The Detroit Labor Market: Recent Trends, Current Realities

October 31, 2019

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October 2019

Harry Holzer, Georgetown University; and Joshua Rivera, University of Michigan

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Abstract

Persistent racial segregation, population exodus, the decline of the auto industry, and a significant economic downturn – these characteristics of Detroit in the recent past have brought tremendous change to the city’s labor market and continue to create challenges. At the same time, local efforts at economic development combined with the national recovery have attracted business activity and increased jobs. To understand the current reality of Detroit’s labor market, we provide updated evidence on economic trends and look at barriers facing those left out of the economic recovery.

We draw the following conclusions:

  • Detroit’s population is bifurcating, with the overall population getting older while the number of young, college-educated, and white residents also increases modestly.
  • Labor force participation is stubbornly low, with high school non-completion, disability, and criminal records likely reducing labor force activity for many residents.
  • For those who are employed, wages are concentrated in the lower-to-middle range ($10-20/hour), as fewer Detroiters earn very low (less than $10/hour) wages or mid-level and higher wages ($20/hour or more) than in the past.
  • Well-paying jobs in professional services and health care are often filled by suburban in-commuters with a college degree, as a growing number of jobs in the city for those without college degrees shift to the low-wage service sector.
  • We estimate that up to 140,000 working-age Detroit residents are not in the labor force, with many facing multiple barriers to work such as lack of a high school diploma, having no car, reporting a disability, and having been out of work in the past year.

These conclusions suggest policymakers should redouble efforts to increase wages and assist residents facing multiple barriers to employment. Evidence suggests this can be done by bolstering the Earned Income Tax Credit to increase the return to work, expanding workforce training while helping residents access suburban employment, and subsidizing jobs for those whose current challenges make unsubsidized employment prohibitive. While previous studies have made a case for expanding workforce training and the Earned Income Tax Credit, little has been written on subsidized employment strategies for cities in Michigan. In response, our companion brief, “Toward a Comprehensive, Inclusive, and Equitable Subsidized Employment Initiative in Detroit,” provides details on how to implement a city-wide subsidized employment initiative and reviews the evidence supporting this strategy as a means of addressing chronic unemployment and reducing economic/racial disparities.

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