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Sunday, February 9th, 2014

In-State vs. Out-of-State Migration

My recent repost of an article on Columbus, Ohio’s brand blew away the all time comment record for this blog, with 271 as of this writing.

One the discussions was around the extent to which Columbus and other Ohio cities draw mostly from the state or from a broader area. Obviously with Ohio State University, Columbus has a massive in-state draw. But what about people from out of state?

To try quantify this, I used the IRS migration data in my Telestrian system to sort out net migration into that which is with the state of Ohio, and that which is with other states. Before the data, a couple caveats. First, this is based on tax return data so probably understates student movements as many (most?) undergrads aren’t filing their own returns. Second, for multi-state metros like Cincinnati, someone moving from Ohio to the Kentucky or Indiana part of the metro area still counts in the total. The metro area is considered a unit. Also, movements within the metro area are ignored. With that, here’s the chart (click to enlarge):

As expected, Columbus has a huge in-state draw. But what surprised me is that Columbus actually has negative migration with the rest of the country. In effect, Columbus gains people from Ohio and exports them to the rest of the country. I’m sure the university has something to do with this, but it’s interesting nevertheless. Cincinnati shows the same pattern, only at a smaller scale. And Cleveland is bleeding people both to Ohio and the rest of the country. Keep in mind with Cleveland that a lot of the in-state outmigration is probably in effect suburban because of the nature of the way Northeast Ohio metros are set up.

To put this in perspective, I ran the same analysis for various other similar sized metros:

This was a shocker to me. Look at Nashville and Charlotte. It’s not so much that they have large net migration from out of state, but that they have very low net migration from inside. Though Nashville is the boomtown of Tennessee, it seems not to be sucking in people from the rest of the state.

Portland is also an interesting case. It appears to be like Nashville and Charlotte, but what this doesn’t show is that overwhelmingly the net migration to Portland is coming from California – 53,000 people worth. If you exclude both Oregon and California, Portland only drew a net of 21,000 people from the rest of the country. Contrary to what you might think, vast quantities of people (on a net basis) are not streaming into Portland from all over the country. It’s a regional draw.

Austin parallels Columbus a bit in that it has a huge in-state draw, possibly again because of the university. It also as a huge migration with California – 30,000 people. If you look at Texas plus California, that’s about half the total. Charlotte has a similar effect with New York and New Jersey migration.

Indianapolis is sort of a control with Columbus. It is primarily an in-state draw but does have a positive balance with the rest of the country. Keep in mind that it will inevitably lose some people to Sunbelt states for retirement. There’s not much you can do about that. But it’s an effect say North Carolina may have less of. The contrast with Columbus in out of state migration could be due to the lack of a major school there. I don’t know for sure.

Looking more closely at the 3C’s, here is their net migration with each other:

And here is the gross migration, which is the total number of people moving back and forth:

And here’s the percentage of metro area population that is living in the state they were born in:

There’s no radical difference. In fact, by my eyeball calculation, the difference between Columbus and Cleveland is almost entirely due to the former’s higher percentage of foreign born residents (again, partially an artifact of OSU). In their domestic population they are similar. Cincinnati is in the corner of the state and a three state metro. It’s easy to see that its born in state of residence figure is lower because of people who crossed a state line while not leaving the region, though I can’t quantify the exact figures.

Friday, February 7th, 2014

Los Angeles: A Time For Truth

I’ve been saying a while now that Los Angeles is a sick man economy. It never really recovered from the peace dividend, and the metro area has fewer jobs now than in 1990, though in fairness that’s in part only because its exurbs are considered a separate MSA. Los Angeles used to have bigtime corporate strength in not just entertainment, but also aerospace and defense, energy, automotive, financial services, and more, all of which have withered apart from entertainment. Even foreign migration to the region is weakening. New York draws two and half times as many immigrants. LA retains a spectacular economy, a powerful immigrant-fueled small business sector, has the ports, etc. and is even still the largest manufacturing center in the country, but it’s pretty clear there are big time problems. This is particularly obvious in contrast to the booming Bay Area.

A recent report called “A Time For Truth” put out by a group called the Los Angeles 2020 Commission lays out some of the grim facts. Though focused on the city and not the region, and thus likely overstating problems on a regional basis, it highlights a lot of the issues. Here are a few sample:

Los Angeles is barely treading water while the rest of the world is moving forward. We risk falling further behind in adapting to the realities of the 21st century and becoming a City in decline.

Activity in most of our key economic sectors is flat or in decline. We have repeat- edly ignored or fumbled opportunities in one of this era’s major growth industries, the intersection of science and engineering — a field where our university-based intellectual capital ought to make us a leader. With the closure of Boeing’s plant in Long Beach, there is no longer a large-scale aircraft, space vehicle fabrication or assembly facility left in the area.

Three decades ago, LA was home to 12 Fortune 500 headquarters. Today, there are 4. New York, in contrast, has 43 and has continued to add major employers in the last decade.

We have developed a “barbell” economy more typical of developing world cities, like São Paulo, rather than a major American urban area. We are experiencing growth at the top of the income ladder and at the bottom, while the middle class shrinks year after year.

The report includes a lot of unpleasant truths that have been written about before by others like Joel Kotkin. Maybe a fancy pants commission will be listened to, however. In any case, it’s worth a read to get a local take on the city. There’s more to come as this report focused on conditions rather than recommendations, though for that reason perhaps it will be less controversial.

Wednesday, January 22nd, 2014

Infographics: Metropolitan Populations and Income

Here’s one that’s been making the rounds. A site called Peakbagger put together this chart showing historical metropolitan area population ranks for the top 20 metros (click to enlarge):

This clearly shows the relative stability of the top of the top of the hierarchy vs. ranks further down.

The Census Bureau has an interesting interactive graphics tool called Islands of High Income. I was playing with it and set the slider as close to the median income as I could. Here are the counties that exceed it:

Sunday, January 12th, 2014

Why State Economic Development Strategies Should Be Metro-Centric

Globalization, technology, productivity improvements, and the resulting restructuring of the world economy have led to fundamental changes that have destroyed the old paradigms of doing business. Whether these changes are on the whole good or bad, or who or what is responsible for bringing them into being, they simply are. Most cities, regions, and US states have extremely limited leverage in this marketplace and thus to a great extent are market takers more than market makers. They have to adapt to new realities, but a lack of willingness to face up to the truth, combined with geo-political conditions, mean this has seldom been done.

Three of those new realities are:

1. The primacy of metropolitan regions as economic units, and the associated requirement of minimum competitive scale. It is mostly major metropolitan areas, those with 1-1.5 million or more people, that have best adapted to the new economy. Outside of the sparsely populated Great Plains, smaller areas have tended to struggle unless they have a unique asset such as a major state university. Even the worst performing large metros like Detroit and Cleveland have a lot of economic strength and assets behind them (e.g., the Cleveland Clinic) while smaller places like Youngstown and Flint have also gotten pounded yet have far fewer reasons for optimism. Many new economy industries require more skills than the old. People with these skills are most attracted to bigger cities where there are dense labor markets and enough scale to support items ranging from a major airport to amenities that are needed to compete.

