As cities struggle with post-pandemic growth, a recent Route Fifty story says Midwestern cities are “reaching beyond traditional incentives,” instead “promoting quality of life benefits.” But two of the cities cited depend either on government spending, or on their status as a wealthy suburb in a metro area. That’s very traditional—and inequitable—for growth, and isn’t a strategy more troubled areas can use.
Columbus, Ohio and Carmel, Indiana are cited in the Route Fifty story, but they aren’t great cases for new innovative city strategies. Columbus, Ohio is a growing city and metropolitan area. It relies on substantial public money supporting the economy, because it’s the state capital and home to mega-university Ohio State.
Growing state government and associated work and a growing university have helped anchor an educated labor force, in turn attracting other employers. As a result, the Columbus metro population has grown 18% in the past decade.
And far from going “beyond traditional incentives,” the region is a big recipient of industry subsidy dollars. The Columbus region will receive billions in federal and state dollars to subsidize a new Intel
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Indeed, the Route Fifty story’s claim of places “reaching beyond traditional incentives” is belied by the data. Good Jobs First (GJF), our most valuable watchdog of wasteful economic development subsidies, called 2022 a “mega-year for megadeals.” GJF reports 2022 saw “eight economic development deals in which companies received at least $1 billion in subsidies—for a single facility.” That’s “equal to the previous nine years combined.”
Route Fifty also cites Carmel, Indiana, as another innovator, without mentioning that it’s part of the Indianapolis metropolitan area. Census data for Carmel describe a wealthy suburb. It’s 80.5% white and highly educated, with 73.5% of its residents over 25 holding a BA or higher. Three-quarters of its housing units are owner occupied.
And only 3% of Carmel’s residents live in poverty, while the city has a median annual household income of almost $120,000. In 2020, Carmel’s household income was 81% higher than the median for the Indianapolis metro, Carmel’s home region. So Carmel will attract affluent metro residents, as it always has—again, not a novel strategy.
Troubled Midwestern cities with declining industries and populations can’t simply create a massive public university, relocate the state capital, or generate affluent suburbs. As I argue in my new book Unequal Cities, wealthy suburbs like Carmel have prospered for decades by getting the economic benefits of urbanization while not paying their fair share of regional costs. That may benefit Carmel’s residents, tax base, and schools, but it isn’t an innovative growth strategy.
The Route Fifty story does quote Tim Bartik at the Upjohn Institute, one of our best thinkers on how place-based policies can help troubled cities and regions. Bartik notes the “chicken-and-egg problem” many cities face in trying to attract high-tech workers—if you don’t have the firms and jobs, it’s hard to get the workers, and if firms don’t see a qualified labor pool, they’re less likely to locate there.
Creating what economists call a “thick” labor market of higher educated and skilled workers can help regions grow and prosper. For years, job growth in Silicon Valley kept attracting tech workers, which in turn attracted firms—and capital—to the region. Those investments in turn attracted more workers, allowing incomes to grow (and housing prices to skyrocket), contrary to standard economic analysis that predicted costs would drive workers and companies away.
The rise of working from home (WFH) may be eroding that advantage, but we don’t know how big or permanent WFH will be. Recent pandemic population shifts have been away from large metropolitan areas, especially in 2020-2021, when Brookings demographer William Frey reports “the rate of out-migration” from major metro areas “more than tripled.”
So we could be seeing some movement to lower-cost metropolitan areas, especially ones with good schools and affordable housing. Although housing costs are rising pretty much everywhere, due to America’s long-term lack of construction, residents of high-cost areas like San Francisco or New York City can try to sell their high-priced home and buy a less expensive one elsewhere. That of course will help drive up housing prices in lower-cost metros.
We may get more of this cost equalization among metropolitan areas—what economists call “convergence.” Prosperous places like Columbus and Carmel may be well situated to benefit further from a WFH-driven increase, and capture more footloose home-based workers.
But it isn’t a new economic strategy for cities. All cities always are trying to attract educated, affluent new residents, and they certainly haven’t abandoned traditional business subsidy policies. Jim Russell at Producer Cities, who follows these population movements very closely, says “Midwestern economic development is about firm attraction, not workforce attraction. It’s pro-business, anti-talent.”
Regrettably, unequal and economically troubled cities at the center of prosperous metropolitan areas is America’s urban form. It will take a lot more than relocating some affluent highly educated workers to growing cities or high-income suburbs to change that picture.