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Cronyism on an Industrial Scale to Blame for Inflated New York Subway Costs

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Just before year end, the New York Times dropped a bombshell report on what they term “the most expensive mile of subway on earth.”

An extensive investigation by the Times finally starts to get at the heart of why construction costs on the New York subway are vastly higher than anywhere else in the world.

The inescapable conclusion is that a major culprit is industrial scale cronyism (or featherbedding, or corruption, or whatever you want to call it) infecting nearly every aspect of the system: employees, contractors, and consultants:

Trade unions, which have closely aligned themselves with Gov. Andrew M. Cuomo and other politicians, have secured deals requiring underground construction work to be staffed by as many as four times more laborers than elsewhere in the world, documents show.

Construction companies, which have given millions of dollars in campaign donations in recent years, have increased their projected costs by up to 50 percent when bidding for work from the M.T.A., contractors say.

Consulting firms, which have hired away scores of M.T.A. employees, have persuaded the authority to spend an unusual amount on design and management, statistics indicate.

Public officials, mired in bureaucracy, have not acted to curb the costs. The M.T.A. has not adopted best practices nor worked to increase competition in contracting, and it almost never punishes vendors for spending too much or taking too long, according to inspector general reports.

Here are some further highlighted excerpts.

The budget showed that 900 workers were being paid to dig caverns for the platforms as part of a 3.5-mile tunnel connecting the historic station to the Long Island Rail Road. But the accountant could only identify about 700 jobs that needed to be done, according to three project supervisors. Officials could not find any reason for the other 200 people to be there.

“Nobody knew what those people were doing, if they were doing anything,” said Michael Horodniceanu, who was then the head of construction at the Metropolitan Transportation Authority, which runs transit in New York. The workers were laid off, Mr. Horodniceanu said, but no one figured out how long they had been employed. “All we knew is they were each being paid about $1,000 every day.”

Massive overstaffing driving by union contracts:

Mike Roach noticed it immediately upon entering the No. 7 line work site a few years ago. Mr. Roach, a California-based tunneling contractor, was not involved in the project but was invited to see it. He was stunned by how many people were operating the machine churning through soil to create the tunnel.

“I actually started counting because I was so surprised, and I counted 25 or 26 people,” he said. “That’s three times what I’m used to.”

The staffing of tunnel-boring machines came up repeatedly in interviews with contractors. The so-called T.B.M.s are massive contraptions, weighing over 1,000 tons and stretching up to 500 feet from cutting wheel to thrust system, but they largely run automatically. Other cities typically man the machine with fewer than 10 people.

It is not just tunneling machines that are overstaffed, though. A dozen New York unions work on tunnel creation, station erection and system setup. Each negotiates with the construction companies over labor conditions, without the M.T.A.’s involvement. And each has secured rules that contractors say require more workers than necessary.

The unions and vendors declined to release the labor deals, but The Times obtained them. Along with interviews with contractors, the documents reveal a dizzying maze of jobs, many of which do not exist on projects elsewhere.

There are “nippers” to watch material being moved around and “hog house tenders” to supervise the break room. Each crane must have an “oiler,” a relic of a time when they needed frequent lubrication. Standby electricians and plumbers are to be on hand at all times, as is at least one “master mechanic.” Generators and elevators must have their own operators, even though they are automatic. An extra person is required to be present for all concrete pumping, steam fitting, sheet metal work and other tasks.

In New York, “underground construction employs approximately four times the number of personnel as in similar jobs in Asia, Australia, or Europe,” according to an internal report by Arup, a consulting firm that worked on the Second Avenue subway and many similar projects around the world.

Contractors with incentives to drive up costs, with zero cost containment:

Even though the M.T.A. is paying for its capital construction with taxpayer dollars, the government does not get a seat at the table when labor conditions are determined. Instead, the task of reining in the unions falls to the construction companies — which often try to drive up costs themselves.

Typically, construction companies meet with each trade union every three years to hammer out the labor deals. The resulting agreements apply to all companies, preventing contractors from lowering their bids by proposing less generous wages or work rules. That is not a problem in the private sector, where the possibility of nonunion labor can force unions to be more competitive, or in parts of the public sector that involve more potential bidders. But in the small world of underground construction, experts say there is little cost containment.

Tim Gilchrist, a transportation adviser to Govs. Eliot L. Spitzer and David A. Paterson, noted all costs are passed on to the M.T.A. “Nobody at the negotiating table is footing the bill,” he said.

Critics pointed out that construction companies actually have an incentive to maximize costs — they earn a percentage of the project’s costs as profit, so the higher the cost, the bigger their profit.

The profit percentage taken by vendors also is itself a factor in the M.T.A.’s high costs.

In other parts of the world, companies bidding on transit projects typically add 10 percent to their estimated costs to account for profit, overhead and change orders, contractors in five continents said. Final profit is usually less than 5 percent of the total project cost, which is sufficient given the size of the projects, the contractors said.

Things are much different in New York. In a series of interviews, dozens of M.T.A. contractors described how vendors routinely increase their estimated costs when bidding for work.

Lack of competition in bidding:

Lack of competition is also a problem for the M.T.A. A Times analysis of roughly 150 contracts worth more than $10 million that the authority has signed in the past five years found the average project received just 3.5 bids.

“In other cities, you get eight bids for projects,” said Gary Brierley, a consultant who has worked on hundreds of projects in the last 50 years, including the No. 7 line extension and the Second Avenue subway. “In New York, you get two or three, and they know that, so they’ll inflate their bids if they think they can get away with it.”

One of the most important contracts in recent years, for the construction of the Second Avenue tunnel, got just two bids. M.T.A. engineers had estimated the contract would cost $290 million, but both bids came in well above $300 million, and the authority did not have much leverage. Ultimately, it awarded the deal for about $350 million — 20 percent above its estimate.

Massive overhead and soft costs:

On average, “soft costs” — preliminary design and engineering, plus management while construction is underway — make up about 20 percent of the cost of transit projects in America, according to a 2010 report by the Transportation Research Board. The average is similar in other countries, contractors said.

Not in New York.

The latest federal oversight report for the Second Avenue subway projected soft cost spending at $1.4 billion — one-third of the budget, not including financing expenses. M.T.A. officials said that number was high because it included some costs for design of later phases of the line. But experts said it was still shocking.

“The crazy thing is it’s so high even with everything else,” said Larry Gould, a transit consultant and former M.T.A. subway planner. “If we have three or four times as many workers, how can the percentage for soft costs be so high?”

The long-rumored “Parsons Brinckerhoff tax” and the revolving door:

Both the Second Avenue subway and East Side Access projects hired the same main engineering firm: WSP USA, formerly known as Parsons Brinckerhoff. The firm, which designed some of New York’s original subway, has donated hundreds of thousands to politicians in recent years, and has hired so many transit officials that some in the system refer to it as “the M.T.A. retirement home.”

The firm was the only vendor to bid on the engineering contract for the Second Avenue subway, records show. On East Side Access, it is sharing the contract with STV Inc., which recently hired the former M.T.A. chairman Thomas F. Prendergast. The contract was initially for $140 million, but it has grown to $481 million.