2. States are not singular economic units. This follows straightforwardly from the first point. As a mix of various sized urban and rural areas, regions of states have widely varying degrees of economic success and potential for the future. Their policy needs are radically different so the one size fit all nature of government rules make state policy a difficult instrument to get right. Additionally, many major metropolitan areas that are economic units cross state borders.

3. Many communities may never come back, and many laid-off workers may never be employed again. Realistically, many smaller post-industrial cities are unlikely to ever again by economically dynamic no matter what we do. And lost in the debate over the n-th extension of emergency unemployment benefits is the painful reality that for some workers, especially older workers laid off from manufacturing jobs, there’s no realistic prospect of employment at more than near minimum wage if that. As Richard Longworth put it in Caught in the Middle, “The dirty little secret of Midwest manufacturing is that many workers are high school dropouts, uneducated, some virtually illiterate. They could build refrigerators, sure. But they are totally unqualified for any job other than the ones they just lost.” This doesn’t even get to the big drug problems in many of these places. This isn’t everybody, but there are too many people who fall into that bucket.

I want to explore these truths and potential state policy responses using the case study of Indiana. An article in last week’s Indianapolis Business Journal sets the stage. Called “State lags city with science, tech jobs” it notes how metropolitan Indianapolis has been booming when it comes to so-called STEM jobs (Science, Technology, Engineering, Math). Its growth rate ranked 9th in the country in study of large metro areas. However, the rest of Indiana has lagged badly:

Indiana for more than a decade has blown away the national average when it comes to adding high-tech jobs. But outside the Indianapolis metro area, there isn’t much cause for celebration.

Careers in science, technology, engineering and math—typically referred to as STEM fields—have surged in growth compared to other careers in Marion and Hamilton counties. It’s a boon for economic development, considering the workers earn average wages almost twice as high as all others, and employers sorely need the skills. Dozens of initiatives focus on building STEM jobs in the state.

A recent report ranked the Indianapolis-Carmel metro area ninth in the country in STEM jobs growth since the tech bubble burst in 2001. But while the metro area has grown, the rest of Indiana has barely budged from the early 2000s, an IBJ analysis of U.S. Bureau of Labor Statistics found.

Indianapolis grew its STEM job base by 39% since 2001 while the rest of the state grew by only 10% (only 6% if you exclude healthcare jobs). Much of the state actually lost STEM jobs.

This divergence between metropolitan Indianapolis (along with those smaller regions blessed with a unique asset like Bloomington (Indiana University), Lafayette (Purdue University) and Columbus (Cummins Engine)) and the rest of the state is a well-worn story by now. Here are a few baseline statistics that tell the tale.


Item Metro Indianapolis Rest of Indiana
Population Growth (2000-2012) 15.9% 4.1%
Job Growth (2000-2012) 5.9% -7.2%
GDP Per Capita (2012) $50,981 $34,076
College Degree Attainment (2012) 32.1% 20.1%

Additionally, there does appear to be something of a brain drain phenomenon, only it’s not brains leaving the state, it’s people with degrees moving from outstate Indiana to Indianapolis. From 2000-2010 a net of about 51,000 moved from elsewhere in Indiana to metro Indianapolis. As Mark Schill put it in the IBJ:

“Indianapolis is somewhat of a sponge city for the whole region,” said Mark Schill, vice president of research at Praxis Strategy Group, an economic development consultant in North Dakota.

The situation in Indiana, Schill said, is common throughout the United States: States with one large city typically see their engineers, scientists and other high-tech workers flock to the urban areas from smaller towns.

Even I find it very surprising that of my high school classmates with college degrees, half of them live in Indianapolis – this from a tiny rural school along the Ohio River in far Southern Indiana near Louisville, KY.

What has Indiana’s policy response been to this to date? I would suggest that the response has been to a) adjust statewide policy levers to do everything possible to reflate the economy of the “rest of Indiana” while b) making subtle tweaks attempt to rebalance economic growth away from Indianapolis.

On the statewide policy levers, the state government has moved to imposed a one size fits all, least common denominator approach to services. The state centralized many functions in a recent tax reform. It also has aggressively downsized government, which now has the fewest employees since the 1970s. Tax caps, a comparative lack of home rule powers, and an aggressive state Department of Local Government Finance have combined to severely curtail local spending as well. Gov. Pence took office seeking to cut the state’s income tax rate by 10% (he got 5%), and now wants to eliminate the personal property tax on business. Indiana also passed right to work legislation.

I call this “the best house on a bad block strategy.” I think Mitch Daniels looked around at Illinois, Ohio, and Michigan and said, “I know how to beat these guys.” Indiana is not as business friendly as places like Texas or Tennessee, but the idea was to position itself to capture a disproportionate share of inbound Midwest investment by being the cheapest. (I’ll get to Pence later).

The subtle tweaks have been income redistribution from metro Indianapolis (documented by the Indiana Fiscal Policy Institute) and using the above techniques and others to apply the brakes to efforts by metro Indy to further improve its quality of life advantage over many other parts of the state (see my column in Governing magazine for more). One obvious example is a recent move by the Indiana University School of Medicine to build full four year regional medical school campuses and residency programs around the state with the explicit aim of keeping students local instead of having them come to Indianapolis for medical training.

What there’s been next to nothing of is any sense of metropolitan level or even regional thinking. The state does administer programs on a regional level, but the strategy is not regionally oriented and the administrative borders don’t even line up. Here are the boundaries of the various workforce development boards:

There’s a semi-metropolitan overlay, but as I’ve long noted places like Region 6 are economic decline regions, not economic growth regions. Here’s how the Indiana Economic Development Corp. sees the world:

These are not just agglomerations of the workforce districts, there are numerous differences between them. The point is that clearly the organization is driven by administrative convenience and the political need for field offices, not a metro-centric view of the world or strategy.

Add it all up and it appears that Indiana has decided to fight against all three new realities above rather than adapting to them. It rejects metro-centricity, imposes a uniform policy set, and is oriented towards trying to reflate the most struggling communities. I don’t think this was necessarily a conscious decision, but ultimately that’s what it amounts to.

When you fight the tape, you shouldn’t expect great results and clearly they haven’t been stellar. Since 2000, Indiana comfortably outperformed perennial losers Michigan and Ohio on job growth (well, less job declines), but trailed Kentucky, Wisconsin, Minnesota, Iowa, and Missouri. But notably, Indiana only outpaced Illinois by a couple percentage points. That’s a state with higher income taxes (and that actually raised them) that’s nearly bankrupt and where the previous two governors ended up in prison. Yet Indiana’s job performance is very similar. What’s more, Hoosier per capita incomes have been in free fall versus the national average, likely because it has only become more attractive to low wage employers.

