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Michigan and income inequality

Mar 27, 2015

One of the most significant stories in America is also one of the most neglected by both the politicians and the media. Over the last thirty-five years, there has been a massive redistribution of income in Michigan  and the country from the poor to the rich.

There are mountains of economic data confirming this. According to a study by best-selling economist Thomas Piketty, the share of the nation’s income captured by the top one percent went from less than 10 percent to almost 24 percent just before the Great Recession.

Since the recovery began, the inequality has become even more pronounced. In Michigan, according to a study by the Economic Policy Institute, the top one percent captured 82 percent of all income growth.

That was actually not quite as bad as the national average.

But it’s bad enough to be a significant long-term threat to democracy.  Yet – is there anything an individual state can do about this?

Isn’t income inequality the result of national and, to some extent, global policies?

I asked Michigan State University economics professor Charles Ballard about this. He’s the author of Michigan’s Economic Future, and one of the top experts on the economy in this state.

To my surprise, he told me that while this was indeed a national problem, there were things an individual state could do about it, and some things Michigan has been doing right.

Perhaps the most important is the resources we’ve been pouring into early childhood education. “That won’t have an effect that will show up in the income data for a long time,” he said, but it will have a positive impact decades from now.

Expanding the number of people eligible for Medicaid is also huge, far more than the statistics show, he told me. That’s because while it makes a big difference to those who have it, it doesn’t show up in the normal definitions of income.

Ballard also thinks the increase in our minimum wage is positive. Yes, it may make it harder for some marginal and young workers to find work, but that will be outweighed by the positive effect on low-wage workers, whose spending causes a ripple effect through the whole economy.

But we are making some big mistakes too, the economist said. He likes the Snyder administration’s skilled trades initiatives, but he thinks what he calls a 'policy of systematic dis-investment in higher education' is, and will be, a huge long-term disaster.

Ballard would recommend reversing those cuts and making it easier for kids to attend college. He also would extend the K-12 school year to two hundred days.

He said

“the evidence is overwhelming that the long summer break is bad for educational outcomes.”

That’s especially true for the poor. He feels strongly that Michigan and its citizens would be better off if we had a graduated state income tax, and he would also extend the sales tax to services and entertainment, since these are more often consumed by higher income groups.

There may not be a lot of political will to do these things, but the lessons of history make it clear vast income inequality is a threat to any society, and perhaps to democracy most of all.     

Jack Lessenberry is Michigan Radio's political analyst. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.