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Michigan has a growing gap between haves and have-nots

By Celeste Bott
Capital News Service

LANSING — Michigan has a widening income gap, according to a national study by the Center on Budget and Policy Priorities and the Economic Policy Institute.

The institute, a nonprofit research organization based in Washington, D.C., compared the incomes of the richest households to low- and middle-income households, showing inequality at the state level.

Elizabeth McNichol, co-author of the report and a specialist on fiscal issues, said that while income inequality is a national problem, state governments can make changes that can help close the gap and promote more economic growth.

“As state policymakers plan their budgets for next year, they should pursue policies that push back against the trend of rising inequality,” McNichol said. “States that narrow — rather than widen — income gaps will reap economic benefits in the long run.”

Actions state governments can take include raising the minimum wage, making tax systems less regressive, strengthening support for low-income workers and improving the unemployment insurance system, according to the institute.

The study — which measured Census Bureau income data from the late 1970s through the late 2000s — showed the widening income gap is primarily attributed to falling incomes of the poor.

According to the report, Pulling Apart: A State-by-State Analysis of Income Trends, there was an average 10.3 percent drop in incomes among the bottom 20 percent of Michigan households in the last decade.

The richest 5 percent of households have incomes more than space 12 times larger than the bottom 20 percent.

Michigan was one of 11 states where the incomes of the top 5 percent of households increased by 85 percent to 162 percent.

By contrast, income growth in the bottom fifth of households stayed below 27 percent in all those states, and Michigan was the only state in which they actually fell, according to the report.

Judy Putnam, communications director for the Michigan League for Public Policy, said the gap is largely due to long stretches of unemployment.

Karen Holcomb-Merrill, policy director for the league, said she agreed with McNichol that policy changes would reduce the economic divide.

“In years past, Michigan has been a shining example of an economy that works because of a strong middle class,’’ Holcomb-Merrill said. “We need to make sure our budget and tax system strengthen our low- and middle-income families rather than making life more difficult for them.”

Possible solutions include restoring the traditional unemployment period to 26 weeks instead of the current 20 weeks, returning the Michigan Earned Income Tax Credit to 20 percent and indexing the state’s minimum wage law to inflation to keep up with rising costs, according to the League.

Sheldon Danziger, a professor of public policy at the University of Michigan, researches the causes of such income gaps by studying the effects of economic policy changes on trends in poverty and inequality.

“Most economists cite several factors that have contributed to rising inequality,” Danziger said. “Labor-saving technological changes, the globalization of labor and product markets, immigration of less-educated workers, the declining real value of the minimum wage and declining unionization all contribute.”

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