Fiscal discipline, low taxes, and business friendly regulations are important. But they aren’t the only pages in the book. Workforce quality counts for a lot, and this has been Indiana’s Achilles heel. (My dad, who used to run an Indiana stone quarry, had trouble finding workers with a high school diploma who could pass a drug test and would show up on time every day – hardly tough requirements one would think). Also aligning with, not against market forces is key.

I will sketch out a somewhat different approach. Firstly, regarding the chronically unemployed, clearly they cannot be written off or ignored. However, I see this as largely a federal issue. We need to come to terms with the reality that America now has a population of some million who will have extreme difficulty finding employment in the new economy (see: latest jobs report). We’ve shifted about two million into disability rolls, but clearly we’ve to date mostly been pretending that things are going to re-normalize.

For Indiana, the temptation can be to reorient the entire economy to attract ultra low-wage employers, then cut benefits so that people are forced to take the jobs. I’ve personally heard Indiana businessmen bemoaning the state’s unemployment benefits that mean workers won’t take the jobs their company has open – jobs paying $9/hr. Possibly the 250,000 or so chronically unemployed Hoosiers may be technically put back to work through such a scheme – eventually. But it would come at the cost of impoverishing the entire state. Creating a state of $9/hr jobs is not making a home for human flourishing, it’s building a plantation.

Instead of creating a subsistence economy, the focus should instead be on creating the best wage economy possible, one that offers upward mobility, for the most people possible, and using redistribution for the chronically unemployed. You may say this is welfare – and you’re right. But I would submit to you that the state is already in effect a gigantic welfare engine. In addition to direct benefits, the taxation and education systems are redistributionist, and the state’s entire economic policy, transport policy, etc. are targeted at left-behind areas (i.e., welfare). Even corrections is in a sense warehousing the mostly poor at ruinous expense. So Indiana is already a massive welfare state; we are just arguing about what the best form is. I think sending checks is much better than distorting the entire economy in order to employ a small minority at $9/hr jobs – but that’s just me. Again, we are in uncharted territory as a country and this is ultimately going to require a national response, even if it’s just swelling the disability rolls even more. I do believe people deserve the dignity of a job, but we have to deal with the unfortunate realities of our new world order.

With that in mind, the right strategy would be metro-centric, focusing on building on the competitively advantaged areas of the state – what Drew Klacik has called place-based cluster – and competitively advantaged middle class or better paying industries.

Contrary to some of the stats above, this is not purely an Indianapolis story. Indiana has a number of areas that are well-positioned to compete. Here’s a map with key metro regions highlighted:

This may look superficially like the maps above, but it is explicitly oriented around metro-centric thinking. Metro Indy has been doing reasonably well as noted. But Bloomington, Lafayette, and Columbus (sort of small satellite metros to Indy) have also done very well. In fact, all three actually outperformed Indy on STEM job growth.

Additionally, three other large, competitively advantaged metro areas take in Indiana territory: Chicago, Cincinnati, and Louisville. These are all, like Indy, places with the scale and talent concentrations to win. True, none of the Indiana counties that are part of those metros is in the favored quarter. But they still have plenty of opportunities. I’ve written about Northwest Indiana before, for example, which should do well if it gets its act together.

This covers a broad swath of the state from the Northwest to the Southeast. It comes as no surprise to me that Honda chose to locate its plant half way between Indianapolis and Cincinnati, for example.

The state should align its resources, policies, and investments to enable these metro regions to thrive. This doesn’t mean jacking up tax rates. Indiana should retain its competitively advantaged tax structure. But it should mean no further erosion in Indiana’s already parsimonious services. The state is already well-positioned fiscally, and in a situation with diminishing marginal returns to further contraction.

Next, empower localities and regions to better themselves in accordance with their own strategies. This means an end to one size fits all, least common denominator thinking. These regions need to be let out from under the thumb of the General Assembly. That means more, not less flexibility for localities. Places like Indianapolis, Bloomington, and Lafayette would dearly love to undertake further self-improvement initiatives, but the state thinks that’s a bad idea. (I believe this is part of the subtle re-balancing attempt I mentioned).

It also means using the state’s power to encourage metro and extended region thinking. For example, last year within a few months of each other the mayors of Indianapolis, Anderson, and Muncie all made overseas trade trips – separately and to different places. That’s nuts. The state should be encouraging them to do more joint development.

This also means recognizing the symbiotic relationship that exists between the core and periphery in the extended Central Indiana region, clearly the state’s most important. The outlying smaller cities, towns, and rural areas watch Indianapolis TV stations, largely cheer for its sports teams, get taken to its hospitals for trauma or specialist care, fly out of its airport, etc. Metro Indianapolis and its leadership have also basically created and funded much of the state’s economic development efforts (e.g., Biocrossroads) and many community development initiatives (the Lilly Endowment). Many statewide organizations are in effect Indianapolis ones that do double duty in serving the state. For example, the Indiana Historical Society. (There is no Indianapolis Historical Society).

On the other side of the equation, Indianapolis would not have the Colts and a lot of other things without the heft added from the outer rings out counties that are customers for these amenities. It benefits massively from that, particularly since it’s a marginal scale city. One of the biggest differences between Indy and Louisville is that Indy was fortunate enough to have a highly populated ring of counties within an hour’s drive.

So in addition to aligning economic development strategies around metros, and freeing localities to pursue differentiated strategies, the state should encourage the next ring or two of counties that are in the sphere of influence of major metros to align with their nearest larger neighbor.

Contrary to popular belief, this is a win-win. When I was in Warsaw, Indiana, people were concerned that many highly paid employees of the local orthopedics companies lived in Ft. Wayne. From a local perspective, that’s understandable and obviously they want to be competitive for that talent and should be all means go for it. On the other hand, what if Ft. Wayne wasn’t there for those people to live in? Would those orthopedics companies be able to recruit the talent they need to stay located in small town Indiana?

It’s similar for other places. Michael Hicks, and economist at Ball State in Muncie, said, “Almost all our local economic policies target business investment and masquerade as job creation efforts. We abate taxes, apply TIFs and woo businesses all over the state, but then the employees who receive middle-class wages (say $18 an hour or more) choose the nicest place to live within a 40-mile radius. So, we bring a nice factory to Muncie, and the employees all commute from Noblesville.” Maybe Muncie isn’t completely happy about this, understandably. But would they have been able to recruit those plants at all (and the associated taxes they pay and the jobs for anybody who does stay local) if higher paid workers didn’t have the option to live in suburban Noblesville? Would the labor force be there?

