September 2015 Peter Ruark, Senior Policy Analyst Seema Singh, Policy Fellow Labor Day Report: Economic Recovery Eludes Many Michigan Families While Michigan s unemployment numbers have returned to pre-recession levels, and jobs con nue to be added, economic recovery is s ll extremely far-off for the 17% of Michigan individuals and 23.4% of Michigan children living in poverty. 1 There are a number of factors that help explain why economic improvements have not reached all families in the state, including con nuing high underemployment, the persistence of long-term unemployment and racial dispari es in unemployment. Addressing long-term unemployment and suppor ng workers who are stuck in part- me or low-wage work remains crucial. Understanding and reducing racial dispari es in unemployment is also key. State policymakers must adopt policies that will support families working toward economic security. These include reasonable unemployment insurance and a living wage, as well as investment in adult educa on and postsecondary training that connect workers to jobs that enable them to support their families. nothing about the loss of workers from the labor force over me. The good news about Michigan s unemployment rate must be seen in light of a significantly shrinking labor force and an increasing share of the state s working-age popula on that is no longer in the labor force. In 2000, when Michigan s economy was at its best in many decades, the unemployment rate was 3.6% and 69% of working-age adults in Michigan were working or ac vely looking for jobs. In 2009, when Michigan had its highest annual unemployment rate in recent years (13.7%), its labor force par cipa on rate had fallen to 63%. Since then, despite the unemployment rate improving each year, the labor par cipa on rate has fallen to less than 61% in Michigan. Michigan s labor force par cipa on rate was 60.5% in 2014 despite its lowest unemployment rate in many years, and was far below the Midwest labor force par cipa on rate of 65% (Figure 1). 3 Figure 1 MANY WORKERS IN MICHIGAN ARE STILL NOT BACK TO WORK Michigan s unemployment rate dropped to 5.3% in July 2015, the lowest it s been since 2001. 2 While this is something to celebrate, it masks the fact that labor force par cipa on is low and that many workers have simply stopped looking for work. The unemployment rate measures the percentage of the labor force that wants to work but is not working; it does not measure the percentage of the working-age popula on that is unemployed or has le the labor force en rely. It also says Labor Force Participation Rate 2000-2014 (Michigan Unemployment Rate Shown for Selected Years) 3.6% 13.7% 7% 10.4% 7.3% Source: Economic Policy Institute Analysis of Current Population Survey Data PROMOTING ECONOMIC SECURITY THROUGH RESEARCH AND ADVOCACY 1223 TURNER STREET SUITE G1 LANSING, MICHIGAN 48906 P: 517.487.5436 F: 517.371.4546 WWW.MLPP.ORG A UNITED WAY AGENCY
Number Unemployed Number Employed Total in Labor Force Michigan Unemployment Rate Compared With Total Number of Workers Source: Bureau Labor Statistics 2000 2004 2009 2011 2014 186,452 356,785 669,741 488,672 347,972 4,976,322 4,705,591 4,233,803 4,198,276 4,402,307 5,162,774 5,062,376 4,903,544 4,686,948 4,750,529 In addi on to the labor force par cipa on rate being low, Michigan s labor force itself is shrinking. Michigan s workforce has lost many workers in the past 15 years. In 2000, there were 5.16 million workers in the labor force (this includes all adults currently employed and unemployed), but by 2014, Michigan s labor force was comprised of slightly more than 4.75 million workers a loss of more than 412,000 workers since 2000 (Figure 2). 4 Workers leave the workforce for a variety of reasons: re rement, moving out of state (in some cases to look for Figure 2 or accept work), incarcera- on, full- me paren ng, a ending school full- me and death. Using 2000 as a baseline, in 2011, the number of Michigan s lost workers surpassed the number of currently unemployed workers. Although by 2014 the state regained some of its workforce, the number of lost workers con nues to exceed the number of unemployed workers (Figure 3). It is in this context of a shrinking labor force and a low labor force par cipa on rate that we must view the decreasing unemployment rate. The state s unemployment rate alone is not a sufficient measuring s ck and Michigan certainly has a long way to go to recover from the past 12 years of a poor economy. UNDEREMPLOYMENT AND LONG-TERM UNEMPLOYMENT While the number of jobs has increased and there are fewer unemployed workers, many of the jobs that were Unemployed Workers Versus Lost Workers Figure 3 Number of Unemployed Workers During Year Workers Lost Since 2000 (difference between number of workers during year and number of workers in 2000) Source: Local Area Unemployment Statistics MICHIGAN LEAGUE FOR PUBLIC POLICY SEPTEMBER 2015 PAGE 2
