Have Michigan Wages Kept Up With the Cost of Living?
It Depends on Whether You Count Housing.
If you’ve spent any time talking with neighbors, clients, or candidates for elected office over the past few years, you’ve heard some version of the same complaint: wages just haven’t kept up with the cost of living. It’s become a kind of folk wisdom — repeated so often that it feels self-evidently true.
But is it actually true in Michigan? I pulled twenty years of data to find out, and the answer is more interesting than the conventional narrative suggests.
The setup
I looked at four things from 2005 to 2024:
Median household income for Michigan (U.S. Census)
Median household income for Kent County, the heart of the Grand Rapids metro (U.S. Census, SAIPE)
The Consumer Price Index for the Midwest region — the basket of “all the stuff households buy” (BLS)
That same CPI broken into two pieces: housing costs (shelter) on one hand, and everything else on the other
The point of splitting the CPI was to test a specific hypothesis. If wages have lagged the cost of living, which costs are outpacing wages? Is it broad-based — food, gas, healthcare, clothes, all of it? Or is one category doing the heavy lifting?
The headline numbers
Over twenty years:
Michigan median household income rose +73.0%, from $45,930 to $79,460.
Kent County median household income rose +73.2%, from $46,637 to $80,768.
The Midwest CPI rose +54.1%.
If you stop reading right there, the conventional wisdom is wrong. Wages didn’t lag the cost of living — they outpaced it by roughly 19 percentage points. In real, inflation-adjusted terms, Michigan households gained about 12% in purchasing power over those twenty years.
That’s not a runaway success story. Twelve percent over twenty years is meager — about 0.6% per year. But it is growth, not loss. And it’s the same answer for the state as for the Grand Rapids metro.
A simple home constructed on a narrow infill lot.
So why does it feel like wages haven’t kept up?
This is where splitting the CPI matters. When you separate housing costs from everything else, the picture sharpens dramatically:
The shelter component of the CPI grew +78.5% over twenty years.
Everything else in the CPI — food, transportation, healthcare, apparel, and energy combined — grew just +52.2%.
Housing inflated about 1.5 times faster than everything else households buy. And shelter is a big share of the basket — roughly a third of household spending — so it pulls the headline CPI up substantially even though most other categories grew slowly.
But what about the bottom third?
The median tells you what happened to the household in the middle of the income distribution. It doesn’t tell you what happened to the household struggling near the bottom. So I ran the same analysis for the bottom 20% of households — using national data, since state-level quintile time series at this level of detail isn’t reliably available year-by-year. The national patterns track Michigan closely on this measure.
The result is a kind of paradox.
In nominal terms, the income limit defining the bottom 20% of households in terms of income grew about +74% from 2005 to 2024. Going up from roughly $19,200 to roughly $33,400. That’s almost identical to the median household. After deflating by the same Midwest CPI, the bottom 20% saw real income gains of about +13% — basically the same +13% the Michigan median household saw. Strip housing out of the inflation measure and that real gain rises to about +14%, again mirroring the median.
If income were the whole story, we’d say the bottom 20% has held its own about as well as the middle. Modest, slow, but positive growth.
But income isn’t the whole story. Spending patterns are also part of how cost of living is felt. And here’s where the bottom 20% diverges sharply from the middle: they spend a substantially larger share of their budget on housing.
According to the BLS Consumer Expenditure Survey, the lowest income quintile spends roughly 40% of their household expenditures on housing. The middle quintile spends about 33%. The top quintile spends about 31%.
That difference matters enormously when housing prices grow 1.5 times faster than everything else. The headline CPI weights housing at about a third of the basket, which approximates the typical household. But for low-income households, housing is closer to two-fifths. The inflation they actually experience — what economists call their “personal” inflation rate — is meaningfully higher than the headline number.
So the picture for the bottom 20% in Michigan is this: their income kept pace with the headline numbers, but the cost of living they actually faced rose faster than the headline measure suggests, because housing — which they’re more exposed to — outpaced everything else. The squeeze is the same squeeze that hits the median household, only sharper.
Allowing more homes on the same amount of land is the simplest measure local government can take to address the high cost of housing - not the only measure.
What this all means
The “everything is more expensive” feeling that pervades public conversation is, statistically speaking, not about everything. It’s about housing. Most other categories of household spending have grown roughly in line with — or slower than — wages.
This matters for how we talk about affordability and how we set policy. If the diagnosis is “the whole economy is broken and wages can’t keep up,” the prescriptions tend toward broad income supports, minimum wage debates, and tax policy. Those have their place. But if the diagnosis is “housing costs are the one big category outpacing earnings,” the prescriptions look very different — and they look a lot like the work many of us are already trying to do: zoning reform, infill development, missing middle housing, brownfield redevelopment, financing tools to bring more units online, and protecting affordability where it already exists.
The bottom-quintile data sharpens this conclusion rather than complicating it. If housing-led inflation hits low-income households harder because they spend more on housing, then housing reform isn’t just a quality-of-life issue or a middle-class concern — it’s the most direct anti-poverty intervention available to local government. Every unit of attainable housing produced does double duty: it eases the squeeze on the median household, and it eases that squeeze disproportionately on the households that need it most.
A caveat that makes the story worse, not better
The CPI’s shelter measure almost certainly understates what households actually experience when buying or renting a home. It’s built primarily on Owners’ Equivalent Rent — a survey-based estimate of what owners would charge to rent their homes — rather than home purchase prices or mortgage payments. Michigan home prices, measured by the FHFA House Price Index, have grown substantially faster than CPI Shelter over this period. Rents in Grand Rapids have grown faster too.
So when I say housing accounts for the disparity between wage growth and the cost of living, that’s the conservative version. If we used home prices and mortgage payments — which is what households actually face when they try to buy in — housing’s contribution to the squeeze would look considerably larger, and would look larger still for the renters and prospective first-time buyers concentrated in the bottom of the income distribution.
The bottom line
Michigan wages — at the median and near the bottom — have, modestly, kept up with the headline cost of living over the past two decades. They’ve outpaced inflation in food, transportation, healthcare, and most other categories. The one place where the cost of living has clearly outrun earnings is housing. That single category is where almost all of the lived sense of “we’re falling behind” comes from, and it falls hardest on the households that can least absorb it.
It’s a more focused problem than the headlines suggest. That should be encouraging. Focused problems have focused solutions, and we know what most of them are. The question is whether we’ll do them at the scale and pace the data demands.
Allowing for adequate and diverse housing options to meet the market needs in each community is the way forward.
Data sources: U.S. Census Bureau (median household income, ACS and SAIPE; bottom-quintile income, Current Population Survey), U.S. Bureau of Labor Statistics (Consumer Price Index, Midwest urban and U.S. city average series; Consumer Expenditure Survey for household spending shares; “United States Inflation Experience across the Income Distribution,” 2023). Income data retrieved via FRED. Analysis covers 2005 through 2024.