I saw a similar dynamic in Columbus. Younger workers recruited by Cummins Engine chose to live in Greenwood (near south suburban Indy). Columbus wants to keep upgrading itself to be more attractive – a good idea. But the ability to reverse commute from Indy is an advantage for them.

Louisville, Kentucky has one of the highest rates of exurban commuting the country because so many Hoosiers in rural communities drive in for good paying work.

This is the sort of thinking and planning that needs to be going on. Realistically, most of these small industrial cities and rural areas are not positioned to go it alone and they shouldn’t be supported by the state in attempting to do so. They need to a align with a winning team.

There are two groups of places that require special attention. One is the mid-sized metro regions of Ft. Wayne, Evansville, and South Bend-Elkhart. These places are too far from larger metros and aren’t large enough themselves to have fully competitive economies. No surprise two of the three lost STEM jobs. Evansville has done better recently on the backs of Toyota, but has a vast rural hinterland it cannot carry with its small size. The region has done ok of late, but it has also received gigantic subsidies in the form of multiple massive highway investments, and now a massive coal gasification plant subsidy. I don’t believe this is sustainable. These places need special assistance from the state to devise and implement strategies.

The other grouping consists of rural and small industrial areas that are too far outside the orbit of a major metro to effectively align with it. This would includes places like Richmond or Blackford County. They might get lucky and land a major plant, but realistically they are going to require state aid for some time to maintain critical services.

For the last two groups especially, there also needs to be a commitment by the state’s top brain hubs – Indy and the two university towns – to applying their intellectual and other resources to the difficult problem at hand. Part of that involves helping them be the best place of their genre that they can. While cities are competitively advantaged today, not everybody wants to live in one. So there is still an addressable market, if not as large, for other places.

Put it together and here’s the map that needs to be changed. It’s percentage change in jobs, 2000-2012:

Pretty depressing. Urban core counties had some losses, but suburban Indy, Chicago, and Cincy did decently (Louisville’s less well), plus Bloomington area, Lafayette, and Columbus. You see also the strong performance of Southwest Indiana which is fantastic, but the sustainability of which I think is in question. Wages are higher in metro areas too, by the way. Here’s the average weekly wage in 2012, which shows most of the state’s metros doing comparatively well:

In short, I suggest:

- Retain lean fiscal structure but limit further contractions
- Goal is to build middle class or better economy, not bottom feeding
- Align economic development efforts to metro areas, particularly larger, competitively advantages locations. Align capital investment in this direction as well.
- Greater local autonomy to pursue differentiated strategies for the variegated areas of the state
- Special attention/help to strategically disadvantaged communities, but not entire state policy directed to servicing their needs.
- Utilization of transfers for the chronically unemployed pending a federal answer, but again, not redirection of state policy to attract $9/hr jobs.

This requires a lot of fleshing out to be sure, but I think is broadly the direction.

Back to Gov. Mike Pence, would he be on board with this? He’s Tea Party friendly to be sure and interested in fiscal contraction. But he’s not a one-trick pony. He’s actually taken some interesting steps in this regard. He is subsidizing non-stop flights from Indianapolis to San Francisco for the benefit of the local tech community. He also wants to establish another life sciences research institute in Indy. And he’s talked about more regionally focused economic development efforts. It’s a welcome start. I think he groks the situation more than people might credit him for. Keep in mind that he did not establish the state’s current approach, which arguably even pre-dated Mitch Daniels, and he has to deal with political realities. And if as they say only Nixon could go to China, then although a reorienting of strategy is not about writing big checks, still perhaps only someone with conservative bona fides like Pence can push the state towards a metro-centric rethink.

Thursday, January 9th, 2014

More Fun With Per Capita Incomes

After yesterday’s post, I thought I’d throw up some additional comparisons, this time at the metro level. County and metro per capita incomes only go back to 1969, not 1929, but there are still interesting things to see. I’ll post these without analysis for you to ponder on your own. Again, all data from the Bureau of Economic Analysis, with charts via Telestrian.

The five boroughs of New York City (Manhattan=New York County, Brooklyn=Kings County, Staten Island=Richmond County). In the case of Manhattan, it’s worth noting that this is a mean not a median value.

New York vs. Los Angeles. Keep in mind, the exurbs of LA are technically considered a separate metro area (Riverside-San Bernardino) and so aren’t included in the LA metro figures:

Chicago vs. Indianapolis:

Denver vs. the Twin Cities vs. Seattle:

Atlanta vs. Dallas-Ft. Worth vs. Houston:

Memphis vs. Nashville:

Cincinnati vs. Cleveland vs. Columbus:

Wednesday, January 8th, 2014

Convergence and Divergence In Per Capita Income

I was doing some research on the economic history of Rhode Island recently and decided to take a historical look at its per capita income levels vs. Massachusetts. Here’s what I found:

This is per capita income as a percentage of the US average. Both states started out far higher than the US average, peaking at 150% of it in the 1930s. But over the course of a mere decade or so, the both crashed to about the national average. (The stark reality of this collapse is evident in the wartime newsreel “Report From Rhode Island” which shows the Newport mansions in ruins). You can see also that up until the end of the war, the two states were virtually identical, then diverged. Both states had to spend some time wandering the wilderness, though Rhode Island had the worst of it. In fact, Rhode Island has never recovered. Its per capita income has simply oscillated between slightly above and slightly below the US average for close to 70 years. Massachusetts by contrast limped along until around 1977, then embarked on an uptrend and ever wider divergence from Rhode Island. A very telling graph I think.

I got curious and wondered about another state pair I’ve long looked at, Illinois and Indiana. So I ran the same graph and this is what I came up with:

Here we see an opposite pattern and one that surprised me. These two states were very divergent at the end of the Roaring 20s, with Illinois far above the US average and Indiana far below it. Over a similar time frame in which Mass and Rhode Island collapsed, these states converged, with Indiana gaining strongly and Illinois losing. This convergence left a gap to be sure but what I found most surprising is that it has basically remained constant over the decades. Both Indiana and Illinois have remained in parallel downtrends. Given the dominance of Illinois’ economy by metro Chicago, and the incredible divergence in policies between the two states, I wasn’t expecting them to track each other. Though maybe I shouldn’t have since I’ve noticed similar things in recent times before.

We hear a lot about income inequality in the US today. But if you look at those charts, it seems pretty clear that in the early parts of the century, the US was an extremely divergent economy in which some states where massively most prosperous than others. However well Massachusetts may be doing, for example, it hasn’t yet reached its pre-war peak. The Great Depression and World War II seem to have had an enormous leveling effect (looks like a lot of the New Deal was extremely effective over the long term, the TVA, REA, etc).

So I decided to plot the whole country on a map. In the map below, states in blue grew their per capita personal income at a higher rate than the nation as a whole since 1929. The ones in red grew more slowly. The color scaling is proportionate to the percentage change value. The 61.7 is the percentage value of the US average in decimal format, that is, 6,170%. (Keep in mind, this is a nominal value, not inflation adjusted).

