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The real State of the State: Amid boom times, potholes line Michigan’s economic path

The real State of the State: Amid boom times, potholes line Michigan’s economic path
Monday, Feb 11, 2019

February 10, 2019 
There are potholes in Michigan — and not just in the roads.

Potholes in household income. Potholes in the percentage of working adults. Potholes in student achievement and funding for K-12 schools. And potholes in post-secondary educational credentials needed to fill in-demand jobs.

After nine years of economic growth that replaced seven-in-10 of the jobs lost in the Great Recession, there are signs of long-term trouble as Democratic Gov. Gretchen Whitmer prepares to deliver her first assessment of Michigan’s standing in a State of the State address Tuesday to the Republican-controlled Legislature.

The data that researchers use to compare the economic vitality of individual states paints a picture of a Michigan that’s nowhere near achieving the “top 10 state” status long-desired by business leaders.

Economists say the workforce shortages many employers are experiencing can be traced to both a skills gap among adults and too few people working.

Michigan’s employment-to-population ratio ranks 38th in the country at 57.8 percent. The national average is 59.5 percent, and Midwest rival Minnesota has more than two-thirds of its residents working, according to U.S. Census data analyzed by University of Michigan economist Donald Grimes.

Minnesota also has a better-educated and younger populace than Michigan, which is in the bottom tier of oldest states as measured by median age.

Minnesota households earn on average $68,388 annually, 15 percent more than Michigan households that average $54,909 annually, according to U.S. Census data.

Median household income in Michigan is about 10 percent below the national annual average of $60,336.

Per capita income among working adults who are not retired was $29,348, ranking Michigan 33rd in the country in this category of earnings from just paychecks.

The weak showing is directly tied to educational attainment.

Michigan ranks 33rd in median household income and 31st in the percentage of adults over age 25 with a bachelor’s degree. When adjusted for cost of living, Michigan is still at 33rd.

To climb up the national prosperity ranks, Michigan needs to increase its number of high-income workers and retirees, Grimes said.

“Ironically, the states that do the best job in attracting and retaining these individuals don’t necessarily have the lowest tax rates, but they have the amenities that wealthy people want,” said Grimes, assistant director of the Center for Labor Market Research at UM’s Economic Growth Institute.

Lower-paying jobs on the rise: 62 percent

The Michigan Association of United Ways’ most recent study of the state’s workforce showed 62 percent of workers were earning less than $20 per hour in 2015.

Topping out at $41,600, workers earning under $20 per hour were living well below the $56,064 annual income for a family of four that the United Way group calculates is needed to cover housing, food, prescription drugs, taxes, utilities and childcare.

“We’re talking about 40 percent of the population in Michigan struggles to pay just basic bills,” said Mike Larson, president and CEO of the Michigan Association of United Ways.

The Michigan Association of United Ways labels these Michiganians as “ALICE,” which stands for “Asset Limited Income Constrained Employed.”

“They’re working — and sometimes one, two or three jobs,” Larson said.

The 2017 ALICE report, which is due to be updated next month, shows that the percentage of Michigan’s workforce earning under $20 per hour has been steadily growing since the Great Recession.

The number of jobs paying less than $20 an hour increased 7 percentage points from 55 percent in 2007 before the housing market crash and bankruptcies of General Motors and Chrysler.

“The reality is we’ve got to get good-paying jobs,” Larson said. “But we’ve got to have people who are educated and trained to do those jobs.”

Student achievement is stagnant: 40th and 42nd

Those are the reading and math score rankings for Michigan’s fourth graders in 2017 compared to other states in the annual National Assessment of Educational Progress (NAEP) rankings.

The 2017 test scores — the most recent data available — were a slight improvement from the previous year.

But fourth-graders in Michigan were testing just below fourth-graders did in 2003, a reflection of stagnant or no growth in student achievement over the past 15 years, according to NAEP data.

“Unfortunately, while Michigan’s rankings in some subjects have improved since 2015, this is due to larger declines in other states — not because Michigan has made significant improvement in student learning,” according to The Education Trust-Midwest, a Royal Oak-based education research organization.

Fourth-grade test scores for Detroit schools remain worst in the nation among large urban districts, as average student achievement scores on NAEP tests dropped five points between 2015 and 2016, according to Education Trust-Midwest.

Test scores for fourth-graders are how Michigan’s youngest students get measured against other states.

But the academic achievement of third-graders is what education policymakers are most worried about.

Between 2003 and 2015, Michigan is one of five that had negative improvement for reading scores among third graders, according to Ed Trust’s 2018 report, “Top Ten for Education: Not by Chance.”

The stakes for this year’s second-graders are higher than ever as they are the first class that will be subjected to a new law requiring third-graders to be reading at their grade level or they can be held back.

