Crain's Detroit Business: Michigan's working poor grows to 43 percent of all households
· Nearly 1.7 million Michigan households in 2017 earned less than what they need to make
ends meet, according report released by Michigan Association of United Ways
· Health care and child care costs dominate budgets
· Association calls for increased child care subsidies and tax credits
Despite continued economic expansion and near record-low unemployment, Michigan's population of working poor is growing.
Nearly 1.7 million households in 2017 in the state earned less than what they need to make ends meet, a result of the fastest-growing jobs in Michigan being low-skilled and low-wage and increasing costs of living, according to a report released today by Michigan Association of United Ways.
The report determines the state's population of employed workers who fail to afford the basic needs of housing, child care, transportation, health care, technology and food. This group of workers are called ALICE (asset-limited, income-constrained, employed), a phrase coined by the United Way in 2009 to identify barriers to greater employment for low-income workers.
ALICE workers are those earning below the average cost to cover basic expenses, which the United Way defined as $61,272 a year for a family of four and $21,036 for a single adult. In Michigan, ALICE workers and those living below the federal poverty line — $14,380 a year for an individual and $25,750 a year for a family of four — has increased to 43 percent of households in 2017 from 40 percent of households in 2010, according to the report.
According to the report — the third in five years — 29 percent of households fall under ALICE and another 14 percent fall below the poverty line.
"Naturally, we think it should be getting better with unemployment going down and the economy doing well, but the increase of costs for health care, child care and housing are growing faster than the average salary," said Mike Larson, president and CEO of the Michigan Association of United Ways. "So while the overall economy seems to be doing better, the reality is more and more families are struggling to afford basic needs."
The bare-minimum "Household Survival Budget," defined by the United Way, has increased by 26 percent for a single adult and 27 percent for a family of four (defined as two adults with one infant and one toddler). For a family of four, this means earning full-time wages of $30.64 an hour to cover the bare-minimum budget, the report said, while a single adult would need to earn $10.52.
The major causes of the survival budget increase are health care costs and taxes (or lack of tax credits), which spiked 98 percent and 83 percent monthly between 2010 and 2017, according to the report. The tax increase is caused by higher prices for all other categories and higher relative earnings needed to cover expenses. The biggest cost remains child care, which averaged $1,122 monthly in 2017 for a family of four.
Rising cost of health care
Health care costs continue to cripple the working poor, largely due to an average 59 percent increase in out-of-pocket costs, as well as the addition of the Affordable Care Act penalty for not purchasing health insurance. So while Michigan expanded Medicaid coverage in April of 2014, the Medicaid eligibility cutoff remains only 138 percent of the federal poverty level, many ALICE families do not qualify, the report said.
Michigan workers simply can't get ahead of rising costs because jobs, while plentiful, do not pay enough. Roughly 61 percent of jobs in Michigan pay less than $20 per hour, with nearly two-thirds of those paying less than $15 per hour, according to data gathered for the report from the U.S. Bureau of Labor Statistics. The greatest jobs gains in Michigan between 2010 and 2017 were in occupations that paid between $9.43 per hour and $15.91 per hour.
Retail jobs, for example, increased 12 percent between 2010 and 2017, but wages only rose 5 percent. Assembly and fabricator jobs grew 64 percent between 2010 and 2017, but wages declined 1 percent over the same period, according to the study.
The low-wage problem is the biggest problem in metro Detroit. In Wayne County, 683,986 households, or 56 percent of all households in the county, were considered in the ALICE category or below the poverty line in 2017. In Macomb and Oakland counties, that figure was 39 percent and 32 percent, respectively.
Demographically, baby boomers are falling into the ALICE category at a greater rate than any other age group, according to the report. Between 2010 and 2017, working poor households where the primary earner was 65 years or older grew by 17 percent, according to the report. While all races saw increases in the working poor population, Hispanic and Asian households became poorer between 2010 and 2017, with increases below the ALICE threshold growing 28 percent among the Hispanic population and 43 percent among the Asian population in Michigan.
"The ALICE population is a silent population just working to get by," Larson said. "But the reality is they are a fragile population. If they don't have the money to fix their car, they lose their job. This is massive population that we rely on in our economy and each data point reflects a person or a family, so we need to find solutions."
No easy answers
The solutions, however, are often politically difficult and expensive.
The Michigan Association of United Ways recommends raising the child-care subsidy cap as one way to offer relief. In 2016, Michigan had the lowest income-eligibility level in the nation. In 2018, Gov. Rick Snyder increased the eligibility from 125 percent of the poverty line to 130 percent of the poverty line but the number remains too low, according to the United Way.
Legislators' inaction on moving the subsidy cap up as costs increases led to fewer families receiving child care assistance. In January of 2007, Michigan provided child care subsidies to 57,268 families, according to data from the Michigan League for Public Policy. But that dropped to only 17,047 families by January 2016, despite increases in the state's working poor.
The organization is also calling for Michigan to strengthen the Earned Income Tax Credit, which is a refundable tax credit for low- to moderate-income working individuals and families. Michigan caps its earned-income tax credit to 6 percent of the federal credit, where other states have raised it higher, such as 30 percent in Massachusetts and New York. United Way believes the credit should be 20 percent of the federal credit.
"Child care costs are a huge number for any family to afford," Larson said. "There's no silver bullet here, but we need to look at policy changes that are really impacting our ALICE families."