This shows that although the traditional centers of prosperity in America may still be doing better than the rest, over the long term there has been a convergence in incomes as areas like the Deep South have modernized. Oklahoma is no longer Grapes of Wrath country.

But even among the traditional wealth centers, we see divergent paths. I plotted California, Illinois, Massachusetts, and New York to see what I would find:

We see big differences. California and Illinois have more or less headed straight downhill since the 40s. That surprised me because I’d always thought California enjoyed a sort of Golden Age in the post-war era. It did have a moment in the sun in the 1970s, but it’s interesting that it hasn’t done better vs. a state that got slammed hard by de-industrialization.

New York and Mass had very different paths, reaching 1970s nadirs then rebounding strongly. New York fell below both California and Illinois in the era when NYC nearly went bankrupt. Today it is far ahead of both. The turnaround in Massachusetts has been even more dramatic. Some of the superior performance of Mass may be due to demographic composition, however. It’s no secret that it’s good to be privileged and white in America. Of the traditional tier one big cities, Greater Boston is overwhelmingly the whitest, while LA and San Francisco are the most diverse. LA in particular has absorbed huge numbers of lower skilled Latino immigrants who, unlike the descendants of the early 20th century Irish and Italians immigrants to Boston, are still in the early stages of their development lifecycle. Down the road this should converge. New York managed to pull off its turnaround while retaining significant diversity and a large immigrant pipeline, which makes it even more impressive.

Note: All data from the Bureau of Economic Analysis, accessed and charted via Telestrian.

Tuesday, December 10th, 2013

Southern California’s Road Back by Joel Kotkin

[ Believe it or not, metro LA has fewer jobs today than it did in 1990, making it the only metro in America's top ten that can make that "boast." Today Joel Kotkin shares some of his thoughts on rebuilding - Aaron. ]

If the prospects for the United States remain relatively bright – despite two failed administrations – how about Southern California? Once a region that epitomized our country’s promise, the area still maintains enormous competitive advantages, if it ever gathers the wits to take advantage of them.

We are going to have to play catch-up. I have been doing regional rankings on such things as jobs, opportunities and family-friendliness for publications such as Forbes and the Daily Beast. In most of the surveys, Los Angeles-Orange County does very poorly, often even worse than much-maligned Riverside and San Bernardino. For example, in a list looking at “aspirational cities” – that is places to move to for better opportunities – L.A.-Orange County ranked dead last, scoring well below average in everything from unemployment to job creation, congestion and housing costs relative to incomes.

Yet, Southern California possesses unique advantages that include, but don’t end at, our still-formidable climatic and scenic advantages. The region is home to the country’s strongest ethnic economy, a still-potent industrial-technological complex and the largest culture industry in North America, if not the world.

In identifying these assets, we have to understand what we are not: Silicon Valley-San Francisco, or New York, where a relative cadre of the ultrarich, fueled by tech IPOs or Wall Street can sustain the local economy. Unlike the Bay Area, in particular, our economy must accommodate a much larger proportion of poorly educated people – almost a quarter of our adult population lacks a high school degree. This means our economy has to provide opportunities for a broader range of skills.

Nor are we a corporate center such as New York, Houston, Dallas or Chicago. We remain fundamentally a hub for small and ethnic businesses, home to a vast cadre of independent craftspeople and skilled workers, many of whom work for themselves. In fact, our region – L.A.-Orange and Riverside-San Bernardino – boasts the highest percentage of self-employed people of any major metropolitan area in the country, well ahead of the Bay Area, New York and Chicago.

Policy from Washington has not been favorable to this grass-roots economy. The “free money for the rich” policy of the Bernanke Federal Reserve has proven a huge boom to stock-jobbers and venture firms but has not done much to increase capital for small-scale firms. Yet it is to these small firms – dispersed, highly diverse and stubbornly individualistic – that remain our key long-term asset, and they need to become the primary focus on regional policy-makers.

Ethnic Networks

Immigration has slowed in recent years but the decades-long surge of migration, largely from Asia and Mexico, has transformed the area into one of the most diverse in the world. More to the point, Southern California has what one can call diversity in depth, that is, huge concentrations of key immigrant populations – Korean, Chinese, Mexican, Salvadoran, Filipino, Israeli, Russian – that are as large or larger than anywhere outside the respective homelands. Foreigners also account for many of our richest people, with five of 11 of L.A.’s wealthiest being born abroad.

These networks are critical in a place lacking a strong corporate presence. Our international connections come largely as the result of both the ethnic communities as well as our status as the largest port center in North America, which creates a market for everything from assembly of foreign-made parts to trade finance and real estate investment. Southern California may be a bit of a desert when it comes to big money-center banks, but it’s home to scores of ethnic banks, mainly Korean and Chinese, but also those serving Israeli, Armenian and other groups.

For the immigrants, what appeals about Southern California is that we offer a diverse, and dispersed, array of single-family neighborhoods. Both national and local data finds immigrants increasingly flocking to suburbs. Places like the San Gabriel Valley’s 626 area, Cerritos, Westminster, Garden Grove, Fullerton and, more recently, Irvine, have expanded the region’s geography of ethnic enclaves.

These enclaves drive whole economies, such as Mexicans in the wholesale produce industry or the development of electronics assembly and other trade-related industry by migrants largely from Taiwan. Global ties are critical here. Korean-Americans started largely in ethnic middleman businesses, but have been moving upscale, as their children acquire education. They, in turn, have helped attract investment from South Korea’s rising global corporations, including a new $200 million headquarters for Hyundai in Fountain Valley, as well as a $1 billion, 73-story new tower being built by Korean Air in downtown Los Angeles.

Tech Industrial Base

During the Cold War, Southern California sported one of the largest concentrations of scientists and engineers in the world. The end of the Cold War, at the beginning of the 1990s, severely reduced the region’s technical workforce, a process further accelerated by the movement out of the region of such large aerospace firms as Lockheed and Northrop. The region has roughly 300,000 fewer manufacturing jobs than it had a decade ago, largely due to losses in aerospace as well as in the garment industry.

Yet, despite the decades-long erosion, Southern California still enjoys the largest engineering workforce – some 70,000 people – in the country. It also graduates the most new engineers, although the vast majority of them appear to leave for greener pastures. One looming problem: a paucity of venture capital, where the region lags behind not just the Bay Area, but also San Diego and New York. This can be seen in the relative dearth of high-profile start-ups, particularly in fields like social media, now dominated by the Bay Area.