The M.T.A. is partly to blame. Officials have added to the soft costs by struggling to coordinate between vendors, taking a long time to approve plans, insisting on extravagant station designs and changing their minds midway through projects. In 2010, they hired a team of three consultants to work full time on East Side Access “operational readiness” — getting the tunnel ready to open — even though contractors knew construction would not end for another decade.

Janno Lieber, who joined the M.T.A. as chief development officer in April, acknowledged there were parts of the authority’s project management approach that have been “broken” and “self-defeating.” Changing plans midway through projects is a “huge issue,” as is over-customization of designs and poor management of consultants, he said.

Definitely click through to read the whole thing, which should be a strong contender for Pulitzer Prize this year.

This piece originally appeared on Urbanophile.

Aaron M. Renn is a senior fellow at the Manhattan Institute, a contributing editor of City Journal, and an economic development columnist for Governing magazine. He focuses on ways to help America’s cities thrive in an ever more complex, competitive, globalized, and diverse twenty-first century. During Renn’s 15-year career in management and technology consulting, he was a partner at Accenture and held several technology strategy roles and directed multimillion-dollar global technology implementations. He has contributed to The Guardian, Forbes.com, and numerous other publications. Renn holds a B.S. from Indiana University, where he coauthored an early social-networking platform in 1991.

Photo Credit: MTA/CC


Case Studies in Autonomous Vehicles, Part 3: Will Autonomous Vehicles Be Able to Handle All Driving Conditions?

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Parts 1 and 2 of this series explored the practical challenges of adopting shared use autonomous vehicles from a human behavior standpoint. In this final piece, I explore the issues AVs might face in the most challenging of driving conditions.

Autonomous vehicle technology is generally evaluated against a spectrum of 6 levels, ranging from Level Zero, which is a completely human controlled vehicle, to Level 5 being “completely” autonomous with no human intervention save perhaps for directions. Generally autonomous technology has been focused on ultimately developing truly “driverless” Level 5 vehicles. In order for fully autonomous vehicles to succeed at this level, they must be able to perform in all driving conditions at all times. Otherwise, we risk such vehicles getting stranded, crashing or stopping without the ability of a human driver to course correct.

Even if such situations occur only once in 100,000 miles, they could cause serious challenges, including stranded traffic and passengers and threats to passenger safety. Many individuals will also have “range anxiety” about riding in vehicles that can only go a certain distance or drive in certain conditions. Many of the trickiest driving situations, what I call “The Other 1 Percent,” require good human judgment, intuition and non-verbal communication. Indeed, the industry is acknowledging that closing out on this last, most challenging climb has not been easy. It is not clear how autonomous vehicles will perform in these situations.

What situations will driverless vehicles face and how can we design the vehicles so that they can handle such situations?

Here are some examples to consider:

Two autonomous vehicles meet on a one lane road

Two autonomous vehicles are driving toward each other on a one lane road. When they meet, there is no room on the shoulder for one of them to yield. So they come to a stop. How will they extract themselves from the situation? Will one of them be programmed to back up to a point where the other can pass? Will the passenger be required to intervene and give a voice command? Will the vehicles be communicating with each other or will they act independently? This situation seems like a particularly tricky one that traditionally has been handled using human judgment: one of the drivers knows to yield or to back up to an appropriate place for the other car to pass. Will an autonomous vehicle know how to do the same thing?

Emergency vehicle blocking the road

An emergency vehicle such as a police car is blocking one side of the roadway due to an incident such as a crash or medical emergency. In such situations, vehicles on the blocked side of the road will often approach the incident and proceed around the emergency vehicle, temporarily entering the wrong side of the road as long as it is safe and then proceeding back onto the right side of the road to continue their journey. What will autonomous vehicles do in such situations? Will they be programmed to enter the wrong-side of the road if it is safe? How will they know if it is safe? Will they wait indefinitely for the emergency vehicle to leave?

Riots

An autonomous vehicle is driving several passengers to a reception. However, it approaches an unexpected riot, with people throwing rocks and bottles in the street, making it dangerous to proceed. In such situations, human drivers know to (1) recognize and not to approach the area or (2) if they do approach closely for whatever reason, to turn around and get away from the area. What will an autonomous vehicle do? Will it be able to recognize such a dynamic and evolving situation? How? And what will such vehicles be programmed to do in such situations? In a dynamic, evolving and unstable situation in which human intuition is helpful, a driverless vehicle may not know what to do.

Power outages

Due to a heat wave, the power goes out at street lights throughout a neighborhood. Traditionally, human drivers know to proceed as if at a four way stop sign. Traffic cops sometimes are needed as well as human judgment and communication to proceed safely. Nevertheless, these situations often result in long backups. Will autonomous vehicles know how to effectively navigate streets that are without power? Will they be able to navigate in a mixed use environment, where human driven vehicles are also navigating such intersections?

Natural disasters

A local river overflows its banks and suddenly begins inundating local roads. A human driver may be aware that certain streets tend to flood during heavy rains and will take an alternative route. Will autonomous vehicles have the same information and make the same decision? And will an autonomous vehicle be able to distinguish between a typical rainy roadway versus a flooded one that is too deep to safety traverse?

Inaccurate Mapping/Directions

Mapping apps such as Google, Waze, etc. sometimes give inaccurate or unhelpful driving directions (i.e. directing you to take a street that is now closed or directing you to make a left turn at a busy, uncontrolled intersection.) In such situations, human drivers improvise: they will immediately turn around, take a right turn instead of a left or other maneuver designed to save time. What will autonomous vehicles be programmed to do? Will they stubbornly attempt to proceed to a street that is closed? These decisions could have significant consequences. If shared use vehicles get stuck because of incorrect mapping and they are unable to quickly adjust, it will take longer to pick up and drop off riders, making the sharing of such vehicles less attractive to passengers.

These and other challenging situations are complicated by the fact that driverless cars will likely be in a “mixed use” environment for many years where human-driven and fully autonomous vehicles will share the road.

Conclusion

The “one percent” of driving situations raises an interesting point: what if autonomous vehicles are never able to achieve truly driverless status given the rare but still necessary need for human judgment in some situations? This could have serious implications on various projections for the future, including the need to get driver’s licenses, how fleets are owned and managed, and the design of vehicles and the urban landscape. For example, if cars still need some level of human attention far into the future, that might lend itself towards more continued car ownership.

These scenarios may also influence the design and progress of autonomous vehicles. For example, can we be sure that a steering wheel will never be needed in an autonomous vehicle?

In order for autonomous vehicles to reach their full potential, they need to be able to operate in all environments and at all times so that passengers know they can go anywhere and so that snafus on the roads will be minimized. It appears that this challenge will take a considerable amount of time to address.

Blair Schlecter is based in Los Angeles and writes about transportation policy and innovation. He can be reached at schlecterblair@gmail.com.

Photo: Dllu (Own work) [CC BY-SA 4.0], via Wikimedia Commons

Is There A Niche For Sensible Politics In America?

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Given the current state of American politics, and those of our state of California, our founding fathers might well consider not just turning over in their graves but boring deeper towards the earth’s core. Yet amidst the almost unceasing signs of discord and hyperbolic confrontation, there exists a more sensible approach which could help rescue our wobbling Republic.

