A L I C E ASSET LIMITED, INCOME CONSTRAINED, EMPLOYED September 2014 STUDY OF FINANCIAL HARDSHIP UnitedWayALICE.org/Michigan UNITED WAYS IN MICHIGAN Albion-Homer United Way United Way of Clare and Gladwin Counties Allegan County United Way United Way of Delta County Barry County United Way United Way of Dickinson County Branch County United Way United Way of Eastern Upper Peninsula Capital Area United Way United Way of Genesee County Char-Em United Way United Way of Gratiot County Cheboygan County United Way United Way of Isabella County Chelsea United Way United Way of Jackson County Copper Country United Way United Way of Lapeer County Crawford County United Way United Way of Manistee County Eaton County United Way United Way of Marquette County Gogebic Range United Way United Way of Mason County Greater Huron County United Way United Way of Midland County Greater Ottawa County United Way United Way of Monroe County Heart of West Michigan United Way United Way of Montcalm-Ionia Counties Lenawee United Way United Way of Northeast Michigan Livingston County United Way United Way of Northwest Michigan Marshall United Way United Way of Saginaw County Mecosta-Osceola United Way United Way of Sanilac County Ogemaw County United Way United Way of Southwest Michigan Oscoda Area United Way United Way of St. Clair County Otsego County United Way United Way of the Battle Creek and Kalamazoo Region Plymouth Community United Way United Way of the Lakeshore Roscommon County United Way United Way of Tuscola County Shiawassee United Way United Way of Washtenaw County St. Joseph County United Way United Way of Wexford and Missaukee Counties Tri-City Area United Way Van Buren County United Way United Way for Southeastern Michigan United Way of Bay County This report was powered by CMS Energy. NATIONAL ALICE ADVISORY COUNCIL The following companies are major funders and supporters of the United Way ALICE Project. AT&T | Atlantic Health System | Deloitte | Novartis Pharmaceuticals Corporation | UPS NOTE: In addition to the corporate sponsorships, this Report was made possible by the United Ways noted above. LETTER TO THE COMMUNITY Dear Michiganders, We all saw the physical devastation that Hurricane Katrina brought to New Orleans in 2005, and we watched Superstorm Sandy pummel the Northeast seven years later. But the effects of other types of storms aren’t always quite as clear. A decade-long economic decline capped by the Great Recession hit Michigan’s communities with hurricane force, hobbling the auto industry, bruising wages, and destabilizing families statewide. No one has been hit harder by that gale than ALICE. ALICE is an acronym for Asset Limited, Income Constrained, Employed – those among us who are working, often at more than one job, yet still falling behind. No matter how hard these Michiganders try, they can’t get ahead; and as you will learn in the pages of this Report, all of Michigan’s communities ultimately pay a price for that. There was a time in my life when ALICE was me. I grew up on a family-run potato farm, and I saw how much of their lives and energies my father and his brother put into that. But perhaps the biggest challenge we faced came in the 1980s, when my father left farming to work as a welder. Thanks to the strength of our family structure, we made it through that transition, but I saw ALICE often in those years. Without enough educational opportunities, and faced with barriers at every level, from income to child care to transportation, ALICE families struggled then as they struggle now. The magnitude of that struggle in Michigan is greater than most of us imagine. What we learned about ALICE in the process of creating this Report is startling: today, 40 percent of Michigan households earn too little to provide for basic needs, and nearly two-thirds of jobs statewide pay less than $20 per hour. Changing the lives of ALICE families in Michigan means keeping three things in mind: Michigan is vast. From our southeast corner to the tip of the Upper Peninsula is a 12-hour drive. Measuring need and providing services to households across that area – including those in small, isolated rural communities – is an enormous challenge. Michigan is varied. Ask out-of-staters about Michigan and they tend to think of Detroit; yet the state’s geographic, demographic, and economic variety is astounding. One-fourth of the state’s population lives in rural areas. One-third of the city of Dearborn claims Arab heritage, and the four-county area around Detroit boasts one of the largest Arab populations outside the Middle East. And Michigan’s economy, built on a backbone of manufacturing industries, now extends far beyond that core, with major universities, a $91.4 