But the process of recovery in Southern California does not require imitating Silicon Valley. Instead we need to leverage our existing talent base – and recent graduates – and focus on the region’s traditional strength in the application of technology. A recent analysis of manufacturing by the economic modeling firm EMSI found strong growth in some very promising sectors, including the manufacturing of surgical and medical equipment, space vehicles and a wide array of food processing, an industry tied closely to the immigrant networks.

Cultural Complex

For most Americans, and even more so among foreigners, the image of Southern California is shaped by its cultural exports, not only in film and television but in fashion and design. This third sector epitomizes the uniqueness of the region, and provides an economic allure that can withstand both the generally poor business climate and the incentives offered by other regions.

After a period of some stagnation, Hollywood again is increasing employment. Roughly 130,000 people work in film-related industries in Los Angeles, which is now headed back to levels last seen a decade earlier but still well below the 146,000 jobs that existed in 1999.

At the same time, the sportswear and jeans business in Los Angeles, and the surfwear industry in Orange County, remain national leaders. Overall, the area’s fashion industry has retained a skilled production base – over twice that of rival New York’s – and has been aided, in part, by access to Hollywood, lower rents and labor costs than in New York.

Taken together, these sectors – ethnic business, sophisticated manufacturing and culture – could provide the basis for a renaissance in the local economy. The smaller firms in these fields, in particular, need a friendlier business climate, a more evolved skills-training program from local schools and a better-maintained infrastructure. More than anything, though, they require an understanding on the part of both government and business that their success remains the best means to reverse decades of relative decline.

Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

This piece originally appeared at The Orange County Register.

Tuesday, November 26th, 2013

Chicago: Gentrification Comes to the Neighborhood School by Daniel Hertz

[ You may remember Daniel Hertz from his mind-blowing analysis of growing public safety inequality in Chicago. He's back with another one, this time a look at how gentrification is affecting the performance of Chicago's neighborhood schools. It's probably relevant to any city that's experiencing gentrification. This one comes from a newish web site called Chicago Bureau, which focuses on youth issues - Aaron. ]

To be on track for college, an elementary student needs to “exceed standards” on the ISAT, according to the University of Chicago Consortium on School Research. In 2001, there were only three neighborhood elementary schools in the entire city with a quarter or more students doing that well.

As a result, for a certain kind of parent, there were only two options for educating a child: getting him into one of the city’s flagship magnets, or moving to the suburbs. That put a lot of pressure on magnets and other test-in schools: like the Daley Sr.-era condo towers that still line North Lake Shore Drive, they had to rise above the rest of the city and offer the people who could afford to move to Evanston or DuPage County some reason not to.

But just like there’s only so much lakefront, there were only so many seats in those magnet schools. And over the last 10 years, as downtown and North Side neighborhoods gentrified, the number of parents trying to seat their children in one of those schools has turned what was always a competitive process into a frenzy. Last year, about half the freshmen admitted to Whitney Young, Northside College Prep and Walter Payton had near-perfect test scores and straight-A report cards. And the crunch is too big to be solved by expansions like the one Mayor Rahm Emanuel recently announced for Payton and Coonley Elementary.

Just as the magnet system began to overcrowd, though, neighborhood elementary schools suddenly began making a turnaround. Some of them, anyway. By 2013, those three “high-achieving” schools had become 15. That’s a 400 percent increase over 12 years — and lots of other neighborhood elementary schools were on track to get there soon.

Gentrification ISAT 2001 2013

Unsurprisingly, though, CPS’s new high-scoring schools weren’t distributed all over the city. Instead, progress was contained to the same neighborhoods that had seen the greatest gentrification over the previous 10 or 20 years, or which were already solidly middle-class. As a result, the average high-performing school’s student body in 2013 was only 20 percent low-income, compared to 85 percent for CPS as a whole.

In some cases, the new high-achieving schools had had large middle-class populations from the start and their scores just gradually ticked up. But about half of them saw dramatic demographic transformations. Lakeview’s Blaine Elementary, for example, saw its low-income population fall by 29 percent since 2010. At the same time, the proportion of its students exceeding ISAT standards has jumped by 25 percent. At Audubon Elementary, less than a mile to the west, the number of low-income students dropped 28 percent while ISAT exceed scores have jumped 53 percent over the same four years.

Another eight schools that don’t yet meet the “high-achieving” threshold are also rapidly gentrifying, losing an average of 20 percent of their low-income population over the last four years and doubling their exceed scores.

At the elementary level, then, professional-class families in some parts of Chicago have solved the magnet problem. They don’t have to decamp to the suburbs: they can bring suburban demographics to the city just by sending their kids to their neighborhood CPS school.

Gentrification ISAT grades change

And despite all the fuss over teacher accountability, charter schools and innovative curricula, the fact remains that in America, economic background is the single best predictor of a child’s academic success.

Which leaves the city…where? After decades of losing thousands upon thousands of middle-class families thanks to a struggling educational system, it must be good news for that process to be finally reversing itself. A city without a middle class isn’t going anywhere good; the tax receipts alone are cause for celebration, given the state of Chicago’s budget.

A school system without a middle class is also in big trouble, of course. So it’s heartening to see the beginnings, perhaps, of a decline in the kind of economic segregation that led to 87% of CPS students being low-income in the first place.

But if the number of low-income kids in our newly high-achieving schools keeps plummeting, not many of them will be in a position to benefit from the very transformation that’s pushing them out. After all, how many low-income families can afford a decent place to live within the attendance boundaries of neighborhood schools in Lincoln Park or Lakeview?

For a long time, the egalitarian promise of public education was frustrated by families with wealth fleeing the city for suburban school districts, leaving CPS with a heavy burden of poverty in all but a few elite test-in schools.

Gentrification ISAT - low-income

That dynamic seems to be changing, so that now a greater and greater number of middle-class families are choosing to send their kids to local elementary schools. But if we’re just moving the lines that divide the children who receive a good education from those who don’t—from district boundaries to CPS attendance boundaries—it would be hard to call that significant progress.

There is, though, a difference. The city of Chicago, and the leadership at CPS, have absolutely no power over any of the wealthier districts that surround them. But they can try to shape what happens entirely within their borders. The question of how to mitigate economic segregation in the city’s schools, so that all children have a chance at a decent education—without scaring the middle class back to the suburbs and starting again at square one—will be, I think, one of the greatest challenges our school system will face for the next generation.

Gentrification ISAT - High-Achieving Schools

Gentrification ISAT - Gentrifying Schools Pull Away

This post originally appeared at Chicago Bureau on November 5, 2013.

Sunday, November 3rd, 2013

The Tough Realities Facing Smaller Post-Industrial Cities

A couple weeks ago the Economist ran a leader and an article on the plight of smaller post-industrial cities, noting that these days the worst urban decay is found not in big cities but in small ones. They observe:

Partly, this reflects the extraordinary success of London and continuing deindustrialisation in the north of England. Areas such as Teesside have been struggling, on and off, since the first world war. But whereas over the past two decades England’s big cities have developed strong service-sector economies, its smaller industrial towns have continued their relative decline. Hartlepool is typical of Britain’s rust belt in that it has grown far more slowly than the region it is in. So too is Wolverhampton, a small city west of Birmingham, and Hull, a city in east Yorkshire.