Centrism has long been the subject of well-meaning advocacy but has lacked a class or geographic focus. It most defines the politics of the suburban middle. Much of the urban core — where Clinton and other Democrats often win as many as 80 to 90 percent of the vote — is now about as deep blue as the Soviet Union was red. For its part, the countryside has emerged so much as the bastion of Trumpism that MSNBC’s Joy Reid labels rural voters, “the core threat to our democracy.”

A niche for sensible politics?

Most Americans do not live in either the urban core or rural periphery; more than half live in suburban areas which nearly split their ballots in 2016 , with perhaps a slight edge for President Trump. Many suburban areas — not only in California or New York but in places like Fort Bend County, outside Houston — went for Clinton. Democrats won big recently in the Virginia suburbs, and did better in those in Alabama; both resulted in stinging defeats for Trump and the GOP.

To consolidate these gains, Democrats need to resist the tendency, most epitomized by the likes of Gov. Jerry Brown, to detest not only suburbs, but the entire notion of expanded property ownership, privacy and personal autonomy. Suburbanites may not like Trump’s nativism and grossness, but they do have an interest in preserving their way of life.

A more reasoned, problem solving approach seems the best course as well for Republicans. The most popular governors in the nation, for example, are not progressive firebrands like Brown or Washington’s Jay Inslee, both under 50 percent approval. Nor are right-wing firebrands so popular; Kansas’ Sam Brownback wins plaudits from less than a quarter of his electorate. They are measured politicians like Maryland’s Larry Hogan and Massachusetts’ Charlie Baker, Republicans from deep blue states with roughly two-thirds approval.

Read the entire piece at The Orange County Register.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book is The Human City: Urbanism for the rest of us. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Photo Credit: Gage Skidmore from Peoria, AZ, United States of America (John Kasich) [CC BY-SA 2.0], via Wikimedia Commons

Thoughts on Boston and Northern Exclusion

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The Boston Globe's Spotlight investigative team recently touched a lot of nerves with its seven-part series about Boston's perception and reputation as a racist city. The Spotlight team should be commended for asking -- and seeking answers to -- a lot of very tough questions regarding Boston. Is Boston racist? How did it gain that reputation? Why does the reputation persist to this day, particularly among blacks?

Let me say this right off the bat. I've never been to Boston. My only venture into any part of New England is New Haven, CT, very briefly more than 20 years ago. That's it. But as a black man from the Rust Belt, I was keenly aware of Boston's reputation, as is probably a large part of the nation's black community, even if the vast majority of us have never been there. There's been enough anecdotal evidence for blacks to digest over the years to justify our uneasiness about the city. The Red Sox' place as the last team in Major League Baseball (in 1959, a full 12 years after Jackie Robinson appeared with the Brooklyn Dodgers) to employ a black ballplayer? Bill Russell's fraught relationship with the city, even as he led the NBA's Boston Celtics to a championship dynasty in the '50s and '60s? The tumultuous battles over school busing in the '70s? The Charles Stuart murder case, in which a man concocted a story of his wife and unborn child being killed by a black assailant, setting off a widespead manhunt, only to be found to be guilty of the murder himself? The recent taunting of Baltimore Orioles baseball player Adam Jones, at the hand of Red Sox fans? Yes, blacks are familiar with these, and much more.

In the process of seeking answers, the Spotlight team found some interesting pieces of data and revealing facts from recent history that could help explain the city's enduring reputation. Within the city, Boston's black population comprises about 23 percent of its 673,000 residents, or about 155,000 people. That's generally on par with what's seen in other large cities. But that figure obscures the actual presence of blacks in Greater Boston, where the core city is actually a relatively small component of the entire metro area. Blacks make up about seven percent of metro Boston's 4.8 million people, or just about 335,000 people, making it one of the nation's whitest metro areas. In addition, a full 36 percent of blacks in metro Boston are Caribbean and African immigrants, one of the highest such figures for any American metro area, further differentiating Boston's black population from other metros.

Here's some context: metro Milwaukee, just one-third the size of metro Boston, has about the same number of black residents. There are as many blacks in Manhattan as in all of metro Boston.

So the first thing to understand is the relative whiteness of Boston compared to most major U.S. cities.

Of course I can't say this with absolute certainty, but my guess is that Boston maintained its overall whiteness through unintentional and intentional means. Unintentionally because Boston largely missed the Great Migration that brought blacks from the rural South to the urban North throughout much of the 20th century. Check this out from Wikipedia's entry on the Great Migration:

"The Great Migration was the movement of 6 million African-Americans out of the rural Southern United States to the urban Northeast, Midwest, and West that occurred between 1916 and 1970.[1] Until 1910, more than 90 percent of the African-American population lived in the American South.[2] In 1900, only one-fifth of African-Americans living in the South were living in urban areas.[3] By the end of the Great Migration, 53 percent of the African-American population remained in the South, while 40 percent lived in the North, and 7 percent in the West,[4] and the African-American population had become highly urbanized...

Big cities were the principal destinations of southerners throughout the two phases of the Great Migration. In the first phase (1910-1930), eight major cities attracted two-thirds of the migrants: New York and Chicago, followed in order by Philadelphia, St. Louis, Detroit, Pittsburgh, and Indianapolis. The Second great black migration (1940-1970) increased the populations of these cities while adding others as destinations, especially on the West Coast. Cities such as Los Angeles, San Francisco, Oakland, Phoenix, Seattle, and Portland attracted African Americans in large numbers.[11]"

Boston's black population did grow substantially during the 20th century. However, it simply didn't factor into the primary migration patterns of blacks moving from the rural South at the time.

More deeply, though, I think Boston is among a group of cities that was intentional in maintaining a level of whiteness. I think most all Northeastern and Midwestern cities -- from Boston to Washington, and westward to the Twin Cities and St. Louis -- patented a policy of exclusion toward blacks for much of its history. The Great Migration was the first and greatest threat to the policy of exclusion, prompting legal, extralegal, and violent battles in virtually all of the cities within this area at some point in the 20th century.

Whereas southern states were explicit in their exploitation of slave labor to fuel the plantation economy from the settlement of this country, I think morally ambivalent northern states and their largest cities chose to avoid the thorny idea of slavery and black people in their midst. They first sought to exclude blacks, and when they no longer could do that, they sought to marginalize them.


Southern exploitation. Source: pbs.org

Beware -- here's where I venture into deep conjecture that may or may not have any basis in reality. I see Boston and all of New England as being founded as "shining cities on a hill", or idealistic communities that conformed to the religious and social mores of its pious founders. In the 1600s, those moving to the South came here to get rich; those moving to the North were seeking enlightenment.

New Englanders certainly weren't unaware of what was happening in the South. They may have even shared some of the views that many Southerners had about blacks at the time as inferior. But their piety prevented them from the type of exploitation that developed in the South. Their response? Build a society that doesn't include blacks. Let black people be an issue that Southerners must confront. If blacks do enter our society, keep them at the margins.

Just as the desire of Southern planters to enrich themselves via cash crops like tobacco and cotton led to the establishment of the plantation economy and slavery, the desire of New Englanders to develop religiously and socially "pure" communities led to implicitly exclusive places in the North.

I believe this was intentional, and became the prevailing way of organizing the American community and social structure in all places not Southern. Northern exclusion became the dominant influence as it moved into the Midwest, the Plains, the Rockies, the Pacific Northwest, and the Southwest.


