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Poverty Solutions at the University of Michigan

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Work and Opportunity in Detroit: The case for a bold subsidized employment initiative

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By Patrick Cooney

Introduction

For the past decade, Detroit has had the highest poverty rate of any big city in the country. While the city’s poverty rate had declined from nearly 40% in 2015 to just over 33% in 2018, it remains a full six percentage points higher than that of Memphis, the peer city with the second highest poverty rate (US Bureau of the Census 2018).

A potential driver of the city’s high poverty rate is its low rate of labor force participation. Thirty-five percent of Detroiters between the ages of 18 and 64 are not in the labor force, meaning they are neither employed nor actively looking for a job. As shown in Appendix Table 1, Detroit is exceptional in this regard, with the highest rate of labor force non-participation of any major city in the country, and significantly above peer cities like Philadelphia (29%), Milwaukee (25%), Baltimore (25%), and St. Louis (21%). For Detroit, this high rate of labor force non-participation translates to tens of thousands of working-age Detroiters wholly disconnected from the formal economy.

Bolstered by the national recovery, the City of Detroit—alongside public, private, and nonprofit partners—has made tremendous progress in putting thousands of Detroiters back to work and pulling thousands of families out of poverty. To continue this progress, however, we need to figure out why so many Detroiters are still not working, and community stakeholders must craft novel strategies to help this population gain a foothold in the labor market.

Two recent papers from Poverty Solutions at the University of Michigan diagnose the problem of labor force non-participation in Detroit and offer a potential remedy. The Detroit Labor Market: Recent Trends, Current Realities, written by economist Harry Holzer of Georgetown University and Joshua Rivera of Poverty Solutions, offers the most comprehensive picture to date of the characteristics of Detroiters not participating in the labor market. They estimate that nearly 140,000 working-age Detroit residents are not in the labor force, and many face multiple barriers to employment, including low educational attainment, disability, and lack of transportation. The social consequences associated with this scale of joblessness are staggering and warrant appropriately scaled interventions.

The second paper, Toward a Comprehensive, Inclusive, and Equitable Subsidized Employment Initiative in Detroit, written by
Chris Warland and Melissa Young from the Heartland Alliance, an anti-poverty organization based in Chicago, proposes a solution appropriate to the scale of the problem. Warland and Young envision a subsidized transitional employment program in Detroit that intentionally seeks to reengage those Detroiters who are disconnected from the labor market due to barriers to employment. Cities across the country operate subsidized employment programs, connecting struggling residents directly to employment and wages. Indeed, research suggests these programs provide the greatest benefit to the most disadvantaged, making subsidized transitional employment an essential tool for ensuring equitable employment outcomes as Detroit sees an economic resurgence.

Key Findings

  • There are nearly 140,000 working-age Detroiters who are not participating in the labor force, meaning they are unemployed and are not looking for work.
  • 60% of working-age Detroiters with no college experience face at least one major barrier to work, dramatically reducing their odds of being in the labor force.
  • Subsidized transitional employment programs are an effective way of rapidly connecting disadvantaged workers to work and wages.

Conclusion

Since the end of the Great Recession, the City of Detroit and its partners have made significant progress in putting Detroiters back to work and pulling Detroit families out of poverty. Despite that progress, Detroit faces the lowest rate of workforce participation in the country, with tens of thousands of residents not working, and not looking for work. Widespread labor force disengagement suggests there is a segment of Detroit’s population that struggles to access jobs in a competitive market, and is not able to be served by traditional workforce programs.
As such, Detroit’s challenges should be addressed through a large-scale subsidized transitional jobs program, designed to give tens of thousands of disadvantaged Detroiters a foothold in the labor market. Such a program would not be easy or cheap to implement, but it is perhaps the only solution capable of getting large numbers of Detroiters facing significant barriers to employment rapidly connected to employment and wages, thereby helping to pull tens of thousands of additional Detroit families out of poverty.

Download PDF of the full policy brief