Time to end income inequality

pdficonJuly 2016
Legislative Coordinator, Rachel Richards

Michigan’s top 1% makes 22 times more than rest of workers

Time to end income inequality chart 1Michigan’s income inequality is a persistent and increasing problem that has a negative impact on the state’s residents and economy.1 Between 1947 and 1979, incomes at all levels increased at relatively similar rates for Michigan residents as well as nationally. In the late 1970s, there was a significant divergence as most of the income growth started going to the top earners and leaving the rest of Michigan residents behind.

Time to end income inequality chart 2Over the next 30-plus years, Michigan incomes fared worse than most of the rest of the nation. Between 1979 and 2013, overall incomes actually fell in the state. However, income decline in the bottom 99% solely caused this decline. In 1979, the top 1% of Michigan households held about 9% of the total income in the state. By 2013, the share of state income taken home by this group had nearly doubled to 17.9%, while the rest of Michigan residents saw their incomes decline.

Major income disparities exist between different genders and races. In 2014, Michigan women working full time still made only 74.6 cents for every $1 a full-time working male made. This is below the national average and ranks Michigan as one of the worst states in the Midwest region, trailing all of our immediate neighbors. In addition, women of color, and most men of color, continue to have lower median incomes than white, full-time working men.

Time to end income inequality chart 3Why Does This Matter?

Simply put, poverty in Michigan—especially for children—is still too high, and our state’s economic recovery is leaving too many people behind. Many workers have full-time jobs, but are still barely getting by as they struggle to provide for their families. At the same time, Michigan continues to favor policies that benefit the wealthy, such as its regressive tax structure, while reducing, capping and eliminating programs that help the most vulnerable.

Unfortunately, income inequalities do not simply affect what ends up in your bank account. According to the national Economic Policy Institute, increasing inequality might lead to lower income mobility in future generations. Lower-wage earners are less likely to have access to employer-sponsored health insurance coverage and paid sick and family leave, and are more likely to have underfunded retirement accounts. Income gaps affect the ability to pay for healthcare or save for retirement or a child’s college education, and reducing these gaps will have a positive impact on Michigan’s residents, communities and economy.

Time to end income inequality chart 4What Can Policymakers Do to Reduce Income Inequality?

Although income disparities at all levels continue at the national level, Michigan can implement state policies that can help bridge the divide:

  • Improve working conditions: Michigan’s minimum wage is improving, and will rise to $9.25 per hour by 2018. However, more can be done to help Michigan’s lowest-paid workers, such as further raising the minimum wage or eliminating the tipped wage to narrow the gap. Expanding access to high-quality child care would allow more low-wage earners the ability to find more secure and higher-paid employment. Finally, enacting earned paid leave policies would provide workers the necessary flexibility to care for themselves or family members without risking losing money or even their jobs.
  • Improve tax implications: Currently, Michigan’s lowest-income earners pay a higher rate in total state and local taxes than Michigan’s top earners; in fact, they pay nearly double the rate of the top 1%. Restoring Michigan’s Earned Income Tax Credit (EITC) to 20% of the federal credit, expanding the Homestead Property Tax Credit or implementing a fairer income tax, such as a graduated income tax, would let Michigan’s lowest-paid workers keep more of their hard-earned wages.
  • Improve job opportunities: As our economy expands, more jobs will require at least some college education, if not a certification, associate degree or bachelor’s degree. Improving K-12 education—especially for children at risk of educational failure, increasing adult education and expanding access to post-secondary education would help retool Michigan’s workers for its new economy.

For almost four decades, Michigan’s income gap has been widening and it’s time to change that. State lawmakers must do more to adopt policies that will strengthen our economy, alleviate poverty and reduce income inequality for Michigan workers.

Time to end income inequality chart 5

 

 

 

 

 

 

 

 

 

 

 

Endnote

  1. Estelle Sommeiller, Mark Price, and Ellis Wazeter. Economic Policy Institute. Income inequality in the U.S. by state, metropolitan area, and county. Economic Analysis Research Network (EARN) Report. June 16, 2016. American Community Survey 1-year estimates, 2014. PolicyLink/PERE, National Equity Atlas, www.nationalequityatlas.org.