Unemployment and Underemployment Rates in Michigan Figure 4 reason to believe that the effects of the Great Recession remain, and many workers have simply given up searching due to limited supply of stable, livingwage employment. RACIAL DISPARITIES IN UNEMPLOYMENT AND WAGES created in recent years have been low-wage, part- me jobs that do not bring families out of poverty. Currently, 25% of workers over 18 are in low-wage jobs and almost a third (32.4%) of working families in Michigan are lowincome (below 200% of the federal poverty line). 5 It should be no surprise, then, that despite the decreasing unemployment rate, Michigan poverty remained high in 2013 at 17% total and 23.4% for children. This is made clearer when taking into account marginally-a ached and involuntary part- me workers. 6 These workers are not counted in the unemployment rate, but are factored along with unemployed workers into Michigan s underemployment rate of 13.9%, the fi h highest in the na on (Figure 4). 7 Unemployment in Michigan is generally higher and median wages lower for people of color. African-American and Hispanic workers in Michigan have much higher rates of unemployment than white workers. Although all three races of workers have benefited from reduced unemployment rates since 2010, in 2014 the unemployment rate for African- Americans was almost three mes as high as the rate for whites, worse than in 2010 when the rate was just over two mes as high. (Figure 5). While wages have remained generally flat over several decades for workers at large, there is a wide gap between whites and African-Americans due to a significant decline in wages for African-Americans. Economists offer several explana ons for this, mostly res ng on the greater impact the recession had on African-American communi es due to more limited assets compared to whites. 9 Since 2010, while the median wage of white Michigan workers changed very li le (-$.09), that of African-American Figure 5 Michigan s long-term unemployment share (the percent of jobless workers who have been unemployed for more than half a year) was at 6.5% during Michigan s economic boom in 2000, but was 34.8% in 2014. 8 While this is an improvement from 49.8% at its height in 2010, the current rate remains a cause for concern. It is unclear whether the decline is due to a true reduc on in longterm unemployment or to workers dropping out of the labor force en rely. With labor force par cipa on dropping from 63% when the unemployment rate was at its peak to 60% in 2014, there is Change in Unemployment Rate by Race During Michigan's Economic Recovery MICHIGAN LEAGUE FOR PUBLIC POLICY SEPTEMBER 2015 PAGE 3
workers declined by a significant amount (-$2.23). 10 It is clear that African-Americans have not shared in Michigan s economic recovery to the degree that whites have (Figure 6). POLICIES TO HELP FAMILIES RECOVER A number of decisions by policymakers over the last five years have made it harder for families to make ends meet and move out of poverty. The length of me needy families can receive cash assistance has been cut drama cally, an asset test for food assistance has limited those who have access to food, and a cut to the Michigan Earned Income Tax Credit has raised taxes on low-income working families. In light of persistent long-term unemployment and racial dispari es in unemployment, policy changes are needed to help promote economic security. Modernize Michigan s Unemployment Insurance Program Unemployment insurance is a safety net for workers who have become unemployed, but in Michigan, it is not as effec ve as it could be. Currently, many Michigan workers are ineligible to access unemployment insurance benefits, and except in situa ons of work-sharing, the benefits are not available to workers when an employer needs to reduce hours during low-profit periods. Modernizing the system