Northern exclusion, seen through a redlining map of Chicago from the 1930's. It's amazing how much the assessment of mortgage risk then mimics the lack of investment now, even after almost 90 years. Source: inclusion.uwex.uwc.edu

Up until the period after the Civil War, the North didn't have to develop any explicitly exclusive policies to keep blacks out; simply having very few blacks meant few were attracted there, and all Northern cities had to do was imply that blacks could move there, but weren't welcome. But recently freed people in the South now saw a new world of opportunity and began to take advantage by seeking jobs in the rapidly industrializing Northern cities. By the end of the 19th and start of the 20th century, Northern cities began codifying the exclusionary strategies they employed for generations to exert control on blacks moving north. What are those, you ask? Here's a quick list, generally in the chronological order they were first implemented:

Restrictive housing covenants. Covenants were put in property deeds that prevented the sale of property to blacks.

Explicitly exclusionary zoning. Zoning ordinances were developed that relegated blacks to certain parts of cities.

Implicitly exclusionary zoning. Once explicitly exclusionary zoning was overturned in courts, cities sought to exclude by approving zoning ordinances that promoted large-lot, single-family home development that would effectively exclude those who could not afford that lifestyle.

Redlining. Discriminatory lending practices that starve certain areas of a city, often those with large numbers of black residents, of financing and investment.

Public housing construction. The local implementation of public housing construction led to its concentration in largely low-income black communities, and the stigmatization of both public housing and low-income black communities.

Urban renewal. Federal funding for urban renewal projects that cleared "slums" for universities, hospitals and other uses led to the destruction of black neighborhoods.

Interstate highway construction. Similar to public housing and urban renewal, low-income black communities were cleared for highways that were believed to serve a broader public good.

Underfunded city services. As cities faced population decline and a dwindling tax base, many cut costs by directing fewer resources toward lower income parts of their city. That led to disinvested schools, parks and other city services, disproportionately affecting black communities.

Protectionist policing strategy. Cities began intensely concentrating crime-fighting resources in black communities, leading to wider perceptions about both black communities (in need of aggressive policing tactics) and white communities (in need of protection).

You know, the differences between the South's legacy of black exploitation and the North's legacy of black exclusion aren't something that have been recently discovered. Among blacks it's been known at least since the Great Migration brought many north in the early parts of the 20th century, and likely much earlier. During the Civil Rights Movement 60-plus years ago, movement strategists debated what exactly should be challenged in the name of civil rights. Would it be the "separate but equal" Jim Crow policies that created separate public facilities, relegated blacks to the backs of buses, and subjected blacks to voting tests and taxes to suppress voting? Or would it be the mix of policies cited above, each of which have disparate impacts on blacks, but could be reasonably defended as race-neutral? Movement strategists chose the former, hoping that success in one arena would eventually form the foundation for success in another.

That decision came with mixed success. It indirectly led to the emergence of leaders such as Malcolm X -- a black man born in Omaha, NE, raised in Milwaukee and Lansing, MI, and who spent many of his formative years in Boston -- and the growth of the broader Black Power Movement. By the early '60s Malcolm X was challenging the Civil Rights Movement for its integrationist focus -- removing Jim Crow's barriers -- and not focusing enough on other factors that limited black economic growth.

That forced an alteration in strategy among the Southern civil rights activists, leading to the Chicago Freedom Campaign that focused on open housing, greater transportation and job access, improved education and criminal justice system reform. Success in this campaign was far more difficult to achieve. The shift in focus did lead to national legislation like the 1968 Fair Housing Act and an expanded role for the recently-created U.S. Department of Housing and Urban Development, but enforcement was often lacking because the determination of intent to discriminate was difficult.

We're now left with cities where blacks are free to drink from any water fountain, sit wherever they like on a bus, but are increasingly left out of tangible economic gains. Why? Because our society's acceptance of Northern exclusion has strengthened the correlation between location and economic mobility and success. Where you live has become one of the primary indicators of one's economic success; it determines the jobs your parents have, what schools you'll attend, the networks you establish, the opportunities you're exposed to -- creating a gap that grows even wider once colleges are chosen, young adults graduate and new careers are started.

The gap is continually perpetuated, simply by not acknowledging it.

Let me finish by going back to Boston. I honestly don't believe Boston is any more "racist" than any other American city. I do believe its overall whiteness, and the presence of elite universities that have a disproportionate influence on public policy nationwide, gave it a greater hand in establishing many of the strategies listed above.

It's conceivable that many of the policies of Northern exclusion were first discussed and debated in the elite universities that Boston, and New England, are known for, emanating outward and adopted nationally.

This piece originally appeared on The Corner Side Yard.

Pete Saunders is a Detroit native who has worked as a public and private sector urban planner in the Chicago area for more than twenty years.  He is also the author of "The Corner Side Yard," an urban planning blog that focuses on the redevelopment and revitalization of Rust Belt cities.

Photo: A view of downtown Boston, and more. Source: bu.edu

Minnesota's Millennial Mobility

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With both metro and rural areas projected to face a labor force slowdown by 2025 as more baby boomers exit the workforce than millennials enter, where millennials chose to live and work becomes increasingly important. In this report, Chet Bodin, a labor market analyst for Minnesota's Department of Employment and Economic Development, details how the migration patterns of millennials will impact Minnesota's regional labor markets.

Discussion surrounding the millennial generation is widespread and multi-faceted, largely because it is soon to account for the highest percent of Minnesota’s workforce in the next decade. But what makes millennial impact even more important to employers, policymakers, and educational institutions is the context of their arrival. Even as millennials enter the labor force in droves, the previous generation to dominate the workforce, the baby boomers, exit even faster. Consequently, not only are values and norms in the workplace changing, but the ensuing workforce shortage has created a simultaneous challenge. By 2025 both metro and rural areas alike will be facing at best a plateau in labor force growth like never before (see Table 1). Many areas will see their labor forces shrink. The ability of local employers to withstand a shortage will depend on where millennials choose to plant their roots, and the extent that communities prioritize their livelihood.

In Minnesota the supply of millennial workers varies by region, and whether an employer is looking to attract more or live without them, their relative size in the workforce and patterns of mobility matter. The sizable demographic shifts underway have employers of all shapes and sizes examining generational context in their management and hiring strategies more and more.

However, generational identity is often based more on social acceptance than definite timelines, and the specific boundaries of the millennial generation remain somewhat unsettled. If for no other reason, demographic starting and ending points need to be established to provide macro-level quantitative analysis. Most efforts to pin down the boundaries of the millennial generation range between 1977 and 2002, but both the floor and ceiling vary.

The generational boundaries for this analysis are set parallel to the data sources utilized. In 2015 estimates from the American Community Survey (ACS), millennials would have been between the ages of 13 and 38 at the widest range. ACS population estimates, however, are organized by five-year age groups (i.e., 0-4 years, 5-9 years, etc.), and trend analysis benefits from age ranges that follow suit. The youngest age limit can easily be increased to 15 since most people do not enter the workforce until at least that age anyway. In addition, most estimates of the millennial generation do not exceed 20 years in length, which would put the upper age limit at 34 years of age in 2015. By that estimation, millennials researched here would have been born from 1981 to 2000.

