The affordability crisis hit as Michiganders had been treading water for years. It’s time to solve it.
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Affordability is one of the most pressing concerns facing Michiganders today. The rising costs of essentials, coupled with stagnating wages, have created an economy that is out of reach, unfair and unsecure. Inflation-adjusted median wages in Michigan have only grown 3.9% since 1978, compared to 33% for the richest 1%. The good news is that we have solutions we know work well; the bad news is that counterproductive approaches are taking up the spotlight. What Michigan needs are policies that promote wage growth and create a fair and sufficient tax code.
Affordability means different things to different people, but at its core, it's how secure people feel about their finances. What makes people feel that life is affordable for them is creating an economy that is inclusive, fair, and that provides financial security. While lowering costs is necessary, boosting incomes for families with middle and low incomes is a far more effective and practical solution.
One way we can help workers with low incomes become more financially secure is by making the minimum wage a living wage. This means a full-time worker can afford food, shelter, medicine, and transportation, and have a little bit to save at the end of the month. Next year, the minimum wage is set to increase to $15 an hour, but 26.3% of Michiganders are working and still struggling to make ends meet. A $15 minimum wage is not enough to support most working Michiganders. Wages must be boosted.
We can also help support working Michiganders more broadly by supporting union growth across the state. In 1979, nearly 40% of Michiganders were represented by a union; this number has plummeted to 14.2%. As the number of organized workers in the state fell, inequality increased along both race and income levels. Increasing union representation helps increase wages sector-wide. Analysis shows that if Michigan's union representation rate increased to 30%, it could increase full-time wages by $6,400 per year -- a welcome pay increase for Michigan families.
In addition to these pro-labor policies, Michigan needs pro-tax policies that lower poverty, reduce inequality and help pay for public programs. In 2019, government transfers, including programs like Medicaid, Medicare, Social Security and cash benefit programs, comprised over 45% of disposable income for the bottom 60% of households in Michigan. In fact, if it were not for these transfers, inequality and poverty would be worse today than it already is. Despite the value of these programs, anti-tax advocates are claiming that taxes are a source of unaffordability rather than a solution.
But taxes here in Michigan are not a main contributor to the affordability crisis. In fact, Michiganders pay less in taxes than residents of 38 other states, including all of the Great Lakes states.
In fact, we currently pay less in taxes than we did in the past. If we taxed ourselves the same as we did in 2000, we would collect $14 billion in additional revenue. History shows low-tax policies make life more unaffordable because they require spending cuts to households with middle and low incomes to offset the loss in tax revenue. In addition to rising costs due to the Iran war and trade policy, federal tax cuts have increased the cost of living for nearly every group in Michigan, except the top 1%. The bottom 20% alone saw their cost of living increase by 4.5%, and they already pay a higher tax rate than the top 1%.
The cost of raising children has become a major financial hurdle for Michigan families, and tax credits can help families clear this hurdle. Cash programs like the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) account for over a third of all federal spending toward children, and when expanded in 2021, the CTC reduced Michigan child poverty by 73.3%. In 2024, over 1.5 million Michigan families claimed the CTC, putting $3.4 billion back into the state economy. In addition to the CTC, Michigan expanded the state's EITC in 2023, with households being able to claim up to 30% of the federal credit. In 2024, 14% of tax filers claimed the state EITC in Alpena, Alcona, Montmorency, and Presque Isle counties, with an average credit of $770, which put over $3 million back into Northern Michigan communities.
The solution to the affordability crisis is not just more tax revenue, but a tax system that makes all Michiganders, especially the wealthiest, pay their fair share. Instead of simply filling budget holes, lawmakers should see this as an opportunity to craft our tax code to support Michigan families.
Michigan policymakers have a lot of power, and an overdue responsibility, to raise the incomes of its residents by passing policies that are pro-labor and pro-tax, instead of lining the pockets of the richest households and major corporations. Anti-tax policies and anti-labor measures are two sides of the same coin -- both compound the ramifications of the other, leading to higher costs and higher inequity overall. This is an opportunity to reverse course towards a direction where public investments work for all.
If you would like to read more about this, The Michigan League for Public Policy has released two new reports on how Michigan can tackle the affordability crisis.