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More and better jobs?

Oct 30, 2014

Incumbent Republican Governor Rick Snyder has been vague about what he would do in the next four years in office, saying only, "We're on the road to recovery." He also says he'll pursue "more and better jobs." Political observers expect Snyder will continue on the path he's established, working to stimulate businesses while keeping a tight rein on state spending.

Photo tweeted by Snyder campaign.

In an ad, Snyder says, "Our unemployment rate is the lowest in six years with nearly 300,000 new private-sector jobs." 

At 7.2 percent, unemployment is the lowest it's been in six years in Michigan, but the governor fails to note it's still among the highest rates in the nation. Michigan's unemployment rate is the eighth worst in the country. The national average is 5.9 percent.

Michigan started recovery far behind the rest of the nation, but is improving at a faster rate. Unfortunately, that's still not very good. The national economy is not growing at a pace most economists would like to see. Even with Michigan's faster improvement, it's still slow growth and it still leaves Michigan on average worse than the rest of the nation.

In that ad, Governor Snyder also takes credit for an increase in employment that actually began under his predecessor, Jennifer Granholm. The annual average employment hit bottom in 2009 and began improving in 2010, during Granholm's final year in office.

Data from the Bureau of Labor Statistics Quarterly Census of Employment and Wages.
Credit Mark Brush / Michigan Radio

The job growth trend began before Snyder was elected. There are now 289,000 more people working than in the depths of the recession. 

As we've reported previously, Don Grimes, an economist at the University of Michigan, says once you factor out the effects of the improving national economy and the resurgence of the auto industry, there’s not much credit for the  governor to take.

“You’re probably looking at about a 10,000 to 15,000 job gain each year that cannot be explained by the national economic growth or cannot be explained by the strong performance of the auto industry. And that’s sort of a maximum that Governor Snyder can be really claiming, in the nature of 10,000 to 15,000 jobs,” Grimes said.

In an email response to a draft version of this blog, Grimes wrote, "The problem is not the relative number or the type of jobs we are creating. We are doing much better than other states in creating 'good' jobs." Grimes argues  the problem is that the wages for people in their existing jobs have not gone up faster than inflation during the recovery.  He adds, "Adding a couple of percentage points of jobs, even if they pay above average wages, is just not going to move the needle on what the median person is getting paid."

More, but not better

One of the benchmarks to determine whether there are better jobs is the median household income. Michigan, like much of the nation, has lost ground.

Median household income in Michigan. Data from the Bureau of Labor Statistics. Adjusted to reflect 2013 dollars.
Credit Mark Brush / Michigan Radio

Adjusted for 2013 dollars, the median household income in Michigan has fallen from a high of $56,204 in 2006 to $48,801 in 2013. That's a loss of $7,403. While the median household income did begin to increase in the first two years of the Snyder administration, last year it lost ground, falling to its lowest level in more than decade. The national median household income for 2013 was $52,250.

Credit Lester Graham / Michigan Radio

Being a relatively rich state before the recession and adjusting to being a poorer state now leaves many in Michigan trying to determine which direction we should take to find that wealth again. A large tax cut for businesses was supposed to kick start the Michigan economy. Right to Work legislation was supposed to lure more businesses. So far, there is underwhelming evidence that either of those moves is contributing to Michigan's recovery.

While Michigan's job growth has been disproportionately high in the manufacturing sector, the higher wages you'd expect for those jobs have been tempered by changes in the auto industry. The lower-waged "tier two" wage system negotiated by the automakers and the UAW means newer jobs pay far less than jobs in the past. That's contributed to that lower median household income in Michigan.

The one place high-paying jobs have seen significant growth is among white collar workers within the auto industry. However, the numbers are not large enough to drag the state's median household income up. Even if it did, it would only serve to show the growing inequality between average workers and the well-educated professionals filling the offices of the automakers' headquarters.

Percentage of those working down over the decade

Another trend to examine is the percentage of the population who have a job. The national employment participation rate (called the "employment-to-population ratio" has been falling. Until recently, Michigan's rate has been falling. Many people are simply dropping out of the labor market. Currently the national rate is at 59 percent. That is, only 59 percent of the population 16 years and older has a job. In Michigan that rate is lower at 55.9 percent.

Percent of the population in Michigan actually employed. Data from Bureau of Labor Statistics.
Credit Mark Brush / Michigan Radio

Some out-of-work people have left the state because they couldn't find jobs. Some people have been forced to take jobs because they ran out of welfare benefits, a goal of putting time limits on welfare. And as mentioned, some new jobs were added because of the resurgence of the auto industry.

Michigan State University economist Charles Ballard observed, "Some have stayed in school, some have gone on disability, some have taken retirement earlier than they planned." He says the most troubling, though, is the able-bodied folks who have just given up looking for work.

Combined with other factors, that's meant the employment participation rate has risen slightly since Governor Snyder took office.

Getting a greater percentage of people back to work is the sign of a healthy economy. Before the recession, more than 60 percent of the population was actively working.

The claim that there are more jobs in Michigan than during the depths of the recession cannot be disputed. Whether there are better jobs seems a lot less certain. Michigan's recovery started far behind the rest of the nation. While it has made speedier progress than some other states, it still lags behind the performance of the national average in most respects.