Regional Differences

Based on this, the millennial generation – people between 15 and 34 years of age in 2015 – accounted for more than a quarter of Minnesota’s statewide population. As they come of age, millennials will have a significant impact on Minnesota’s culture, economic demands, and workforce supply.

However, the extent of millennial influence varies by region and will continue to change over time. Population projections from the Minnesota State Demographer’s Office estimate that millennials will hold a shrinking share of the state’s population over the next two decades. Twenty-somethings often migrate away from their hometowns for other opportunities, particularly young adults who originate from rural areas.

In Greater Minnesota the Southwest region is projected to have the most millennial out-migration from 2015-2035 and the fastest population decline overall (see Table 2). Yet, their to-be-determined migration patterns may be the contributing factor to actual future outcomes, as many millennials are still in high school and have yet to decide whether they will leave their home towns.






















A Simplified Cohort Analysis helps demonstrate how migration patterns by age groups impact population makeup over time. For example, those who were in the 15 to 19 year old age group in 2010 will be in the 20 to 24 group in 2015. If no one moves in and no one moves out, the count of people 15 to 19 in 2010 would provide an “Expected” count (or control number) of people 20 to 24 in 2015. However, “Actual” numbers are oftentimes different, showing in- or out-migration.

In Southwest Minnesota, a large portion of the millennial generation aged into their 20s from 2010 to 2015, and over 7,500 more of these 20-somethings vacated the region than moved in (see Chart 1). The population projections in Table 1 indicate millennial out-migration will continue as those who are teenagers now enter their twenties and begin to test other markets from 2015-2025.























While the number of millennials in Greater Minnesota will likely decline in the next decade, their impact in the regional workforce will increase in most regions. Based on the labor force participation rates of different age groups, millennials throughout Minnesota are likely to have a larger role when the entire generation comes of age. Historically, the highest labor force participation rates are among those 25 to 44 years of age – the approximate age of all millennials in Minnesota by 2025. (See Chart 2).























But like migration patterns, labor force participation rates vary by region. For example, teenagers tend to have higher labor force participation rates in Greater Minnesota than in the seven-county Metro Area. The number of millennials in a regional labor force varies by their population size and participation rate, but the proportion of the labor force they fill also depends on the activity of other age groups. In Northeast Minnesota the labor force participation rate of those 25 to 44 years of age was nearly 24 percent higher than those 54 to 65. Naturally then, the proportion of millennials in the regional workforce will grow, even as their numbers decrease overall. Indeed, the proportion of millennials in the Northeast labor force is projected to grow by over 4 percent by 2035. (See Table 3).























The percent of millennials is projected to increase in almost every regional labor force of nearly every region of Minnesota by 2025. The only exception, Central Minnesota, currently has the highest percentage of millennials in its workforce, and despite a slight decrease in the proportion of millennials projected there in 2025, the number of working millennials looks as if it will to increase by more than 5,000 in that time.

The labor force in the seven-county Metro Area is set to have the largest infusion of millennials workers over the next 10 years. Close to 90,000 more millennial workers are projected to inhabit the metro by 2025, the result of heavy metro-migration by those in their late 20s (see Chart 3). From 2010-2015 there were 18 percent more 25-29 years olds than expected, trending in stark contrast with the migration patterns of 25 to 29 years olds in every other region of the state. By 2025 the youngest millennials will fall into this age category.























The migration patterns of the oldest millennials, who will be in their early forties by 2025, will also have significant effects on the composition of regional labor markets. To varying degrees, every region of the state attracts more people ages 30 to 34 than they lose, but the same cannot be said about age groups 35 to 39 and 40 to 44. From 2010-2015 Northwest Minnesota was the only region to attract more people from both of these age groups than it lost. (See Chart 4).























Therefore, based on current trends, millennials in Northwest Minnesota are projected to account for almost 40 percent of the regional labor force by 2025 (see Table 3).

What may be equally important to future migration patterns, however, is the qualitative nature of the millennial generation in the workplace, and whether parts of Greater Minnesota have the cultural flexibility to accommodate the new economic and technological norms millennials practice. After all, most migration to Greater Minnesota generates from the metro area, and millennials may not be as eager to move in their 30s and 40s as others are today. Fortunately, employers throughout Minnesota still have time to prepare for possible changes or even influence labor force trends. Cultural differences notwithstanding, the potential for a labor force shortage in the near future has employers looking to maximize their talent and attract workers. Employers who chooses not to upgrade their technological capabilities or stay competitive with their wages will have a hard time accomplishing either. But just as important may be the influence industry leaders have on local culture – creating communities that millennials are excited to be a part of can have a major impact. As the numbers indicate, there will be real opportunities to generate mobility to rural parts of Minnesota over the next 10-20 years.

Chet Bodin is DEED's regional labor market analyst in northwestern Minnesota. He has a bachelor's degree from the University of St. Thomas in St. Paul and a master's degree in public policy from the Humphrey School of Public Affairs at the University of Minnesota.

Photo: Telepwn at English Wikipedia [Public domain], via Wikimedia Commons

Should the Midwest Play a Game It Can’t Win?

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Noah Smith at Bloomberg wrote a recent column on how to revive the Midwest that channels the ideas of Michigan based Brookings scholar John Austin. This strategy has two main planks: lure more immigrants and invest more in higher education (presumably research universities).

This is a fine idea. There’s only one problem: In an economy driven by immigrants and university research, which places are likely to win? The places that are already winning this very battle: the elite coastal cities like Boston, New York, and the Bay Area.

We’ve had decades now to observe where immigrants are settling in the US. They are mostly bypassing the Midwest. Even Chicago has seen its immigrant flows start to dry up.

And as I previously documented, in a superstar economy, the Midwest has few of the absolutely most elite programs in critical STEM fields. CMU’s computer science program is the exception that proves the rule.

The immigrants and education strategy is like telling the Washington Generals that if they want to start winning games, they should just go beat the Globetrotters. It’s not going to happen. The Midwest’s role in this current system is as the designated loser. The only way to start winning is to find out how to play a different game.

This is something that the Midwest leadership class mostly can’t even comprehend. That’s somewhat understandable. It’s much easier to look at how other people succeeded and say, “Let’s do some of that” than it is to try to change the game completely, which is a difficult an inherently uncertain enterprise. But this pragmatic mindset is what has undermined the Midwest. It’s a big part of what killed Michigan in the first place.

There’s certainly a role for pragmatism, just as there is a valid place in the Midwest for focusing on immigration and universities. That can be part of the mix to be sure. But that’s only going to work for a limited number of places such as college towns. It’s not a sufficient strategy.

Here’s a place to start thinking differently. We are in a disruptive era in Washington right now. What fundamental changes to the status quo in federal policy that aren’t already being advocated by coastal progressives would Midwest leaders like to see? Consider the example floated by Matt Yglesias (a coastal progressive, but in this case putting forth a different kind of idea) of breaking up the federal bureaucracy and moving big chunks of it to the interior. This by itself may not be a game changer. But what new ideas could be? How would Midwest leaders re-write the rulebook to put their own region in a favorable position to win? Thinking of game-changing ideas, and mobilizing leadership to start pushing them, has to be part of any reinvention strategy.

This piece originally appeared on Urbanophile.