And even with growth, the most ambitious and best-educated people will still tend to leave places like Hull. Their size, location and demographics means that they will never offer the sorts of restaurants or shops that the middle classes like.

Their editorial forthrightly embraces a policy of triage, saying “The fate of these once-confident places is sad. That so many well-intentioned people are trying so hard to save them suggests how much affection they still claim. The coalition is trying to help in its own way, by setting up ‘enterprise zones’ where taxes are low and broadband fast. But these kindly efforts are misguided. Governments should not try to rescue failing towns. Instead, they should support the people who live in them.”

This same dynamic is clearly evident in the United States as well. Bigger cities have tended to weather industrial decline far better than smaller ones. There seems to be some threshold size below which it is difficult to support the infrastructure, the amenities, and the thick labor markets that attract the people and businesses in 21st century growth industries. My “Urbanophile Conjecture” heuristic suggests that you need to be a state capital with a population greater than 500,000 to be thriving. But even larger places that aren’t capitals and conventionally viewed as failures like Detroit retain powerful metro area economies and large concentrations of educated workers, especially in the suburbs. Conversely, smaller places like Youngstown, Ohio and Flint, Michigan face much bleaker circumstances.

There are exceptions to the rule, including many delightful college towns or the occasional oddball like Columbus, Indiana, but for the most part smaller post-industrial cities have really struggled to reinvent themselves.

In part this is because a rising tide hasn’t lifted all boats, only some of them. As economist Michael Hicks noted, “Almost all our local economic policies target business investment, and masquerade as job creation efforts. We abate taxes, apply TIF’s and woo businesses all over the state, but then the employees who receive middle class wages (say $18 an hour or more) choose the nicest place to live within a 40-mile radius. So, we bring a nice factory to Muncie, and the employees all commute from Noblesville.”

In short, growth actually fuels divergence because a) the growth disproportionately accrues to the places that are doing well in the first place and b) even when struggling cities can attract jobs, people earning middle class wages frequently live elsewhere. Doug Masson likened this to Jesus’ statement that “For he that hath, to him shall be given: and he that hath not, from him shall be taken even that which he hath.” I think there’s a lot of evidence that for bigger cities a lot of activity is exhibiting a convergent or flattening effect. That’s why so many places today have decent startup scenes, quality food, agglomerations of talent, etc. But for smaller cities my observation is that it’s still a divergent world.

You see this on full display in central Illinois, where the town of Danville (population 33,000) and Champaign-Urbana (combined population 124,000) are only about half an hour’s drive apart on I-74. Danville is one of the bleakest towns I’ve ever visited in the Rust Belt. When your Main Street is a STROAD, you know you’re in trouble. Champaign-Urbana by contrast, is a fairly healthy community. It’s home to the main campus of the University of Illinois, seems to be reasonably thriving, has many high quality residential streets, a direct rail connection to Chicago, etc. As a college town, it’s one of those “exception” smaller places.

Anyone within reasonable driving distance with a choice would almost undoubtedly choose to live in Champaign over Danville, unless they had a family or personal connection to the latter. It’s an easy slam dunk decision. In effect, proximity to Champaign acts as kryptonite to Danville’s revitalization. Again, a rising tide only fuels this divergence.

This sort of divide between communities mirrors the divide in society as well. The question is, what approach should be taken to address these disparities? One approach is to focus on the people, and leave the places to rot. Jim Russell has noted that “people develop, not places” thus most place based economic strategies are destined to fail. This approach has also been advocated by economist Ed Glaeser, who in an article title, “Can Buffalo Ever Come Back?” answered his own question by saying, “probably not—and government should stop bribing people to stay there.”

This is obviously unpalatable to policy makers of either the left or the right, as no one has yet embraced it openly. How then have the left and right responded? The response of the left seems to be what Walter Russell Mead has labeled the “blue model” solution. His basic view is that the post-war economy was based around a policy consensus he labeled the blue social model (and which Urbanophile contributor Robert Munson has simply labeled the New Deal). This involved large corporations, powerful unions, extensive industrial regulation, and an expanding safety net. Those who wish to retain the model suggest allowing divergence to continue, but raising taxes on the wealthy and successful in order to redistribute them to sustain those at the bottom of the ladder (via an expanded welfare state), who are in effect seen as lost causes in the modern global knowledge economy, though few of them will openly say it. So the idea is to invest in success, and redistribute the harvest aggressively. That’s why you see lots of left advocacy in favor of tax increases on higher income earners and against food stamp and other benefit cuts, but a paucity of ideas for how to provide the left behinds with jobs and opportunity.

Mead suggests there’s no such thing as the red social model, and perhaps he’s right in that there’s never been a national policy consensus we could label as such, but there’s certainly a red model response to current conditions and it’s called the Tea Party, or what Mead has labeled a “Red Dawn” in many places like Kansas, North Carolina, and New Mexico. This is a type of single factor determinism model. In these kinds of models, a single factor like education, transportation infrastructure, climate, etc is treated as overwhelmingly determinant in driving the economic structure and outcomes. The factor posited by the Red Dawn model is government, therefore the red model response is to slash and burn government (with the potential exception of highway spending) to lower costs, taxes, and regulatory barriers that are perceived to be holding the economy back. In other words, government is the base, and the economy and everything else is the superstructure. Fix the base and the superstructure will correct itself. That’s the theory.

Broadly speaking, these are the paths that Illinois and Indiana have followed. Chicago’s size enables it and its values to political dominate the state in the modern era. With only a rump of a Republican Party, the Democrats are free to do what they like. Conversely, in Southern influenced Indiana it is the outstate areas that are numerically superior to the successful urban regions, thus the state follows their policy preference, and Republicans overwhelmingly dominate the state so there’s little real opposition to red model policies.

What have the results been? Most obviously, Illinois is nearly bankrupt while Indiana is sitting on a AAA credit rating and a $2 billion surplus in the bank. (It has a pension deficit, but it’s manageable and there’s a funding strategy in place). Clearly Indiana has a more functional political system than Illinois, which somehow manages to remain gridlocked despite a “four horseman” style legislative system and overwhelming Democratic dominance. So score two for Indiana.

Finances aside, what have the results been? Illinois has poured massive quantities of cash into building on success, with items like the O’Hare Modernization Program and Millennium Park. The successful side of the economy, epitomized by the global city portion of Chicago, has soared to incredible heights. This is a city that earned at seat at the table of the global elite. On the other hand, the overlooked areas like much of the south and west sides of Chicago and places like Danville, are in horrific shape. The goal of allowing divergence clearly worked. However, with the state’s finances in abysmal shape, the redistribution portion did not happen. Indeed, the social safety net and basic services depended on by the rest of Illinois are being shredded. Even if you believe that it’s viable to simply support a large lumpenproletariat in perpetuity on welfare – which is doubtful – financial extremis means Illinois isn’t even able to try.

