Making a better future for the next generation in Michigan.

As the Pie Grows, So Grows the Family’s Slice?

Mar 29, 2023 | Economic Development, Economy, Income, Michigan, People | 0 comments

I like pies – especially apple pie à la mode. There is a different kind of pie, though. Some time ago pies became a metaphor for our economy. Some folks want to focus on growing the pie — making the economy bigger. Some folks want to make sure that everyone gets a fair slice of the pie.

Michigan’s Pie is growing

Reading over the economic development website of Michigan, you would think that both states are gung-ho pie growers. The Michigan Economic Development Corporation says, “For more than a decade, Michigan has been laser-focused on growing and strengthening its economy, and today the state is being increasingly recognized as a top place for doing business.”

Great. We are growing the pie, but I couldn’t find anything on the websites about how the pie gets sliced up. Michigan has powerful pitches for potential employers on the low cost of doing business, ease of obtaining capital, quality of life, assistance available, incentives, and the low cost of living. What does that do for the families of Michigan?

Wouldn’t it be nice if we also made a statement about how we intend our economic growth to benefit everyone in the state, especially those who have been left behind in the past. If prosperity were widely shared in our states, it could help us maintain a peaceful society, prevent crimes of financial need, improve family cohesion and health, and foster a sense of hopefulness in the next generation.

In the 2020s, we are setting the foundations for the 2040s when our children and grandchildren become voters. Will they be happy with us if we stay “laser-focused” on growing our economies without much focus on how that prosperity gets shared?

In the booming economy of 2019 just before the COVID-19 virus hit, a survey by the Pew Research Center showed a majority of Americans believed the economy was helping the rich while hurting the poor and middle class. A majority of today’s parents are probably transferring that belief to their kids.

How have Michigan been slicing it up?

I looked at our “real” economic growth and family income growth for the 10 years 2011 – 2021. “Real,” in this case means the effect of inflation has been removed. Figures from the Federal Reserve Bank of St. Louis show that Michigan’s economy grew by 15% while family incomes grew just 9%.

So, I concluded the families of Michigan are being left behind in all this business-oriented growth! Business owners and executives must be raking in profits from the growth and paying wage-earners as little as they can get away with. That’s what I thought at first.

Another part of the story

After mulling it over, it occurred to me that the population of Michigan was also growing during this 10-year period. Part of the economic growth was created by the newcomers. Each state had a base rate of growth from its starting population and additional growth from the new population.

I think the right way to compare economic growth and median family income growth is to subtract the change in population from the total economic growth. So here are the figures:

  • Michigan’s population only increased by 2%.
  • The base rate of growth for the existing population was 15% – 2% = 13%.
  • With median family incomes only going up 9%, there is a 4% deficit between the growth of the state’s economy and growth of family incomes during the 10-year period.

Even adjusting for different rates of population growth, it looks like the families’ slice of the pie got a little smaller over the decade. Executive salaries, business profits, taxes, or some unknown factors must have been grabbing a bigger share of the economy than they had at the beginning of the decade.

I don’t think the controversy between pie growers and pie slicers will end anytime soon. Growing the pie is great — common sense says no one benefits from a shrinking pie. The results of growth in Michigan over the last ten years, however, tells me that just growing the pie is not enough to keep the gap between wage-earning families and those with capital assets from widening.

If this trend is not reversed over the next ten to twenty years, we can expect the next generation to feel they are losing ground. We can’t expect them to sit still for that. Whether that fuels right-wing populism, left-wing socialism, emigration, or a nasty brew of all three is impossible to predict. Now is the time for the states’ leaders to study how we are slicing the pie and act.

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