Aaron M. Renn is a senior fellow at the Manhattan Institute, a contributing editor of City Journal, and an economic development columnist for Governing magazine. He focuses on ways to help America’s cities thrive in an ever more complex, competitive, globalized, and diverse twenty-first century. During Renn’s 15-year career in management and technology consulting, he was a partner at Accenture and held several technology strategy roles and directed multimillion-dollar global technology implementations. He has contributed to The Guardian, Forbes.com, and numerous other publications. Renn holds a B.S. from Indiana University, where he coauthored an early social-networking platform in 1991.

Brush Park, Detroit. Photo Credit: Stephen Harlan, CC BY-SA 2.0

Tech's New Hotbeds: Cities With Fastest Growth In STEM Jobs Are Far From Silicon Valley

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The conventional wisdom sees tech concentrating in a handful of places, many dense urban cores that offer the best jobs and draw talented young people. These places are seen as so powerful that, as The New York Times recently put it, they have little need to relate to other, less fashionable cities.

To a considerable extent, that was true – until it wasn’t. The most recent data on STEM jobs – in science, technology, engineering or mathematics – suggests that tech jobs, with some exceptions, are shifting to smaller, generally more affordable places.

What we may be witnessing, in fact, is a third turning in the tech world. The initial phase, in the 1950s, was mostly suburban – dominated by the still-powerful Bay Area, Boston and Southern California – and was heavily tied to aerospace and defense. The second phase, now coming to a close, refocused tech growth in two hot spots, the Bay Area and Washington's Puget Sound, and largely involved social media, search and digital applications for business services.

The third tech turning, now in its infancy, promises greater dispersion to other markets, some with strong tech backgrounds, some with far less. In the last two years, according to numbers for the country’s 53 largest metros compiled by Praxis Strategy Group’s Mark Schill based on federal data and EMSI’s fourth-quarter 2017 data set, the STEM growth leader has been Orlando, at 8%, three times the national average. Next are San Francisco and Charlotte (each at 7%); Grand Rapids, Michigan (6%); and then Salt Lake City, Tampa, Seattle, Raleigh, Miami and Las Vegas (5%).

Why Are New Players Rising?

Silicon Valley, along with its urban annex, San Francisco, seems likely to remain the tech center for the foreseeable future. The area accounted for 44% of the country’s venture capital funding in 2014, according to a Brookings analysis of Pitchbook data, and the San Jose and San Francisco regions’ STEM employment – more than 440,000 jobs – is larger than that of greater New York, which has more than twice the population. The highest location quotient, essentially the percentage of STEM jobs per capita, can be found in the Valley – a remarkable 3.38 in 2017 – while the San Francisco area comes in at roughly half that rate, with an LQ of 1.76, just behind the figures for Seattle and Washington, DC.

But recently there have been signs that the tech sector’s growth in the region is slowing, despite the presence of Google, Facebook and Apple, three of the world’s most highly valued companies. From 2006 to 2016, the Valley saw a remarkable 33% growth rate in STEM jobs – roughly 3% per year. But in the last two years, that rate has fallen to 2% annually. In some recent months in parts of the Bay Area, The San Jose Mercury reports, the tech job count has actually declined.

One limiting factor could be high housing costs. A recent report from the state Legislative Analyst's Office showed that many CEOs, particularly in Silicon Valley, regard severe housing unaffordability – where you need to earn more than $200,000 annually to buy a median-priced house – as their biggest business challenge.

The effects can be seen in domestic migration, which despite the boom has been declining since 2012. Old-time Silicon Valley residents can celebrate the rapid appreciation of their homes, but for new entrants the prospects are bleak. If millennials continue their current rate of savings, notes one study, it would take them 28 years to qualify for a median-priced house in the San Francisco area – compared with five years in Charlotte, or three years in Atlanta. This may be one reason that, according to a recent ULI report, 74% of Bay Area millennials are considering a move out of the region in the next five years.

Who Are These New Players?

If the Valley is slowing, one might expect the slack to be picked up in places that are heralded – at least by their boosters – as tech havens, places like Chicago, New York and Los Angeles. Instead, the fastest STEM growth is occurring in somewhat less ballyhooed places that have far lower housing costs and typically have less onerous tax and regulatory regimes.

Several factors may be in play. In the early part of the decade, notes a 2016 Brookings study, software focused on such things as search, social media and systems design; now, much of the impetus is coming from manufacturing-related industries, such as autos and industrial products, which may help explain the strong growth experienced by places like Grand Rapids.

That metro is also home to 17 universities and colleges, which guarantee a steady flow of tech workers. Low housing costs are certainly a potential allure; Trulia recently ranked the region as the housing market best “poised for growth” in 2018. The area boasts successful firms like Open Systems Technologies, a provider of IT services that employs about 140 people in its headquarters near downtown.

Charlotte, another new high-flier, also takes advantage of lower costs, a revived downtown area and ties to the financial service industries. The real estate firm CBRE named the city its top "momentum market" in 2016 based on its tech-talent growth rate from 2010 to 2015 (74.7%). It was followed by Nashville, with a 67.9% rate; both outpaced the Bay Area, at 61.5%.

Finally, there’s our fastest grower, Orlando, a city better known for Mickey Mouse than high-tech. Like Charlotte, Grand Rapids and Nashville, the city benefits from a combination of lower housing costs and enough amenities to attract millennials. Some companies, like Arrow Sky Media LLC, which specializes in animation and game development operations, and Finexio, a financial technology company, have recently relocated to Orlando, the latter firm from Silicon Valley. These decisions follow recent moves to Orlando by ADP and Deloitte, with 2,850 employees hired between the two companies, a majority of them tech workers.

Gallery: The Metros With The Most STEM Job Growth

How About Those Megacity Tech Hubs?

For many of these emerging markets, the tech boom has accompanied growth in their central cores. But locating in a downtown or adjacent area in a smaller city is not the same as doing so in a megacity like New York, Los Angeles or Chicago: Tech workers can find affordable environments in the relatively dense areas but, as they age, can also settle in affordable, leafy suburbs, many of which are just a short commute away.

These options are not so readily available in our largest metros: Chicago, New York and Los Angeles. Although journalists and local boosters have claimed all three places are “the next Silicon Valley,” their tech growth from 2006 to 2016 was below average, and all now have location quotients below the national average (New York’s, for example, was 0.89 for 2016).

While these regions’ cost of living may pose the biggest threat, millennials, the fuel for tech firms, also may not be as urban-centric as some have predicted. Their numbers have recently dropped or plateaued in the much-celebrated core cities of Boston, Chicago, Los Angeles and New York after rising earlier in the decade. In contrast, many Sun Belt areas – Nashville, Charlotte, Houston, Dallas-Fort Worth, Austin, Orlando – enjoy stronger net population growth in those between 25 and 34 than coastal California and the Northeast.

A recent downturn in the energy industry – a major source of STEM employment – has led to a decrease in jobs in such places as Houston, Oklahoma City and New Orleans.

What Will The Third Turning Tech Environment Look Like?

Of course, none of this is to suggest that anyone will challenge Silicon Valley/San Francisco or even Seattle, clearly following in the Bay Area’s path, at the top of the tech pyramid. But Seattle, once relatively cheap, has become more and more expensive, with the nation’s fifth-highest rents; already, some 45% of local millennials are considering leaving because of the high prices. Even rising Denver is facing a price squeeze, and a mounting exodus.