Meanwhile in Indiana, pretty much the entire state policy has been reoriented towards making the left behind areas attractive to lower wage businesses. Policies that would cater to higher end businesses in successful urban areas have been less popular. That’s not to say there’s been nothing. Gov. Pence recently agreed to subsidize a non-stop flight between Indianapolis and San Francisco to help the local tech industry, for example. And he’s supported efforts to boost the life sciences sector. But I think think it’s fair to say low costs and low taxes are the watchword, with right to work, light touch environmental regulation, mass transit skepticism, etc.

However, most of Indiana’s left behind type places have not recovered. Overall the state has retained a stubbornly high unemployment rate significantly above the US average, and, even more worrying, incomes have been declining relative to the US. Metropolitan Indianapolis, Lafayette, Bloomington, and Columbus have done reasonably well. Much of the rest of the state has continued to struggle, particularly in adding jobs with middle class wages. As the recent commentary by Brian Howey, Michael Hicks, and Doug Masson shows, Indiana retains its “Noblesville-Muncie” divides mirroring Illinois’ “Champaign-Danville” ones.

In short, the blue and the red model produced some success, albeit in different modes (think San Francisco vs. Houston, Chicago vs. Indianapolis), for the “haves” side of the equation but haven’t yet proven equal to the “have nots.” The Economist makes it clear the totaly different policy configurations of the UK haven’t made a dent in it either. Post-industrial blight in much of Europe tells a similar tale. This suggests that there are powerful macro forces at work that are extremely difficult if not impossible to overcome. It’s no surprise then that the Economist suggests giving up.

Again, that’s not likely, so what should we do? I won’t pretend to have all the answers to a very difficult question. However, I’ll suggest a few possibilities:

  • Seek to stop the civic death spiral. This means getting ahead of the decline curve by seeking to halt the cycle of people and businesses leaving, leading to revenue declines and degraded quality of place, leading in turn to to service cuts and tax increases and disinvestment, which leads to more people and businesses leaving. This involves getting ahead of decline and restructuring government to a place where you can hold a defensible position on services and taxes from which you can seek to rebuild.
  • Integrate with metropolitan economies. Rather than Muncie trying to hold Noblesville/Metro Indy at bay, or Danville the same to Champaign, closer connectivity is the key. I’ve written on this before regarding Indiana. In the short term losing the highly paid employees to a nearby municipality is a good thing. Without those living options for the managers, etc. you’d never be in play for the plant in the first place. That connection expands your labor pool, provides trade opportunities, etc. Just the property taxes from the plant is valuable, and can be used in rebuilding. Fostering these connections would require decisions that seem counter-intuitive on the short run. For example, Ball State University in Muncie should clearly expand its downtown Indianapolis presence. That isn’t necessarily taking away from Muncie. It’s building new connections and opportunities for Muncie where they don’t exist today.
  • Find a claim to fame around which to rebuild. Carl Wohlt says that every commercial district needs to be known for at least one sure thing. Similarly, what’s Danville’s sure thing? Some towns like Warsaw or Elkhart already have it and need to build on it. Others need to find one. That’s not to say one thing is the only thing you’ll ever need or that you aren’t opportunistic around potentials deals that come your way. But you have to start somewhere. Where do you put your limited available civic funds?

I’m not so naive as to think this it the complete answer. But if there’s to be a genuine attempt to rescue places, then new thinking is needed and a turnaround will take a long time. In the meantime in parallel, clearly people-centric solutions also need to be pursued, to give people the best opportunity to realize their potential and dreams in life, where ever that may take them. No city is a failure that does this for its citizens.

Thursday, October 17th, 2013

Well-Heeled in the Windy City

A couple weeks ago, noting the apparently immunity of global city Chicago to problems elsewhere in the city, I asked the question: What happens when global city Chicago realizes there’s a good chance it can simply let the rest of the city fail and get on with its business?

I’d argue we’re seeing the results right before our eyes.

At the same time murders in significant parts of the city are even higher than during the peak of the crack epidemic, when the city says its too poor to hire more cops, when 54 schools are closed and a 1000 teachers laid off, half the mental health clinics closed, libraries cut back, etc., Chicago has found a nearly limitless stream of money for elite amenities, most recently – and appallingly – $50+ million in TIF subsidies for a new DePaul arena. There’s also been hundreds of millions of dollars more in corporate welfare under Daley and Rahm.

Investing in success is a great idea – if you plan to harvest a return on that investment to fund city services and your safety net. It’s clear there’s no intention of doing this in Chicago. I discuss this in my most recent City Journal piece, “Well-Heeled in the Windy City.” Here’s an excerpt:

Clearly, cities like Chicago must retain a substantial portion of upscale residents and businesses. Detroit and other cities show the results of failure on this front. Yet the moral case for elite amenities has always rested on the assumption of a broader public good: what benefited the wealthy would also make life better for the rest of the city….Under Emanuel’s leadership, though, Chicago has made peace with a two-tier society and broken the social contract. Rather than trying to expand opportunity, Chicago has bet its future on its already successful residents—leading some on the left to call Emanuel Mayor 1 Percent. The Windy City isn’t alone in following this strategy. Detroit has gone bankrupt, but that hasn’t stopped city government from lavishing $450 million in subsidies on a new Red Wings arena.

Since I critique bike infrastructure as part of Chicago’s splurge for the elite, I want to clarify that point here where there are lots of bike advocates. I strongly support bike infrastructure. In fact, I once gave a presentation where I said protected bike lanes and bike share should be Rahm’s top two transport priorities on taking office because they are cost-effective and can leverage outside funds. However, even the most passionate advocates must admit that the optics are bad on making a full court press on bike lanes when cutting core services elsewhere. More importantly, Rahm’s explicit rationale on bike infrastructure has been luring talent for the tech economy, thus it is an elite focused venture. For example, the Sun-Times reported:

Emanuel called protected bike lanes central to the city’s sustainability plan and his efforts to make Chicago the high-tech hub of the Midwest. Chicago “moved up dramatically” in the list of major cities whose employees bike to work, he said.

“It’s part of my effort to recruit entrepreneurs and start-up businesses because a lot of those employees like to bike to work,” he said.

“It is not an accident that, where we put our first protected bike lane is also where we have the most concentration of digital companies and digital employees. Every time you speak to entrepreneurs and people in the start-up economy and high-tech industry, one of the key things they talk about in recruiting workers is, can they have more bike lanes.”

I’m simply taking the mayor at his word. (See also here and here).

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