budget. They should resist more tax cuts so that Michigan can help struggling families and grow the skilled workforce we need.’’

The lopsided growth is not new. From 1979 to 2012, the top 1% in Michigan saw a 115% jump in income. Meanwhile the bottom 99% realized nearly a 17% decline. Overall, income declined by 5%.

The report comes on the heels of a forum I attended last week hosted by the Institute for Public Policy and Social Research at Michigan State University. At the forum, I was reminded that it could have been far worse in our state.

Charles Ballard, MSU economics professor and vice chair of the League’s board of directors, cited research estimating that without the successful rescue of the auto industry, 1 million more jobs would have been lost in the Great Recession – most of them in Michigan and Ohio.

Michigan has 500,000 fewer jobs today than it did at the peak employment year in 2000, Ballard noted.

As the EPI report concludes, Michigan already has a large and growing income inequality problem. It’s hard to imagine what that would look like if tens of thousands or even hundreds of thousands of good-paying auto manufacturing jobs disappeared in addition to the 850,000 Michigan jobs that evaporated between 2000 and 2010.

— Judy Putnam

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