Michigan’s low labor force participation rate remains a problem

LANSING — Michigan’s labor force participation rate is the 11th lowest in the US, and business leaders are looking for ways to improve job opportunities.

Having a capable workforce and increasing labor force participation are priorities for the Small Business Association of Michigan, or SBAM, said Brian Calley, its president and chief executive officer.

The rate is the percentage of the population that is working or actively looking for a job. Michigan’s labor force participation rate of 60.1% is below the national average of 62.3%.

According to the Bureau of Labor Statistics, Washington, DC has the highest rate, while West Virginia brings up the rear.

The states with the lowest labor force participation rates, including Michigan at 11th.

The states with the lowest labor force participation rates, including Michigan at 11th.

Courtesy/Federal Reserve Bank of St. Louis

“We have a labor force participation rate of just over 60% and it’s going to be really difficult for us to grow in the future with the size of the workforce that we have today,” Calley said.

To address the problem, Calley said, SBAM advocates more employment opportunities for people with disabilities and better access to childcare.

He said decent affordable housing is also part of the solution in areas where the government is promoting incentives for new businesses.

One example is the General Motors plant being built in Delta Township, he said.

Michigan State University economics professor Luis de Araujo keeps a close eye on the labor force participation rate.

Though the pandemic lowered rates statewide, Araujo said there are structural reasons explaining Michigan’s lower rate, including a gap between employer needs and worker skills.

“When this gap is large, workers have a hard time finding a job and may drop out of the labor market when finding a job takes too long and is quite frustrating,” Araujo said.

Other business organizations are also addressing the issue, including the Michigan Chamber of Commerce.

Wendy Block, senior vice president of business advocacy and membership, said the organization “has been researching and working with others in the business community to identify some of these key barriers to employability.” This requires looking “through many different lenses.”

The pandemic is a major factor affecting labor force participation as many people have disengaged from the workforce, Block said.

Others may find it difficult to enter the labor market because of other costs, including childcare.

Block said the chamber supports efforts such as the tri-share program, in which employees, employers and the state all share a third of childcare costs.

“That’s been very successful because it allows employers to put some skin into the game alongside their individual employee, and it gives the state some data to see if that’s doing anything,” Block said.

According to Block, employee training is important for preparing potential employees and preparing existing employees for future jobs.

She cited the Michigan Reconnect program, which offers free community college courses in the county for people over 25 seeking an associate degree, and the state-funded Going Pro Talent Fund, which provides grants to employers to help train current employees and recruit new ones to win.

Block said these initiatives have been successful in matching companies with potential workers with the required skills.

Calley said the Reconnect program is more beneficial to smaller businesses because it’s designed for individuals rather than a cohort, which is primarily intended for larger businesses.

He said SBAM worked with the Chamber of Commerce and other organizations to set up the program.

“When this legislation was being drafted, we were right there as part of that process, so I think Reconnect is a good example of the kind of innovation that is making workforce development programs more accessible for small businesses,” he said.

As the new Democratic legislature ponders policies that could transform the state’s economic environment, Block said the majority’s policy agenda has created a “mixed set of problems for the business community.”

For example, the Chamber and SBAM both oppose repealing Michigan’s right to work, which has been heavily criticized by unions.

But Block said the chamber supports other legislative measures, such as expanding the earned income tax credit beyond 6%, in a bid to retain workers. The loan helps low-income working-class families.


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