Cutbacks in H-1B visas could create labor shortages in particularly immigrant-dependent places like the Valley, where most tech workers are foreign born. To appeal more to domestic workers, tech giants will have to accommodate them in lower-cost places. Apple already has more than 6,000 employees in less costly Austin– roughly half the size of the company’s spaceship headquarters in Cupertino – including a hardware engineering division. The tech giant has very few openings in Southern California, but 10 times as many in Texas. Rapidly expanding Amazon is looking for a second headquarters, presumably in a lower-cost area, and has held many of its recent job fairs far from the West Coast. Google has been expanding most robustly in Colorado and Austin, as well as downtown San Jose. Facebook is expanding in lower-cost areas like Ohio.

So contrary to popular belief, growing dispersal, not consolidation, represents the future of STEM employment. Not every smaller city will win, but some may well become serious players in the tech game. As costs intrude and tech itself morphs, competition for STEM jobs will spread, and other regions will begin to impose themselves on the nation’s high-tech map.

This piece originally appeared on Forbes.com.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book is The Human City: Urbanism for the rest of us. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Immigration and Trust

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Do we only really trust people who are like us? And if so, is that a mistake?

Distrust of the unfamiliar and the foreign is a natural survival mechanism for most species, including the human species. But, if empirical evidence is worth anything, a reflexive distrust of the foreigner cannot be said to be equally benign. Distrust sows fear. And fear plays in the hands of demagogues and can turn into a contagious pathology with numerous undesirable consequences.

One of these consequences is an excess of caution. Safety is important but an obsession with safety is counterproductive. Locking your door at night is prudent, but fear of ever leaving your house can lead to atrophy and other physical and mental degradations. As in most things, a fine calibration between the desire for safety and the need to accept minimal risks is likely to yield the best outcome.

Qualifying Immigrants

This calibration is proving difficult for some people in matters of immigration and of acceptance of the foreign-born, especially when terrorism and unemployment are factors to be considered. What is a fine calibration in this case? By definition it means accepting certain people but not others. But then what should be the dividing lines?

To some, it makes sense to only admit immigrants who are skilled professionals. To others, though they may not openly admit it, it makes sense to admit certain nationalities or religions but not others. Because some people look or sound or dress differently, some people want to limit their entry into the United States. Opinions on whom to admit seem to depend on one’s own personal traits, politics, family history and life experience.

The willingness to trust one specific immigrant would probably facilitate that one immigrant’s integration into American society but such willingness is not required for the country to accept immigrants in general. In other words, the idea that we need to trust each and every immigrant, as suggested by “extreme vetting”, is of limited value, given that we cannot conclusively vet people with no history of malfeasance. Conversely, it is entirely plausible that we will extreme-vet and accept some immigrants who will end up being criminals anyway. The virtue test can stop people with a record of crime and terrorism. But regarding others, it is a futile effort until we unlock the code, if there is such a thing, that identifies a person as a future criminal or terrorist before they commit a crime or act of terror.

Instead we may look at immigrants in general and accept that there will be among them a certain percentage of criminals, as there is in any sizable group of people. Instead of a zero-crime target, the goal should be if possible to ensure that immigrants on average do not commit more crimes than Americans. In fact we are there already, with research showing that, on the whole today, immigrants commit fewer crimes than native-born Americans.

As to foreign terrorism, 9/11 showed on a large scale and in vivid pictures the terrorists’ intention to cause as many victims as possible. Can we then create a watertight admission policy that keeps all terrorists outside the country? It is a very difficult and moving goal, given our porous borders and the fact that some terrorists have been American-born citizens.

After 9/11, there were far fewer foreign terror attacks on US soil than we feared on the morning of 9/12. This is mainly thanks to our government, military and counter-terrorism agencies that have worked tirelessly to make the country safer. But it is also true that all but a tiny percentage of people from anywhere simply want to go about their daily business, to raise their children and attend to their jobs. Their chief motivations are economic and social, not ideological.

Circles of Trust

To an American with little exposure to foreign-born citizens (say a resident of the rural Midwest), levels of trust could be configured as concentric circles. Trust and reciprocity would be closest nearer the center and would get diffused in the outer circles. So for an American of German descent for example, the inner circle beyond family and close friends would be other locals of German descent. The next circle out would be people of Central and Northern European origin and the next would be those of Southern and Eastern European descent.

Then would come non Europeans, in random order Americans of Hispanic, Middle-Eastern, African, Indian, Chinese or other Asian origins. Depending on one’s own experiences and biases, the people in the outermost circle would be any one of these. To the German-American therefore, a Swede may feel a bit more foreign than a fellow German, but closer to him than an Italian. And the Italian may appear quite different to him until someone even more different, say a Japanese or Indian, wheels into town.

A similar configuration would apply to religion. An evangelical Christian may not feel much kinship if left alone in a room with a Catholic, but his affinity towards that same Catholic may grow if people from more distant religions subsequently enter the room.

Applied to nationalities, this concentric configuration is mirrored by the results of a survey conducted by Gallup that asked Americans which countries they viewed favorably or unfavorably. The results are shown in the table below.

The countries perceived as being most like the United States were looked on most favorably by Americans, followed by non-Muslim allies and friends. A third group could be described as strategic friends around the world. Then, a fourth group of Muslim allies and former Communist states.

It is interesting to note here that although the US has long standing friendships with the governments of Saudi Arabia, Pakistan and others, fewer than a third of Americans view these countries favorably. This divide is probably reversed for the last group where the US has adversarial relations with the governments of Syria, Iran and North Korea but Americans tend to view their citizens more favorably than these figures suggest.

An Immigrant, not an Ambassador

These are Americans’ views of the listed countries. The question is does it make sense to project those views on immigrants originating from these countries? In other words, if Americans view Libya unfavorably, does it make sense that they should view Libyan immigrants unfavorably?

Immigrants are self-selecting and are therefore inherently different from their compatriots who stay in the home country. In addition, immigrants have put their faith in the American system by electing to come to America instead of another country. On the whole, the notion that our perception of immigrants should differ from our perception of their country of origin deserves more consideration than it is currently given. The first step of becoming an American occurs in the act of emigration.

Our internal mapping of trust as a series of concentric circles may feel comfortable but it has serious limitations. If we rely too much on it, we run the risk of wallowing in our comfort zone to the point of atrophy while missing out on the fresh ideas brought by outsiders. Richard V. Reeves, a senior fellow at the Brookings Institution, recently wrote that:

When people live in communities where almost everyone looks, thinks, and lives alike, communal sympathy is likely to be replaced by tribalism.

Further, it could be argued that immigrants and other outsiders, when properly motivated, can act as a check on cronyism and the dominance of old boys or other legacy networks and on similarly debilitating social and economic distortions.

Meanwhile, among professional elites, trust increasingly forms between people of varied ethnic and cultural backgrounds who have a shared education, mission and work ethic. Here the concentric circles are more centered on a corporation or organization and radiate out first to corporate partners, clients and suppliers, then to individuals at competing firms and finally to persons in unrelated businesses.

