LANSING – The gap between the state’s poorest households and richest has again increased, a national study by the Center on Budget and Policy Priorities and the Economic Policy Institute shows, and Michigan residents have generally fared worse than higher-income households since the late 1970s.
While incomes for the richest fifth of households grew nearly 50 percent from the late 1970s to the mid-2000s, incomes for the poorest fifth dropped almost 4 percent, a statement by the Michigan League for Public Policy noted. It also said the incomes of the top fifth of households in the mid-2000s earned 7.5 times the average income of the bottom fifth, as compared to the top fifth making less than 5 times as much as the poorest fifth in the 1970s.
The top 5 percent of wage earners in Michigan had income more than 12 times larger than the bottom fifth in the mid-2000s, the study showed.
“State tax policy must address the growing wage gap in Michigan because it is harmful for all in our state,” Karen Holcomb-Merrill, policy director of the Michigan League for Public Policy, said in a statement. “As Gov. Snyder prepares next year’s budget, he must offer ideas that make our tax system less regressive instead of growing the economic divide. Tax cuts that benefit Michigan’s richest households without helping poor and middle-income are the wrong way to go.”
Across all states, the average income of the richest fifth of households was 8 times that of the poorest fifth as of the late 2000s. New Mexico, Arizona, California, Georgia and New York ranked among the top five states with the largest gaps. Iowa had Wyoming had the lowest gaps, with a rich-to-poor differential of 5.6 and 5.9 times, respectively.
Nationally, incomes fell by close to 6 percent among the bottom fifth of households on average and rose by 8.6 percent among the top fifth from the late 1990s to mid-2000s.
In Michigan, the shift from manufacturing jobs to service jobs was seen as a key reason for the widening income disparity, the league said. The gap is rising across the nation, however, because of long periods of unemployment, more intense competition from foreign firms and a minimum wage that has not kept up with price increases.
The league called for restoring the traditional period of unemployment to 26 weeks from 20 weeks; returning the Michigan Earned Income Tax Credit to 20 percent of the federal credit from 6 percent; and indexing the state’s minimum wage law to inflation to keep pace with rising costs as avenues to narrow the income gap.
“In years past, Michigan has been a shining example of an economy that works because of a strong middle class,” Ms. Holcomb-Merrill said. “We need to make sure our budget and tax system works to strengthen our low-and-middle-income families rather than making life more difficult for them.”
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