Michigan State University researchers published an extensive study last month linking a decline in student achievement to per-pupil spending declining by 30 percent from 2002 to 2015 when adjusted for inflation.

Michigan ranked “dead last among states in total education revenue growth since the passage of Proposal A” in 1994, according to the report authored by MSU Professor David Arsen and two doctoral students.

Lagging Midwest competitors in higher ed: 43.7 percent

Michigan’s overall postsecondary education attainment rate of 43.7 percent of adults over age 25 ranks 36th nationally, lagging behind Midwest rivals Minnesota (54 percent), Illinois (51 percent), Kansas (50.7 percent), Iowa (47.6 percent) and Ohio (44.1 percent), according to the Lumina Foundation’s 2018 report, “A Stronger Nation.”

The state’s pool of workers with a high-level certificate, associate’s degree, bachelor’s degree or higher also lags more than three percentage points behind the national average of 46.9 percent.

When just accounting for adults with a bachelor’s degree or higher, the educational achievement rate is much lower.

As of 2015, just 28 percent of Michigan adults older than age 25 had completed a bachelor’s degree, according a data analysis from The Education Trust-Midwest.

The gap is within Michigan as well. In just 10 of Michigan’s 83 counties, the rate of post-secondary educational achievement exceeds the statewide average. That group of counties includes Oakland County (56 percent) and Washtenaw County (62.5 percent). It does not include the state’s most populous county (Wayne County, 32.2 percent) or the third-most populous county (Macomb County, 37.9 percent), according to the Lumina Foundation’s 2018 report.

Michigan is one of nine states that has no statewide post-secondary education attainment goal written into state law or strategic plan for improvement, according to a 2017 study by the Indianapolis-based Lumina Foundation.

“Michigan’s attainment rate is 44 percent, but it has not formally established a statewide attainment goal that meets Lumina’s criteria for rigor and efficacy,” the Lumina Foundation wrote in its 2018 report.

The Lumina Foundation has set a nationwide goal of 60 percent of adults having some form of post-secondary education by 2025 — a goal adopted by the Michigan College Access Network.

The Michigan College Access Network has defined the effects of a less-educated workforce this way: Of 100 ninth-graders in Michigan, 73 graduate high school on time, 45 enroll in college or trade school within a year of graduating high school, 32 remain enrolled from their first to second year and 18 graduate within six years.

The “damn” roads are getting worse: 79 percent

That’s the percentage of state trunkline roads — freeways, state highways and main thoroughfares like Gratiot, Woodward, Grand River and Michigan avenues — that the Michigan Department of Transportation rates as being in good or fair condition.

But the forecast is not good.

Metro Detroit’s sprawling suburbs alone have a combined 2,000 miles of county roads rated in fair or poor condition that need to be resurfaced or totally reconstructed.

The Southeast Michigan Council of Governments estimates Livingston, Macomb, Monroe, Oakland, St. Clair, Washtenaw and Wayne counties alone need $1.2 billion more annually over the next 25 years to get 80 percent of roads in good or fair condition.

SEMCOG analysis of state-by-state transportation spending found Michigan was expected to spend $179 per capita on road construction in 2018, 39 percent less than the national average. Every Great Lakes state except Ohio spends more than twice as much per capita on road construction, according to SEMCOG.

Whitmer made fixing Michigan’s “damn” crumbling infrastructure the cornerstone of her campaign for governor.

It was a message based largely around criticism of former Gov. Rick Snyder and the Legislature’s 2015 road-funding plan to gradually invest $1.2 billion more annually in the state’s roads by 2021.

By every estimate, that plan is not meeting the immediate or long-term needs of Michigan’s highways, county roads and city streets — not to mention underground infrastructure, which has been spotlighted by Flint’s lead contamination water crisis, major water and sewer main breaks in the suburbs of Detroit and emerging PFAS underground drinking water contamination in multiple corners of Michigan.

“Michigan’s roads now require an additional $2 billion dollars annually to fix because there are 20 percent more roads in poor condition today than there were in 2015,” the nonpartisan Senate Fiscal Agency said in a recent memo.

While the 2015 plan has produced record spending for roads, the Michigan Department of Transportation projects the actual pavement conditions on state roads will to continue to decline.

In 2021, when the 2015 road funding plan is fully funded, MDOT projects 57.5 percent of the state’s highways and trunklines will be rated in good or fair condition, down from the current 75 percent rating.

And in nine years, based on the pace of current road-funding revenue sources, MDOT projects 57 percent of roads will be in poor condition.

“To keep prolonging this, it’s just going to exacerbate the problem — we’re going to end up spending more money,” MDOT Director Paul Ajegba told senators last week during a committee hearing.

Source: Crain’s Detroit

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