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Income Slides

Mich. dips below U.S. median for 1st time
August 30, 2006
Gordon Trowbridge and Christine MacDonald
The Detroit News

T he income of the typical Michigan household fell below the national figure in 2005 as the state -- once a promised land for hourly workers -- slipped below the national benchmark for the first time since such figures became available.

Photo: Diane Rose, recently laid off from a secretary job with a local lumber company, and her mother, Theresa St. Laurent, prepare lunch in their Eastpointe home. "I don't know what the solution is," Rose said. "They are going to have to figure out something." (Todd McInturf / The Detroit News)

The median household income here was $46,038 last year, according to Census Bureau estimates released Tuesday. That's just under the national median of $46,242; the bureau called the figures a statistical dead heat. Since the Census Bureau began collecting such data in the 1960s, Michigan has never before trailed the nation.

Just 25 years ago, household income in Michigan ranked eighth among the states. But waves of restructuring by the auto industry knocked it down to 22nd in the latest estimates.

The numbers reflect real pain for thousands of Michigan workers, such as Lenard Desmarais of Clinton Township, who lost his $22-an-hour job with a Warren auto supplier in a round of March layoffs.

"I haven't been called back, and I don't expect to be," Desmarais said. "I am just this far from the proverbial crack that people fall into. There are days I wake up at 5 a.m. in a sweat."

After accounting for inflation, Michigan's median household income is up just barely from 2004 and represents a drop in inflation-adjusted terms from the 2000 census, when the state's median household income was about $52,000.

The numbers are sure to feed the election-year political debate over who bears the blame for the state's slide. And they highlight the struggles of the Big Three automakers, which still fuel the state's economy and whose problems, economists say, are at the heart of Michigan's problems.

Tuesday's release carried worrisome news for Metro Detroit:
Detroit remains at the top of the nation's poverty list. About 31 percent of Detroiters were below the poverty line in 2005, putting the city in a statistical tie with Cleveland as the poorest major city in America.
A second survey, also released Tuesday by the Census Bureau, shows the state's poverty rate increased in 2005. About 13.2 percent of Michiganians were living below the poverty line -- defined as $19,350 for a family of four -- compared with a 12.3 percent in 2004. That survey also showed the number of Michiganians without health insurance increased slightly, to 11.3 percent, though the increase was within the survey's margin of error.
Reflecting the state's struggles, the first income estimates for many local communities since the 2000 census show declines in inflation-adjusted income. But Census Bureau officials said Tuesday comparisons between the new data and 2000 census figures should be used with caution. Only results for communities with more than 65,000 residents were released.
GREAT LAKES AREA STRUGGLES

Michigan wasn't alone in the Great Lakes region; Indiana, Illinois and Ohio also fell in national income rankings.

The region's struggles threaten a vicious cycle that could make recovery increasingly tough, said Amy Rynell, director of the Mid-American Institute on Poverty in Chicago. As incomes fall, so do tax revenues and spending on education and training, and the region's workers fall further behind the rest of the nation, she said.

New jobs in the region increasingly are at either end of the spectrum, she said: high-skilled jobs for which many Midwesterners lack education and training, and low-wage, service-sector positions with little security.

"Neither of those benefit many people in the middle," she said.

The nationwide figures released Tuesday were received unenthusiastically by economists, who noted that Americans' incomes, when adjusted for inflation, continue to grow slowly despite healthy increases in economic activity -- a phenomenon likely to play a key role in the battle for control of Congress this fall. Still, the national poverty rate remained unchanged from 2004, the first year without an increase since 2000.
Michigan's fall below national norms is perhaps merely symbolic; much of the decline took place in the 1980s and early 1990s, and since then the state has largely been marking time.

But the change from the post-World War II period is striking.

Charles K. Hyde, an economic historian at Wayne State University, remembers being stunned when he arrived from New England in the early 1970s to discover that thousands of auto workers, with little or no advanced education, made enough money to buy cottages up north -- something unheard of for most Americans.

"It has been a state where people achieved middle-class incomes with basically a high school diploma," he said.
But increased foreign competition, oil shocks, an aging work force, a corps of well-compensated retirees and perceived lack of manufacturing quality -- all have knocked the Big Three, and Michigan, from their perches. The days of graduating from high school to a top-paying job are over, Hyde said.

Cathy Phelps can relate. The 48-year-old Grosse Pointe Woods woman recently was laid off from her human resources job at a Sterling Heights machine-tool contracting company.

"I thought I would retire from there," she said. "The owner thought I would retire from there." Instead, she's worried about losing her house and affording Christmas gifts for her granddaughter. She has 25 years of experience, but no college degree. "It's not good enough," Phelps said. "They want a piece of paper."

SOME FEEL OPTIMISTIC

Still, some experts said the gloomy feeling isn't permanent.

"Things recently have felt worse than they're going to because of the difficult restructuring going on in auto sector, and not an ongoing trend of Michigan falling farther and farther behind," said Dana Johnson, chief economist for Comerica Bank.

When the Big Three emerge from reorganizations now under way, Johnson said, Michigan is likely to recover.

Others -- workers as well as experts -- were not as confident.

"I don't know what the solution is," said Diane Rose of Eastpointe, recently laid off from a secretary job with a local lumber company. "They are going to have to figure out something."

"This downturn feels different to me," said Margaret Dewar, a University of Michigan expert on the economic development of troubled regions. Past downturns in the state economy have been tied to the nation's, she said.

"Right now, we're in trouble, and the rest of the nation isn't."

Wayne State's Hyde said he's troubled that Michigan, so closely tied to carmaking, is struggling even when auto sales are brisk.

CAMPAIGN REACTS

The campaigns for Michigan governor each had their own interpretation of the new numbers.

"This is just another indicator that Michigan is in desperate need of change," said John Truscott, spokesman for Dick DeVos' GOP gubernatorial campaign.

"We have fallen to the bottom of the barrel in so many key economic indicators The governor likes to blame everybody else. But look at the rest of the country, which is doing pretty darn well."

Chris DeWitt, spokesman for Gov. Jennifer Granholm's campaign, said it's an additional sign that outsourcing is causing severe harm to Michigan's economy.

DeWitt said millionaire DeVos' "income has risen dramatically, thanks to his lobbying to make it easier to outsource jobs to countries like China."

Larger issues than one election are in play, Hyde said: "I'm not sure that the outcome of the election is going to have much impact one way or another."

Detroit News Staff Writer Charlie Cain contributed to this report. You can reach Gordon Trowbridge at (202) 662-8738 or gtrowbridge@detnews.com.

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