UPPER MICHIGAN (WLUC) – From fueling our cars and buying groceries to enjoying what the UP has to offer recreationally, life can get expensive.
Yet Upper Michigan’s rural residents face additional challenges that others do not.
Compared to the rest of the state, the median income in the Upper Peninsula is significantly lower than the state average, and no county has reached that figure in the past five to 10 years.
TV6 investigates why this is so, what is the main cause of this financial struggle and how wages compare to inflation and the cost of living in the country.
“There’s a wide range of income and wages when it comes to the UP,” says Joe Jeeves, financial advisor at Mark Aho Financial Group in Marquette. “Everything is constantly changing.”
Jeeves worked as a financial advisor at Marquette for twelve years.
He tracks the effects of inflation on UP buyers and tries to answer what many of us are wondering: ‘how far will our dollar go?’
From fueling our cars and buying groceries to enjoying what the UP has to offer recreationally, life can get expensive.
“Purchasing power is the power of what your dollar can buy or buy you,” Jeeves said. “Therefore, if a dollar, let’s say five years ago, could buy an apple, right? That dollar had the power to do that. “If an apple costs $1.25, if you look at it and go back and say 25 cents on a dollar is 25%, that apple has gone up 25%, so you’ve lost 25% of your purchasing power.”
With supply chains dwindling, Jeeves says demand in Upper Michigan has still been very high over the past five to 10 years. Now things are starting to get tighter, especially for many UP residents.
However, according to the UP Poverty and Wellbeing Map, published by the University of Michigan, the average income of the more than 300,000 people in Upper Michigan is just under $52,000. In Marquette County alone, as of 2021, it is just above that, at $56,179.
“Prices are still high,” says Jeeves. “Inflation has caused prices to rise, inflation has fallen, some but prices are still high so incomes have not quite kept pace with inflation.”
Despite the cost of living here being slightly lower than the state average, the University of Michigan says UP’s rural status poses unique challenges that are leaving more families feeling financially insecure.
Researchers say this is because, in addition to a higher poverty rate, UP also has a higher percentage of income-constrained households, known as ALICE.
At 30.2%, UP is higher than the state average of 25.9%.
ALICE represents your neighbors who may not qualify as poor but are living paycheck to paycheck. This means that in a time of inflation it becomes particularly difficult to provide for everything in the budget.
“You go out and get a car loan and your car loan has 0% financing when it’s 5%,” Jeeves said. “That’s quite a difference. You go out and buy a house, instead of having a 2.5 or 3%, 30 year mortgage like you could have gotten in 2020, 2021, you’re looking at 6 to 7%. That takes a large part of your income out of the pockets of fellow Yopers and it makes things a lot tighter.”
The UP Poverty and Wellbeing Map highlights several rural-specific challenges that are likely contributing to this trend.
Our population spending requires many to travel further to work, which is likely why 30% or more of household income earners in UP report financial problems related to transportation costs, including gas prices.
In Keweenaw County, 67% of income is spent on housing and transportation costs combined.
The survey also shows that average UP households spend 50% or more of their income on necessities such as utilities and groceries alone.
In 2021, the average home in Upper Michigan sold for about $244,000.
Meanwhile, the average listing for a home in the UP is now $334,497.
“As groceries have gone up, car insurance has gone up, rents have gone up and house prices have gone up, it’s a tough time compared to what it was five, 10 years ago,” Jeeves said.
But there are also signs of a growing economy, which could benefit Yoopers in the long run.
Jeeves and other Upper Michigan economists point to the area’s gross domestic product (GDP), which helps gauge the UP’s economy by measuring the market value of goods and services.
GDP measures a range of sectors, from mining, retail, educational services, industrial growth, government and more.
Between 2017 and 2021, Michigan’s GDP as a whole increased by about 12%.
As for the UP, it has surpassed that growth by 17.5%, with mining, manufacturing, insurance, real estate and leasing included in that growth.
That could mean more employment.
Jeeves says it can be complicated to navigate the numbers, but working to stay ahead of economic changes starts with prioritizing your own spending.
“Be conscientious about your spending decisions right now. Everything is more expensive,” Jeeves said. “Give priority to the essentials as much as possible, but you still want to be able to live your life as much as possible.”
From fueling our cars and buying groceries to enjoying what the UP has to offer recreationally, life can get expensive.
