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Oakland University SBA Data Center

Change in Economic Status of Metro Detroit Households: 2000 to 20014
A recent report by the Pew Research Center, America's Shrinking Middle Class: A Close Look at Changes within Metropolitan Areas, displays information on the change in the share of adults who were lower, middle and upper income from 2000 to 2014. Middle-income households are defined as those with an income that is two-thirds to double that of the U.S. median household income, after incomes have been adjusted for household size. For a three-person household, the middle range was about $42,000 to $125,000 annually in 2014 (in 2014 dollars). Lower-income households have incomes lower that than two-thirds of the median, and upper-income households have incomes that are more than double the median. Incomes are adjusted for the cost of living in the area relative to the national average cost of living. Data on 229 metropolitan areas is reported.

The table below displays the information for Metro Detroit and nine other metropolitan areas used by the Detroit Regional Chamber for benchmarking purposes. All ten areas experienced an increase in the percentage of adults who are lower-income except Pittsburgh. Detroit and Atlanta have the largest increase in lower-income households at respectively 6.9 percent and 7.0 percent. The percentage of household in the lower tier in Detroit had a sizeable increase from 21 percent to 28 percent. Detroit and Atlanta are also the only areas that experienced declines in the percentage of middle and upper income households. The net gain/loss for Detroit is -10.1 percent, the lowest score among the 10 regions and also ranks 221 out of 229 metropolitan areas.

Oakland University SBA Data Center

The large increase in lower-income households combined with the decrease in middle and upper income households in Detroit over the 2000 to 2014 period is associated with the significant drop in manufacturing employment over this period, and declining wages for production workers. The charts below show Metro Detroit's manufacturing employment from 2004 to 2015 and average hourly production wages (adjusted for cost of living) from 2004 through June 2016. While manufacturing employment has increased dramatically since the recession end, it remains substantially below the level of 2004. At the same time average hourly wages for production workers in 2016 dollars have shown a dramatic and steady decline. In 2004 the average hourly wage of production workers was $31.57 (in 2016 dollars); in June 2016 it is $22.02 - a decline of 30 percent. The decline is due to two tier wages in the automobile industry, the lack of any automotive production worker pay increases until the recent UAW contract, and the lingering effects of the recession.

Jonathan Silberman, PhD
Professor of Economics

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