billion agriculture industry, and a newly burnished focus on “Pure Michigan” tourism and recreation. Michigan was built by workers. Think of the successes driven by the labor movement in the U.S., which created phenomenal overall gains for families across the country. Michigan’s goal now is to make the state more of an economic destination, rebuilding wage levels and, especially, creating more urban job opportunities for young adults – people in their twenties and thirties who will be the future of Michigan’s workforce. To accomplish any of this, we have to go back to our roots, to our most basic beliefs about opportunity. If two adults in a family both work full-time, should their income be enough to cover their bills? By getting to know ALICE in the pages of this Report, I hope that we can come closer to having a common language to describe the lives of this group of workers and the challenges that they face. And I hope that readers come to realize what a key role ALICE plays in all of our lives, every day – teaching our children at preschool, getting food to our tables, providing the array of services that make Michigan run for all who live here. By strengthening ALICE individuals and households, we fortify all of Michigan’s communities. With this Report, we look forward to taking the first significant step on that path. Sincerely, Scott Dzurka, President and CEO, Michigan Association of United Ways THE ALICE PROJECT ALICE Asset Limited, Income Constrained, Employed Though we have chosen a woman’s name, this population is comprised of households with men and women alike, and includes children and seniors. United Way is committed to ensuring that our communities are viable places to live and work. To do that, we promote current research, community dialogue, and data-driven policy solutions. These elements form the basis of one of United Way’s broadest and fastest-growing initiatives – the United Way ALICE Project. ALICE was coined by United Way in 2009 after a pilot research project looked at the low-income population in affluent Morris County, one of the five founding communities which merged in 2011 to become United Way of Northern New Jersey. The original study focused primarily on data from 2007, largely before the effects of the economic downturn, known as the Great Recession, were widespread. The value of this research was immediately evident: ALICE became a part of the common vernacular in Morris County, helping define a need and a focus for United Way’s work. ALICE also began to appear in many grant applications, in the media, and in public forums discussing need in this “wealthy” community. It quickly became clear that ALICE extended far beyond the borders of Morris County. In 2011 United Way commissioned a second ALICE study looking at all counties in New Jersey. That Report relied primarily on data collected in 2007 and 2010, measuring the impact of the Great Recession and offering a broader illustration of the challenges ALICE households face. The Report’s findings were stark: fully 30 percent of New Jersey households earned too little to provide basic necessities, and more than half the state’s jobs paid less than $20 an hour. With the forecast for low-wage jobs to continue to dominate the job market, the reality is that ALICE will continue to play an integral role in our communities for the foreseeable future. That is why ALICE has become a central part of all aspects of United Way’s work. Now the ALICE Project has expanded to five additional states, with ALICE Reports being released in California, Connecticut, Florida, Indiana, Michigan and New Jersey. The baseline information established in New Jersey’s 2012 study allows these new Reports to compare our progress as the country’s economic conditions continue to change and, in some cases, improve. We challenge stakeholders in every state to consider the ALICE Reports and their measures as an opportunity for a new dialogue around how to make our communities viable places to live and work. As more and more states embrace ALICE, our hope is that this Report and its companions can serve as a model for the nation. ALICE RESEARCH About Rutgers University-Newark’s School of Public Affairs and Administration (SPAA) In developing the ALICE Project, United Way has partnered with Rutgers University-Newark’s School of Public Affairs and Administration (SPAA), an educational leader in government and non-profit management and governance. Ranked 10th nationally in public management and administration, SPAA promotes an ethics-based performance approach to effective, equitable, and accountable policy implementation through its innovative and comprehensive undergraduate, professional and graduate degrees and certificate programs. The school’s faculty generates knowledge and best practices in public service and administration, and collaborates with public and nonprofit sector organizations and professionals throughout the U.S. and the world. Guided by the principles of knowledge, competence, diversity, and service – with an emphasis on public service values and competencies for effective performance – SPAA promotes accountability, transparency, and performance in the public and nonprofit sectors. The ALICE Research Team Stephanie Hoopes Halpin, Ph.D., assistant professor at the School of Public Affairs and Administration, Rutgers-Newark, and lead researcher and author of the United Way ALICE Report Assisted by: Jeff Backstrand, Ph.D. Joanne Dick Quintus Jett, Ph.D. Cynthia Stein Lessick Jyoti Punjabi Kelly Robinson, Ph.D. Minglu Wang, M.A. Jonathan Woolley and Marc Holzer, Ph.D., Founding Dean, Board of Governors Distinguished Professor, School of Public Affairs and Administration, Rutgers-Newark ALICE Research Advisory Council for Michigan Jennifer Callans, Ph.D., United Way of Southeastern Michigan David Callejo Perez, Ph.D., Saginaw State Valley University David Clifford, Ph.D., Eastern Michigan University Lee Coggin, Ph.D., Baker College of Muskegon Huda Fadel, Ph.D., Blue Cross Blue Shield Jane R. Johnson, M.A., Department of Human Services, Muskegon County Joshua Long, M.S., Data Driven Detroit Barbara Mitzel, Consumers Energy Amy Palmer, M.A., Lenawee United Way Brian Pittelko, MPA, W.E. Upjohn Institute for Employment Research Greg Pordon, M.S.W., Michigan Department of Human Services, Washtenaw County Peter Raurk, M.A., Michigan League for Public Policy Luke Shaefer, Ph.D., University of Michigan Bridget Timmeney, M.S.W., W.E. Upjohn Institute for Employment Research Special Thanks to Michigan Tax Advisor Marshall J. Hunt, CPA, Director, Tax Services, Accounting Aid Society TABLE OF CONTENTS EXECUTIVE SUMMARY �������������������������������������������������������������������������������������������������������������1 INTRODUCTION ������������������������������������������������������������������������������������������������������������������������6 N I� WHO IS STRUGGLING IN MICHIGAN? �������������������������������������������������������������������������������������9 Measure 1 – The ALICE Threshold A II� HOW COSTLY IS IT TO LIVE IN MICHIGAN? ��������������������������������������������������������������������������26 G Measure 2 – The Household Budget: Survival vs. Stability I III� WHERE DOES ALICE WORK? HOW MUCH DOES ALICE EARN AND SAVE? ����������������������������32 H IV� HOW MUCH INCOME AND ASSISTANCE IS NEEDED TO REACH THE ALICE THRESHOLD? �����40 Measure 3 – The ALICE Income Assessment C V� WHAT ARE THE ECONOMIC CONDITIONS FOR ALICE HOUSEHOLDS IN MICHIGAN? ��������������45 I Measure 4 – The Economic Viability Dashboard M VI� THE CONSEQUENCES OF INSUFFICIENT HOUSEHOLD INCOME �������������������������������������������55 CONCLUSION – FUTURE PROSPECTS FOR ALICE HOUSEHOLDS ���������������������������������������������69 N APPENDIX A – INCOME INEQUALITY IN MICHIGAN ������������������������������������������������������������������78 APPENDIX B – THE ALICE THRESHOLD: METHODOLOGY ���������������������������������������������������������79 I APPENDIX C – THE HOUSEHOLD SURVIVAL BUDGET: METHODOLOGY AND SOURCES �������������82 E APPENDIX D – THE HOUSEHOLD STABILITY BUDGET: METHODOLOGY AND SOURCES �������������84 C APPENDIX E – THE ALICE INCOME ASSESSMENT: METHODOLOGY AND SOURCES ������������������86 I APPENDIX F – THE ECONOMIC VIABILITY DASHBOARD: METHODOLOGY AND SOURCES ���������89 L APPENDIX G – HOUSING DATA BY COUNTY �����������������������������������������������������������������������������91 A APPENDIX H – KEY FACTS AND ALICE STATISTICS FOR MICHIGAN MUNICIPALITIES ����������������93 APPENDIX I – MICHIGAN PROSPERITY REGIONS BY INCOME ������������������������������������������������142 APPENDIX J – ALICE COUNTY PAGES ������������������������������������������������������������������������������������143 BIBLIOGRAPHY ��������������������������������������������������������������������������������������������������������������������227 EXECUTIVE SUMMARY Across Michigan, 40 percent of households struggle to afford the basic necessities of housing, child care, food, health care, and transportation. While it is well recognized that Michigan has faced daunting economic times with the decline of the auto industry and the Great Recession, the official poverty rate of 16 percent obscures the true magnitude of the financial instability in the state. The official U.S. poverty rate was developed in 1965, has not been updated since 1974, and is not adjusted