Changes in poverty, working poor
Michigan’s economic recovery has been uneven. Poverty is down in many places but the percentage of the working poor has continued to rise. Click on a county to see the changes from 2015 to 2017.
Source: Michigan Association of United Ways
More Michiganders, especially seniors, are struggling to afford basic needs, from food and housing to child care and transportation.
That’s the conclusion of a new report from the Michigan Association of United Ways, released Wednesday, that aims to identify the barriers the working poor — which the group identifies as ALICE, for “asset-limited, income-constrained, employed” — face in making ends meet.
This year’s report, using data from 2017, suggests there may be a silver lining amid the clouds: While 29 percent of Michigan’s 3.9 million households are considered to be ALICE, up from 25 percent two years earlier, a smaller percentage of households are living in poverty (14 percent, from 15 percent two years ago).
That’s promising, said Mike Larson, president and CEO of the Michigan Association of United Ways. Michigan’s unemployment rate is low, signaling more people are working, and it’s likely that households once in poverty now earn enough to be considered among the working poor.
Even so, they’re still in tough financial shape, Larson said. And the ALICE population is growing, too, because some households that previously had gotten by lost ground, due in part to stagnant wages and a rising costs of living, according to the report.
“ALICE plays a huge role in our economy,” Larson said. “They’re key to the success of our state, and so we need to focus and do everything that we can to lift them up and make them successful.”
Michigan’s first ALICE report was released in September 2014 and updated in 2017. The study attempts to quantify how many of the state’s households struggle to cover the costs of basic needs and recommends strategies for policymakers to help them become more financially secure.
Who’s ALICE in Michigan?
Among the report’s findings:
- The increase in Michigan’s ALICE households can be attributed in large part to those headed by seniors 65 and older, the report said. As of 2017, more than four in 10 senior households, 41 percent, could be considered ALICE. That’s up by 17 percent from 2010. These residents are living and, in many cases, working longer.
- ALICE households led by Michiganders ages 45 to 64 increased by 6 percent from 2010 to 2017, according to the report, indicating “a surprising drop in income for those in their prime earning years.”
- While the number of millennial households that can be counted as ALICE is flat or declining, many young adults can’t afford to live by themselves, according to the report. They’re also delaying marriage and parenthood.
- Single or cohabiting adults younger than 65, without minor children at home, are both the largest household type in the state and the largest number of ALICE households (44 percent of them in 2017).
ALICE is defined as earning more than the federal poverty limit — which, in 2017, was $12,060 for a single person and $24,600 for a four-person family — but not enough to afford financial security.
The amount an average ALICE household in Michigan would need to earn at a minimum to afford basic needs, known in the report as the “household survival budget,” in 2017 was $21,036 annually for a single adult, or $10.52 an hour. That budget rose to $61,272 each year for a four-person family with an infant and a preschooler, or $30.64 an hour. Those figures are up from $18,192 and $56,064, respectively, in 2015.
To be financially stable, this year’s ALICE study says that same single adult would need to earn $34,524 annually, or $17.26 per hour. Perhaps more controversially, the study concludes that a family of four with a baby and a preschooler would need to earn $114,372 a year, or $57.19 per hour.
The “stability budget,” as it’s called, accounts for “stability over time, as well as a reasonable quality of life, and peace of mind,” said Nancy Lindman, the Michigan Association of United Ways’ director of public policy and partnerships.
That stability measure would include safe housing in need of few repairs, licensed and accredited child care, a food budget based on the U.S. Department of Agriculture’s Moderate Food Plan that allows for one meal at a restaurant each month, a vehicle lease and employer-sponsored health insurance, Lindman said. Families above the ALICE income threshold are also more likely to be able to save money, which ALICE families generally are unable to do.
Employment trends influencing the ALICE population include a Michigan job market that is heavily skewed toward low-wage work that pays less than $20 per hour, according to the report. Most of the state’s job growth is in positions that pay hourly wages ranging from $9.43 to $15.91, according to the report, citing U.S. Bureau of Labor Statistics data.
Although unemployment remains low in Michigan — 4.6 percent in 2017, unadjusted for seasonal changes in employment, according to state data — more Michiganders were underemployed, meaning they wanted to work full time but often couldn’t find it. And expansion of the “gig economy” and contract work can create more financial instability, the report states.
Michigan’s ALICE report outlines strategies that state and local policymakers could focus on to help the working poor get through short-term economic downturns and build financial stability over time.
- Providing access to high-quality child care
- Investing in K-12 education
- Removing barriers to employment so ALICE workers can stay in their jobs
- Offering portable employment benefits that an employee can transfer from one job to another, and
- Public and private efforts to help ALICE households get through emergency financial situations, including access to low-rate credit
Other options, Larson said, could include increasing reimbursement payments to child care providers and increasing eligibility for subsidies for more families, increasing supports for children to boost early literacy and increasing Michigan’s Earned Income Tax Credit from 6 percent to 20 percent.
“There’s no silver bullet that just fixes this,” he said. “This is a systemic issue, and it’s going to take the business community, it’s going to take education, it’s going to take state and local governments (and) nonprofits coming together to look at ways to address the issue.”