Study Warns Michigan on Track to Join Mississippi, Alabama as Poorest States in per Capita Income
Study Warns Michigan on Track to Join Mississippi, Alabama as Poorest States in per Capita Income

By Steven Kovac

If present trends continue and no changes are made, Michigan is two decades away from becoming the 48th poorest state in the Union in per capita income, ranked just ahead of Mississippi and Alabama.

That is the warning from researchers Lou Glazer of the think tank Michigan Future Inc. and Donald Grimes, a University of Michigan economist.

The two scholars published the projection in a report called “A New Path to Prosperity?” released in late January—a follow-up to an earlier report that was issued in 2004.

Included in per capita income are things like wages, salaries, self-employment earnings, dividends, and interest.

The researchers examined economic data from 1969 to the present, a period they say aptly represents America’s transition from the “Industrial Age to the Information Age.”

In the new reality, work is increasingly centered in offices, schools, and hospitals rather than factories, they said.

Decline of Auto Industry Not Main Cause

The study found that auto manufacturing wages represented 15.5 percent of total Michigan personal income in 1999. The share was down to 7.9 percent in 2022.

Nationally, the figure dropped from 3.8 percent in 1999 to 2.1 percent in 2022.

In the auto manufacturing sector in Michigan, per capita earnings declined by 46 percent from 1999-2022.

The analysis discovered that the collapse of the auto industry is not the sole cause, or even the main cause, of Michigan becoming less prosperous relative to other states over the past 20 years.

Researchers found that the biggest contributing reason to the state’s economic decline is its failure to develop or attract sufficient numbers of high paying “Knowledge Economy” (white-collar) jobs that require a bachelor’s degree.

States with high concentrations of people between 25 and 34 years of age with a bachelor’s degree are now the drivers of economic growth, which in turn spurs personal income growth and overall prosperity, according to the study.

The team identified information, financial activities, professional and technical services, and the management of companies as the four Knowledge Economy jobs with the highest annual pay.

“These are the private sector industries that many believe are the main growth engines of the post-industrial economy,” the report said.

President Joe Biden speaks alongside Michigan Gov. Gretchen Whitmer (R) during a visit to a United Auto Workers (UAW) phone bank in the metropolitan Detroit area, Mich., on Feb. 1, 2024. (Mandel Ngan/AFP via Getty Images)

Failure to Keep Up With the Times

The study found that the growth rate of industry earnings in the Michigan Knowledge Economy was only two percent over 23 years (1999-2022).

For generations, the good-paying factory jobs of the former “Automobile Capital” of the world lured people seeking a better life from the American South and Europe to the assembly lines of Detroit, which came to be known as “Motor City.”

With the onset of World War II, Michigan earned the nickname the “Arsenal of Democracy.” War production further increased the need for workers, causing thousands of American women to join the state’s burgeoning factory labor force.

Now, Michigan’s population growth is stagnant, and the populace is becoming increasingly older. Educated young people are leaving the state in search of greater career opportunities. Michigan is shrinking relative to other states. Since 1996, it has gone from 18 electoral votes down to 15 in 2024.

Today, the once mighty manufacturing powerhouse ranks 39th in the nation in per capita income. The state ranked 16th in 1999 and 34th in 2019, and has since been trending lower.

“Michigan is now structurally one of the nation’s poorest states,” according to the report. “This is the opposite of where Michigan was in the 20th Century when the state was a relatively high prosperity state,” the report said.

Twenty years ago, Michigan’s annual per capita income of $45,943 was about average among the 50 states. But by 2022, it fell to 13 percent below the national average. That was Michigan’s worst showing since record-keeping began in 1929, according to the study.

A State in Free Fall

During the 1999-2022 period, real personal income per capita grew by $19,389 in the United States and by $11,095 in Michigan.

The study said, “If each state’s personal income per capita grew over the next 23 years at the same rate as between 1999 and 2022, Michigan would end up as the 48th poorest state” by 2045.

Over the years, another problem was Michigan’s lagging growth in income derived from investments. According to the study, “Capital income per capita grew slower in Michigan than the U.S. between 1999-2022 ($2,645 compared to $4,183).”

The study also reported another development with “very scary implications,” not only for Michigan but the entire country.

Between 1999 and 2022, transfer payments such as social security, disability, and welfare accounted for 55 percent of all personal income growth in Michigan and 31 percent of all personal income growth in the nation.

The 2024 “New Path to Prosperity?” report concluded by saying that in Michigan, “The story is basically the same today (as in 2004). There is still not enough focus on growing high-wage, high-educational attainment jobs, and increasing wages in these industries, except that Michigan is starting from an even poorer position today than it was at the beginning of this century.”

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