Rick Haglund: COVID-19 shows how our economy depends on low-wage workers — and how they’re hit hardest

April 4, 2020 5:27 am

Joe Raedle/Getty Images

As Michigan clawed back from the ravages of the Great Recession, in no small part due to the President Obama administration’s 2009 bailout of Chrysler and General Motors, other elected officials grabbed the credit.

Former Gov. Rick Snyder regularly touted Michigan as “the comeback state,” citing his deft management of the state budget, business tax cuts and elimination of job-killing regulations.

President Donald Trump often said the longest economic expansion in the nation’s history was almost entirely due to him. Never mind that the recovery started shortly after Barack Obama took office and slowed under Trump.

But it took only a few weeks for the deadly, insidious COVID-19 virus to collapse what the president has called “the greatest economy in the history of America.”

The hardest hit in this unprecedented crisis have been low-wage workers in food service, retail and other service businesses, most of whom who can’t work from home and get a paycheck.

COVID-19 “is providing a brutally efficient lesson about the value of a well-rounded economy that doesn’t leave workers without income, health care or paid leave during times of crisis,” Brookings Institution researchers Martha Ross and Nicole Bateman wrote last month.

State minimum wage rates | Economic Policy Institute chart

But low-wage workers also weren’t doing very well in an economic boom that produced record corporate profits and widening income inequality. 

Millions of workers were financially unprepared even for a small economic downturn because they were living paycheck to paycheck for years before it hit.

About 53 million people — 44% of the country’s workers — earn low wages. In 2019, their median wage was $10.22 an hour, or about $24,000 a year for those working full-time, according to Brookings. 

More than a quarter of hourly workers — 27% — say they probably couldn’t cover a $400 unexpected expense, according to the Urban Institute. That compares to just 9% of salaried workers who fear they couldn’t meet such an expense.

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In Michigan, 43% of all households don’t earn enough money to afford the basic necessities of food, housing, health care, child care, technology and transportation, according to a report by the Michigan Association of United Ways.

And while a family of four needs income equaling a wage of $30.64 an hour to make ends meet, 61% of all Michigan jobs pay less than $20 an hour, the report said.

There are a variety of reasons why so many in Michigan are struggling financially, including the loss of hundreds of thousands of high-paying manufacturing jobs that have been replaced by lower-paying service jobs. 

But public policy, crafted over decades primarily by Republicans, have played a pernicious role in growing the low-wage workforce.

Lawmakers and governors have, among other things, enacted Right to Work laws designed to cripple labor unions, cut support for education and shortened the length of time unemployed workers can collect benefits.

Michigan almost had robust sick leave in 2018. Republicans killed it.

And as Michigan Advance Editor Susan Demas recently wrote, the Legislature killed ballot proposals in 2018 that would have hiked the minimum wage and mandated paid sick leave for workers.

Business groups say such policies are too burdensome for many small businesses that operate on tight profit margins. There also is a long-held belief among conservatives that generous safety net benefits provide a disincentive to work.

But Federal Reserve Chair Jerome Powell recently blew that argument out of the water when asked in a U.S. Senate hearing if rich social programs were keeping people out of the labor force.

“It isn’t better or more comfortable to be poor and on public benefits now. It’s actually worse than it was,” Powell said, adding that the inflation-adjusted value of benefits has declined as labor force participation has fallen.

Powell cited low education attainment as a major reason why more people aren’t working. It’s also keeping low-wage workers from getting better-paying jobs.

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Michigan ranked 32nd in per capita personal income and 29th in adults with at least an associate degree in the most recent available data.

Gov. Gretchen Whitmer has set a goal of having 60% of Michigan residents attain a postsecondary credential by 2030. But more must be done to boost living standards of low-wage workers.

Michigan State University economist Charles Ballard suggests raising the minimum wage to $12 an hour, which he thinks can be achieved without hurting job growth.

Ballard also recommends increasing the earned income tax credit and implementing a graduated income tax system that would shift the tax burden to wealthier residents.

Expanding health insurance to cover more low-wage workers also would help. But, as Ballard notes, “one of President Trump’s top priorities has always been to go in exactly the opposite direction.”

Number of Michiganders without health insurance rises in 2018

Trump recently said he was considering reopening enrollment in the Affordable Care Act to those without health insurance during the pandemic, but then changed his mind.

But maybe this horrific public health crisis will prompt us to put a higher value on the work of low-wage workers who are ringing up groceries, changing bedsheets in hospitals and nursing homes, delivering prepared food and prescription drugs, and providing other services at great personal risk to their health.

As an internet meme I saw put it: “Suddenly the whole nation is depending on the very people they don’t believe should make $15 an hour.”

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Rick Haglund
Rick Haglund

Rick Haglund writes the "Micheconomy" column for the Michigan Advance. He's a former reporter and business columnist for Booth Newspapers, now the MLive Media Group, with extensive experience covering Michigan’s economy and the auto industry. He now works as a freelance writer based in Southeast Michigan.