to reflect cost of living differences across the U.S. A lack of accurate measurements and even language to frame a discussion has made it difficult for states – including Michigan – to identify the extent of the economic challenges that so many of their residents face. This Report presents four groundbreaking instruments that measure the size and condition of households struggling financially, and it introduces the term ALICE – Asset Limited, Income Constrained, Employed. The Report includes findings on households that earn below the ALICE Threshold, a level based on the actual cost of basic household necessities in each county in Michigan. It outlines the role of ALICE households in the state economy, the public resources spent on households in crisis, and the implications of struggling households for the wider community. Using realistic measures of the financial survival threshold for each county in Michigan, the Report reveals a far larger problem than previously identified. Michigan has 605,210 “ALICE households households below the Federal Poverty Level (FPL) but also has 930,503 ALICE households, which have income above the FPL but below the ALICE Threshold. These numbers are are forced to make staggering: in total, 1.54 million households in Michigan – fully 40 percent, and more difficult choices... than double the number previously thought – are struggling to support themselves. These “savings” ALICE households are working households; they hold jobs and provide services that are threaten their vital to the Michigan economy in positions like retail salespeople, team assemblers, truck health, safety, and drivers, and nursing assistants. The core of the problem is that these jobs do not pay enough future – and they to afford the basics of housing, child care, food, health care, and transportation. The growth of low-skilled jobs is projected to outpace that of medium- and high-skilled jobs into the next reduce Michigan’s decade. At the same time, the cost of basic household necessities continues to rise. economic There are serious consequences for both ALICE households and their communities when productivity and these households cannot afford the basic necessities. ALICE households are forced to make raise insurance difficult choices such as skipping preventative health care, accredited child care, healthy food premiums and or car insurance. These “savings” threaten their health, safety, and future – and they reduce Michigan’s economic productivity and raise insurance premiums and taxes for everyone. The taxes for everyone.” costs are high for both ALICE families and the wider community. N A G HI C MI – T R O P E R E C LI A Y A W D E T NI 1 U MAJOR FINDINGS Who is ALICE? Four in 10 households in Michigan struggle to afford basic household necessities. Based on the most recent data from 2012, 605,210 households live in poverty and another 930,503 are ALICE households. Between the two categories, 1.54 million households in Michigan have income below the ALICE Threshold. ALICE households exist in all age groups. ALICE exists even in households headed by someone in their prime earning years, 25 to 64 years old. In fact, this age group represents the largest segment of ALICE households, reiterating the fact that most jobs in Michigan do not pay enough to allow families afford the most basic household budget. “All counties in Michigan have more ALICE and poverty-level households are spread across all counties in Michigan. All counties in Michigan have more than 27 percent of households living below the ALICE than 27 percent of Threshold. In addition, most towns (73 percent) have more than 30 percent of households households living living below the ALICE Threshold. In Detroit, 38 percent of households have income below below the ALICE the FPL and another 29 percent are ALICE households. Threshold.” ALICE households represent a cross-section of Michigan’s population. Contrary to some stereotypes, ALICE households have a wide range of demographic compositions. As in Michigan’s overall population, more than 77 percent of the state’s ALICE households are White (U.S. Census terminology). However, due to wage discrepancies that disproportionately affect certain groups, it is not surprising to find female-headed households, Blacks, Hispanics, people living with a disability and recent unskilled immigrants over-represented in the population living below the ALICE Threshold. What is the gap between ALICE’s household income and the cost of basic expenses? ALICE households are working or have worked. However, ALICE and poverty-level households earn only 39 percent of the income needed to reach the ALICE Threshold for basic economic survival. Public and private assistance