Growing and strengthening west Michigan's middle class
GRAND RAPIDS April 8, 2015– On paper these days, it seems the economy is steadily moving in the right direction. Employment numbers across the U.S.– and to a lesser extent, Michigan– are up. Consumer confidence is at its highest level since 2004. And corporations are raking in record profits.
But people don’t live on paper.
Even as the Department of Labor numbers show more people working, for many families it feels like it’s impossible to get ahead these days. Savings are dwindling, monthly bills are going up, and disposable income just isn’t what it used to be.
So if the economy is supposedly humming again, why are working families, especially here in west Michigan, feeling pinched?
Three words: Crippling wage stagnation.
According to the Economic Policy Institute, since 2007 (the year before the great recession), wages have stagnated or fallen across the board for American workers– despite GDP growth of 149% and productivity going up by 64% over the same period.
And here’s what wage stagnation looks like locally:
Kent County In 2012, the average weekly wage in Kent County was $824. That number rose only 0.2% in 2013. In 2014, it rose 0.7% (through the first three quarters).
In 2013, the nation’s inflation rate (based upon the Consumer Price Index) was 1.5%. The next year, it was 0.8%
That means in 2013, working men and women in Kent County saw their wages increase 0.2%, while the price of goods and services rose 1.5%. For 2014, it wasn’t quite as bad, but working families’ pay increases were still less than the national rate of inflation.
Ionia County Things are even worse in Ionia County. In 2012, the average weekly wage was $550. That number dropped 1.5% in 2013. In 2014 (through the first three quarters), it dropped an additional 2.2%.
That means the working men and women of Ionia County are finding themselves in a very bad place these days. They’re earning almost 4% less than they were in 2012 (more than $1000/year), even as the price of goods and services have gone up almost 2.5%.
(Source: Bureau of Labor Statistics)
So if you live in west Michigan, and you feel like you just can’t get ahead these days, it’s not your imagination. The price of everything– rent, transportation, groceries, utilities, healthcare and other consumer goods– has gone up at a faster clip than most of our incomes have.
The trend of middle class incomes shrinking isn’t anything new– it’s just been accelerating quicker as union density drops and employers are hiring more part-timers post-recession.
Back in 1964, when Michigan’s union density was higher than any other state at 44.8%, working families actually saw their incomes increase at a faster rate than inflation.
First off, inflation rates, in the mid-60s, were similar to what they are now. In 1965, the inflation rate rose 1.6% from the year before. And in 1966, it rose 2.9%.
But the major difference was that between 1964 and 1965, median wages rose 6%. Wages grew even more from ’65 to ’66– by 8%. When union density was high, it wasn’t uncommon for U.S. median income to increase by more than three times the inflation rate from year to year.
As union membership has dropped, though, so has organized labor’s ability to help raise standards across the board. Now, with company management given more power to set wages, workers have very little influence over how the company’s (record) profits are distributed.
Think union membership only benefits union members? Think again. When it comes to paychecks, the entire American middle class is feeling the effects of labor’s reduced negotiating power. Which means the only way back to middle class prosperity is for organized labor to re-commit to organizing new labor.
By the numbers:
Percentage of Michigan’s workforce in unions, 1964: 44.8%
Percentage of Michigan’s workforce in unions, 2014: 14.5%
Median wages increased: 14%
U.S. inflation rate: 4.5%
American families saw their real income increase by almost 10% over that two year period
Kent Co. median wages increased: 0.9%
Ionia Co. median wages decreased: 3.7%
U.S. inflation rate: 2.3%
Families in Kent County have seen their real income decrease by 1.4% over that two year period, while families in Ionia County have seen their real income decrease by 6% over that same period.