Detroit’s economic recovery continues, yet lags other cities in share of living-wage earners, U-M experts say

August 31, 2023
Detroit skyline seen from Windsor, Ontario, across the Detroit River. Image credit: Bernt Rostad, CC BY-SA 2.0, via Flickr
Detroit skyline seen from Windsor, Ontario, across the Detroit River. Image credit: Bernt Rostad, CC BY-SA 2.0, via Flickr

Detroit’s economic recovery is expected to continue over the next several years, with encouraging employment numbers and rising wages.

However, a good deal of work remains to achieve widely shared economic success, and the city lags several of its Midwestern counterparts in the number of workers earning a living wage, according to University of Michigan economists.

The Detroit Economic Outlook for 2022-28 forecasts a jobless rate below 6% on a sustained basis in 2027 and 2028, and residents’ total inflation-adjusted income per capita to grow by nearly 6% during the forecast period—stronger than the state as a whole. Likewise, Detroit’s payroll employment count surpasses its pre-pandemic level by the end of this year, and by 2028 it stands at more than 11,000 jobs higher than in 2019.

Still, Gabriel Ehrlich, study co-author and director of the Research Seminar in Quantitative Economics at U-M, says high inflation, at least in the near term, will consume much of the residents’ rising incomes. He and his colleagues are concerned about the economic effects of a strike by the United Auto Workers, if it comes to pass.

The economists say the national economy will experience a patch of slow growth next year, but they don’t expect significant negative effects on the area’s construction and automotive industries.

Indeed, the city’s blue-collar sector, which includes construction and manufacturing, has been and will continue to be a bright spot in the local economy. The industries’ job count exceeded their pre-pandemic level by 6,000 jobs, or 13.7%, in the second quarter of this year, and if the forecast holds, Detroit’s blue-collar jobs count would reach 52,400 by 2028—the highest level since 2010.

While the study also projects that Detroit will recover its labor force losses from the past two years by the end of the forecast period, labor shortages will persist for the foreseeable future in the city and state of Michigan.

For the first time, U-M’s economic forecasters analyzed Detroit’s living wage in comparison with “peer” cities: Chicago, Minneapolis, Cleveland, St. Louis and Milwaukee. They used income and household data from the 2021 American Community Survey and an adapted definition of a living wage from the Massachusetts Institute of Technology Living Wage Calculator.

They found only 36% of Detroit residents earn a living wage, compared with 45% in Milwaukee, 48% in Cleveland and 60% in Chicago. Minneapolis has the highest share among cities, though still less than two-thirds of its primary earners make a living wage.

Further analysis revealed educational attainment accounted for about one-third of the gap between Detroit and the other cities. Adding occupational and industry categories, as well as the number of hours worked, explains about 40% of the gap overall.

“I wasn’t surprised to find education was the most powerful predictor for the share of workers earning a living wage,” Ehrlich said. “What did surprise me is that we could only explain less than half of the gap between Detroit and its peer cities. That said, this research was only a first step—I hope to continue this research in the future to learn more about what Detroit can do to raise the share of its workers earning a living wage.”

The forecast was produced as part of the City of Detroit-University Economic Analysis Partnership between U-M, the city of Detroit, Michigan State University and Wayne State University.

Related stories: