Opinion | It's past time for us to focus on Michigan's economic mobility

One of Americans’ fundamental beliefs is that where you start shouldn’t determine where you end. Working hard, taking advantage of opportunities, and persisting in the face of obstacles should allow anyone to get ahead.

But the fact is that far too many people are stuck on the lower rungs of a new economic ladder that is much more difficult to climb under the existing rules.

Rates of upward income mobility in America have fallen sharply over the past half-century, according to a study recently published by the organization Opportunity Insights, a team of researchers and policy analysts who analyze data to help policymakers make informed decisions.

This recent study found that 90 percent of those born in 1940 grew up to earn more than their parents. Today, only half of all children do. 

This not only contradicts the idea that America is the land of opportunity, it also deflates the hope of many generations of parents — that their children will prosper beyond their own situations.

The study also noted that, although economic mobility fell in all 50 states, it declined most sharply in Midwest states, particularly Michigan.

This decline in economic mobility is occurring at the same time Michigan is gradually  becoming a low prosperity state. The think tank Michigan Future notes that Michigan incomes have declined relative to the country, with per capita income going from 1 percent above the national average in 2000 to 14 percent below the national average today. In addition, the Michigan Association of United Ways recently found that 43 percent of Michigan families—1.7 million households—do not have sufficient means to pay for basic necessities.

It is past time for us to focus on this concern. Severe income disparity without opportunity to move up economically and socially is not good for political stability and social cohesion. The interconnected issues of growing income inequality and declining economic mobility will continue to tear at the fabric of society until they are reversed.

Stagnant mobility costs society by stunting overall economic growth and the opportunities that accompany it for individuals at all income levels. Creating a society and economy that reward work, effort, and achievement would be one in which fewer families are dependent on taxpayer-funded public assistance. The social safety net would realize its original purpose of being temporary.

The causes of declining economic mobility and rising income inequality are many, varied, and complex. One simple solution doesn’t exist. To build a consensus across party lines, both Republicans and Democrats must also be willing to abandon ideological rigidity. Work and personal responsibility matter, but so do government and public funding.

State policy makers can start by focusing on three issues: (1) increasing child care subsidies; (2) expanding the Earned Income Tax Credit; and (3) changing Michigan’s school funding approach.

Child care: The lack of affordable and accessible child care is keeping too many individuals — particularly single parents of young children — out of the workforce. This hurts businesses that need workers and individuals who want to escape poverty by working. Although Michigan today helps subsidize child care costs for low income families, the program reaches far too few families. We should try a new approach in which government spending leverages financial contributions from elsewhere, such as private employers, to increase the income eligibility level.

Improve the state EITC: Direct public assistance can provide basic necessities for those in need, but the best way out of poverty and up the economic ladder is to work. The federal Earned Income Tax Credit (EITC), initially signed into law by President Ford and later substantially expanded by President Reagan, provides a tax credit for working individuals with low incomes. Research shows it helps keep families off welfare and has lifted millions above the poverty line.

A bipartisan coalition of state lawmakers came together to pass Michigan’s Earned Income Tax Credit in 2006, giving  tax filers a tax credit on their state income taxes equal to 20% of their federal EITC. Unfortunately, this state tax credit was later reduced to 6 percent of the federal EITC. Restoring the Michigan EITC to its initial level would put more money back in the pockets of working Michiganders with low incomes by rewarding work, critical to economic advancement.

Fund local schools based on student need: Education has even more important in a knowledge-based economy that increasingly demands more advanced skills. Compared to other states, however, Michigan’s levels of education achievement and performance are abysmal, and the levels of achievement for low income students are even worse. While money alone does not drive improvement in learning outcomes, it does matter. Increases in spending have been shown to improve educational attainment and lead to higher wages and reduced poverty in adulthood, particularly for students from low-income backgrounds.

Michigan’s current funding system does not provide funding according to individual student need, but rather provides equal state funds to all students. Children from disadvantaged backgrounds often need more resources to catch up with children from more well-off families. Low-income students often enter kindergarten classrooms already behind academically and usually require more services to catch up. These students are found in all areas of Michigan—urban, suburban and rural school districts.

A differentiated funding formula — providing more money to educate children from low-income families — is used in high-achieving states like Massachusetts and Minnesota and fast-improving states like Florida. It’s also a system that has been pushed by a variety of education and business groups that have studied ways to improve Michigan schools.

Implementing a school funding formula to reflect student need would help start every child on a path to economic prosperity, but it certainly isn’t enough. Given that a four-year post-secondary degree or its equivalent is increasingly becoming the foundation for achieving a middle class lifestyle, Michigan also needs a much stronger commitment to a K-16 perspective with its education policy if it truly desires to expand opportunity.

The COVID-19 crisis is inviting us to ask fundamental questions about government, society, and the economy: what public services are essential, how they should be structured and delivered, and whether we should do things differently than in the past.

There is no better time than now to restore economic mobility to its rightful place on the public agenda.

Making child care more affordable and accessible, expanding Michigan’s EITC, and basing the state’s school funding formula on student need would move the needle on economic and social mobility in Michigan, and are vital to improving our state’s overall economy.

Signed:

Former Lt. Governor John Cherry (D)

Former Senate Democratic Leader Bob Emerson (D)

Former State Representative Pam Faris (D)

Former State Representative Joe Haveman (R)

Former House Speaker Paul Hillegonds (R)

Anne Mervenne (R), former senior staff member for Gov. John Engler

Former Senate Majority Leader Ken Sikkema (R)

Former House Democratic Floor Leader Steve Tobocman (D)