to allow workers who through no fault of their own have their hours cut, allowing part- me workers to receive benefits, and restoring the 26-week maximum (from the current 20-week maximum) are ways to improve Michigan s current system. Michigan can also make unemployment benefits available for workers Figure 6 Change in Median Wage by Race During Michigan's Economic Recovery who choose to leave work based on scheduling issues if the worker is unable to accept the posi on a er an agreed-upon trial period. These steps will give unemployed and underemployed workers the support they need as they look for work. 11,12 Adequately Fund Adult Educa on for Low-Skilled Workers Adult educa on serves the segment of the popula on that does not have the basic skills necessary to gain secure, family-suppor ng employment, or to succeed in occupa onal training that leads to such employment. Yet year a er year, state policymakers neglect to adequately fund this key workforce development program, making it less accessible for low-skilled workers who want to build their skills, become financially self-sufficient and contribute to Michigan s economy. Be er funding for adult educa on, along with expanding it into places such as community colleges and Head Start programs, will enable it to meet the demand more effec vely. 13 Restore Postsecondary Financial Aid Grants for Older Students The decision to get trained in new skills is o en made more than 10 years a er gradua on from high school. While state financial aid helps many students of tradi onal college age, there are no state financial aid programs to help students a end public community colleges or universi es if they have been out of high school for more than 10 years. Two of the three exis ng state grant programs explicitly exclude such individuals from eligibility, and the third is available only to those a ending private, not-for-profit ins tu ons. In 2009, grants specifically for older students were cut from the state budget. The Michigan Legislature had an opportunity to restore these grants during the budget process in 2015, but declined to do so. MICHIGAN LEAGUE FOR PUBLIC POLICY SEPTEMBER 2015 PAGE 4
Raise the Minimum Wage Due to the nature of the recent economic recovery and the reality of many newly created jobs being low wage and part me, maintaining the current four-step minimum wage increase as enacted by law is essen al. Indexing the minimum wage each year therea er based on either infla on or wage averages also has the poten al to li a significant number of families and children out of poverty. Ensuring that jobs pay a fair wage is an opportunity to provide workers with the financial support they need to succeed. ENDNOTES 1. Michigan League for Public Policy, Michigan Families Con nue to Struggle Since Recession, December 2014. 2. Bureau of Labor Sta s cs. 3. Economic Policy Ins tute Analysis of Current Popula on Survey data. 4. Bureau of Labor Sta s cs. 5. Working Poor Families Project data generated by the Popula on Reference Bureau from the American Community Survey. 6. Marginally-a ached workers are individuals not in the labor force who want and are available for work and who have looked for a job some me in the prior 12 months, but were not counted as unemployed because they had not searched for work in the four weeks preceding the survey. (Discouraged workers and condi onally interested workers are a subset of the marginally a ached.) Involuntary part- me workers are individuals who work fewer than 35 hours due to inability to find full- me work or seasonal declines in demand and who want and are available for full- me work. 7. Economic Policy Ins tute, op.cit. 8. Ibid. 9. Pew Research Center, Wealth Inequality Has Widened along Racial, Ethnic Lines since End of Great Recession, December 2014. 10. Economic Policy Ins tute, op.cit. 11. Ben-Ishai, Liz, Rick McHugh and Claire McKenna, Out of Sync: How Unemployment Insurance Rules Fail Workers with Vola le Job Schedules, Na onal Employment Law Project, August 4, 2015. 12. Michigan League for Public Policy, Falling Short: Michigan s Unemployment Insurance Compares Poorly with Other Midwestern States, November 2011. 13. For more informa on, see Michigan League for Public Policy, Willing to Work and Ready to Learn: More Adult Educa on Would Strengthen Michigan s Economy, March 2015. MICHIGAN LEAGUE FOR PUBLIC POLICY SEPTEMBER 2015 PAGE 5