is not enough to lift ALICE households to economic stability. The income of ALICE and poverty-level households is supplemented with $30.6 billion in government, nonprofit and health care resources. Despite these public resources, ALICE and poverty-level households remain 13 percent short of the income needed to reach the ALICE Threshold. What causes the prevalence of ALICE households? N A The cost of basic household expenses in Michigan is more than most jobs can G HI support. Even though the cost of living in Michigan is among the most affordable in the C MI U.S., a basic household budget is beyond what most jobs in the state can provide to working – households. The annual Household Survival Budget for the average Michigan family of four RT O is $50,345 and for a single adult is $16,818. These numbers highlight how inadequate the P E R U.S. poverty designation is as a measure of economic viability, at $23,050 for a family and E C $11,170 for a single adult. The annual Household Stability Budget – one that enables not just LI A Y A W D E T 2 NI U survival, but self-sufficiency in Michigan – is almost double the cost of the Household Survival Budget: $22,849 for a single adult and $92,409 for a family of four. Michigan became less affordable from 2007 to 2012. Despite the Great Recession and the low rate of inflation, the cost of basic housing, child care, transportation, food, and health “Housing care in Michigan increased by 9 percent during this five-year period. affordability, job Economic conditions worsened for ALICE households from 2007 to 2012. Housing opportunities, affordability, job opportunities, and community support worsened in all counties in Michigan and community through the Great Recession, as measured by the Economic Viability Dashboard, a new index that tracks these three economic measures. Two years after the end of the Recession, support worsened conditions have improved but have not returned to 2007 levels. Finding both housing in all counties in affordability and job opportunities in the same county remains a challenge for Michigan through ALICE households. the Great Recession, Michigan’s housing stock does not match current needs. Across the state, there are not as measured by the enough rental units that are affordable: there are almost twice as many renters with income Economic Viability below the ALICE Threshold as there are rental units that they can afford. At the same time, while there are housing units where ALICE households can afford the mortgage, these Dashboard.” households do not have the down payment or do not qualify for a mortgage. What are the consequences of insufficient income for ALICE families and their communities? ALICE households suffer without sufficient income. When ALICE households do not have enough income, they have to make difficult choices to reduce their expenses. For example, if a family cannot afford child care in an accredited facility, they may substitute with an overworked neighbor or an inexperienced relative, jeopardizing their child’s safety and learning opportunities. Other short-term strategies such as skipping preventative health care, home maintenance, or a bill payment may have longer-term penalties, such as poor health, fines, and larger bills in the future. Families with children are leaving Michigan. Higher income is especially important for families with children because of their greater budget costs. Without job opportunities in the state, one option is to move. From 2007 to 2012, the number of married-couple families with children in Michigan fell by 14 percent, the number of single female-headed households with children decreased by 5 percent, and single male-headed households with children decreased by 2 percent. ALICE households pay more for goods and services. ALICE faces increased expenses through basic cost of living increases, as well as greater costs for using alternative financial products. Through the Great Recession and a period of low inflation, a time when the cost of most goods and services decreased, the cost of basic household necessities continued N to increase. In addition, without access to mainstream borrowing, ALICE households in A HIG Michigan resort to using riskier financial options, such as payday lenders, “Buy Here Pay C Here” car loans, and “contract for deed” home purchases. MI – T R The whole community suffers when ALICE has insufficient income. When ALICE O EP children are not ready for school, they add a burden to the educational system. When ALICE R E households cannot afford preventative health care, they are more likely to place future C LI burdens on the health care system, increasing insurance premiums for all. When ALICE A Y A W D E T NI 3 U