Purchasing power is how far your dollar goes in your local economy, the power of what your money can buy.
Compared to elsewhere, most Yoopers work harder to ensure their wages keep pace with inflation.
According to UP financial advisors, inflation is the biggest economic factor impacting our purchasing power, besides rural challenges.
Right now, economists in our state and across the country are working to stay ahead of the inflation curve.
TV6 worked with an assistant professor of economics at Northern Michigan University who is part of the UP effort to forecast rural inflation and how it could affect you.
“One of the things I worry about in the UP is that the cost of inflation in a rural area like Marquette could be more divisive than in other places where wages might be more flexible,” Dr. Joshua Ingber, assistant professor of economics at NMU.
Ingber, like other economists and financial advisors in Upper Michigan, is keeping a close eye on rising inflation and its impact on consumers.
But Ingber hopes to look specifically at how record inflation, starting in 2021, will continue to impact rural areas like UP.
“Basically, I and a number of students contacted about 80,000 emails,” says Ingber. “We’re looking at whether this theory actually gives a fairly indicative picture of what rural inflation might be, by getting an idea of what prices have changed.”
From there, Ingber says efforts increased.
“I took a very small sample size and I saw great evidence that what I’m doing would actually be a good way to indicate rural inflation because we had these anecdotes that, ‘oh my god, they put the power plant in Marquette have closed’. ,” said Ingber. “We knew prices would rise as it became scarcer and we became more dependent on energy from Wisconsin.”
Ingber says his group measured inflation by examining the average of price levels in different markets.
Record inflation has hit Upper Michigan consumers hard between 2021 and 2022, according to the Bureau of Labor Statistics, or the BLS, according to the Consumer Price Index.
However, Ingber says the index does not capture the entire rural experience.
“They try to get good rural representation, but they tend to give more weight to cities,” Ingber said. “It is usually the place where more consumption takes place. We don’t really have a good measure of rural inflation.”
Ingber, like other UP economists, says the evidence goes back to ALICE households and the unique challenges that contribute to their financial status, as we told you earlier.
A recent BLS study found that inflation is driving a sharp increase in the number of UP residents categorized as ALICE, with 30.2% in 2021 rising to more than 40% in 2022.
That was despite a decline in national inflation at the time from about 9% to about 3% today.
“The cost of living is still lower, but two things may be true: that dollars are rising and that prices are making beer more expensive,” Ingber said. “If the base in Detroit is already larger, the inflation rate will be lower, whereas if we work with Blackrocks or Ore Dock beer that could trade for four dollars in the market. A change in the dollar means significant inflation and lower beer costs.”
Ingber says that in addition to rural-specific challenges such as transportation, there are also hidden costs affecting us.
“One of the hidden costs of inflation is that the effects of inflation do not spread evenly. It appears that people whose assets are held at a higher percentage in cash feel poorer more quickly,” said Ingber. “There’s a big concentration in the UP, a lot of businesses, especially here in Marquette. The hospital, NMU, many of these positions are collectively negotiated, the mines. “If you put your wages on a five- or six-year horizon and suddenly there’s inflation, well, guess what, prices have gone up, but your wages are limited by that union contract, you’re actually percentage points poorer.”
Ingber says his thesis’ tool could also be useful in tracking the impact of inflation on wages earned in these types of jobs.
And yet he adds that inflation is currently difficult to predict, but that with the work he has already done, a preliminary forecast is emerging.
“Here’s what I expect: It’s likely that the cost of living here in Marquette will be relatively low compared to places like Detroit and New York and a lot of places in America,” Ingber says. “However, that means inflation is likely to be more inflammatory here. In other words, if the price of beer goes from $7 to $8 in Detroit and from $3 to $4 here in Marquette, the inflation rate here will be much higher.”
Ingber says he expects his project to produce published results within a year, but when all is said and done, he says he can expect the tool to demonstrate UP’s resilience in the face of inflation, and that it the worst possible is behind us.
“You see it in the sports we play and how active people are in the winter, and it has crept into my personality from living here. That resilience and ability to fight is one of the UP’s winter coats for the inflation storm,” Ingber said. “It’s likely that the hardest part of inflation is behind us, based on monetary policy ahead and Americans catching up on nominal wages relative to inflation.”
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