Our notions of trust are deviating from those harbored by our parents and ancestors. They are evolving rapidly and will continue to evolve with new technology and accelerated communications.

Further reading:

Interesting facts on immigration from the Center for American Progress.

Fact check: Immigration doesn’t bring crime into U.S., data say.

This piece originally appeared on Populyst.net

Sami Karam is the founder and editor of populyst.net and the creator of the populyst index™. populyst is about innovation, demography and society. Before populyst, he was the founder and manager of the Seven Global funds and a fund manager at leading asset managers in Boston and New York. In addition to a finance MBA from the Wharton School, he holds a Master's in Civil Engineering from Cornell and a Bachelor of Architecture from UT Austin.

Photo: Grand Canyon National Park [CC BY 2.0 or Public domain], via Wikimedia Commons


A New Vision For Southern California

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Since the start of the last century, Southern California has been a pioneer in building ways of living, and an economy, that broke with normal convention. Our region created a new paradigm, one both defining suburbanism and friendly to middle class aspirations, that attracted millions here.

Today’s Southern California has clearly lost its innovative spirit, straining to emulate — both economically and socially — other models, whether that of dense New York or to reinvent itself as “Silicon Valley South.”

Neither gambit has worked, or is likely to succeed in the future. Instead, the region must focus on a strategy leveraging its most outstanding assets — creative industries, ethnic diversity and, perhaps most important, the entrepreneurial spirit of our people.

Read the entire piece at The Orange County Register.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book is The Human City: Urbanism for the rest of us. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Marshall Toplansky is Clinical Assistant Professor of Management Science at Chapman University. He is co-principal investigator, with Joel Kotkin on “The Orange County Model”, a demographic and econometric research project to identify growth strategies for that region. He is formerly Managing Director of KPMG’s national center of excellence in data and analytics, and is co-founder of Wise Window, a pioneer in sentiment analysis and the use of big data for predictive models. He lives in Orange, California.

Photo: Geographer at English Wikipedia [GFDL, CC-BY-SA-3.0 or CC BY 2.5], via Wikimedia Commons

The Cities Where African-Americans Are Doing The Best Economically 2018

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The 2007 housing crisis was particularly tough on African-Americans, as well as Hispanics, extinguishing much of their already miniscule wealth. Industrial layoffs, particularly in the Midwest, made things worse.

However the rising economic tide of the past few years has started to lift more boats. The African-American unemployment rate fell to 6.8% in December, the lowest level since the government started keeping tabs in 1972. Although that’s 3.1 percentage points worse than whites, the gap is the slimmest on record. A tightening labor market since 2015 has also driven up wages of black workers, many of whom are employed in manufacturing and other historically middle and lower-wage service industries.

There's still much room for economic improvement for the nation's black community -- the income gap with whites remains considerably higher than it was in 2000, with the median black household earning 35.5% less -- but as we pay homage to Martin Luther King this week, the record low unemployment rate is a cause for celebration.

President Trump has predictably taken credit for the good news, but kudos more likely should go to those states and metropolitan areas that have created the conditions for black progress.

The gains have not been evenly spread. To determine where African-Americans are faring the best economically, we evaluated America’s 53 largest metropolitan statistical areas based on three critical factors that we believe are indicators of middle-class success: the home ownership rate as of 2016; entrepreneurship, as measured by the self-employment rate in 2017; and 2016 median household income. In addition, we added a fourth category, demographic trends, measuring the change in the African-American population from 2010 to 2016 in these metro areas, to judge how the community is “voting with its feet.” Each factor was given equal weight.

The South Also Rises

One of the great ironies of our time is that the best opportunities for African-Americans now lie in the South, from which so many fled throughout much of the 20th century. In the past few decades, many good jobs have moved South and blacks, like many whites and Hispanics, have followed.

The South dominated the previous version of this ranking, developed through the Center for Opportunity Urbanism, three years ago, and still does. All of the top 10 metro areas are in the South, led in a tie for the No. 1 spot by Washington, DC-VA-MD-WV and Atlanta, which was our previous leader.

Washington, with its ample supply of well-paid federal jobs, is the metro area where blacks have the highest median household income in the nation: $69,246. Amid rising home prices, the black home ownership rate has dipped to 48.3% from 49.2%, but that’s still fourth highest among the largest metro areas.

Atlanta, with its historically black universities and strong middle class, has long been described as the black capital of America, and its thriving entertainment scene has given rise to claims that it’s become a cultural capital as well. Entrepreneurship is strong, with some 20% of the metro area’s black working population self-employed, the highest proportion in the nation, and though median black household income is quite a bit lower than in the D.C. area at $48,161, costs are lower too. In-migration has slowed since the financial crisis, but the black population is still up 14.7% since 2010.

Atlanta and Washington are followed in our ranking by Austin, Texas, Baltimore and Raleigh, N.C., with the rest of the top 20 rounded out exclusively by Southern cities, except for Boston in 19th place.

Two key determinants seem to be driving these rankings: homeownership and self-employment, traditional benchmarks of entering the middle class. All of the top 10 boast homeownership rates that match or well exceed the black national average of 41 percent. (It should be noted that the national average is a full third lower than the national average for all ethnicities.)

These patterns hold up as well for income. Black incomes have been rising most rapidly since 2010 in largely fast-growing Sun Belt locales, as analyst and Forbes contributor Pete Saunders has found, such as Nashville, Raleigh and Austin. It appears as if the fastest income gains are generally being made in the places where other ethnic groups are advancing as well. After Washington, the metro areas where blacks have the highest annual household incomes are San Jose ($65,400), the capital of Silicon Valley, and No. 4 Baltimore ($53,200), which like Washington has a huge federal employment base.

Gallery: Where African-Americans Are Doing The Best Economically

The New Great Migration

Perhaps the most persuasive indicator of African-American trends lies in population growth. During the period of the Great Migration out of the south in the early 20th century, an estimated 6 million blacks headed north and west to cities such as New York, Los Angeles, Chicago and St. Louis. But now the tide is reversing, with the African-American population dropping in the latter three over the past six years, as well as in San Francisco and cities with fading industrial cores like Pittsburgh, Cleveland, Detroit and Milwaukee.

In contrast the metro areas whose African-American populations have expanded the most since 2010 are the South and Sun Belt: Las Vegas, Dallas-Fort Worth, Austin, Phoenix.

In some cases it’s clear that blacks are leaving for better economic opportunities. In others, high housing prices may play a role: In Los Angeles and San Francisco the black homeownership rate is about 9 percentage points lower than the major metro average.

In San Francisco the black community seems headed toward irrelevance and extinction as tech workers have driven up home prices to unprecedented levels; the metropolitan area's African-American population has dropped 6.3% from 2010.

The situation is particularly dire in California where strict land-use and housing regulations have been associated with increases in home prices relative to income of 3.5 times the rest of the nation since 1995. In coastal California, African-Americans face prices from more than two to nine times their annual incomes than non-Hispanic whites. African-American homeownership rates in California are down 17% in the Golden State compared to a decline of 11% for Hispanics and 6% for non-Hispanic whites. Asian homeownership rates have stayed the same.

Blacks, like many other Americans, are likely to continue to move, as Pete Saunders notes, to cities that are both high growth and relatively low cost. In these cities, housing and land use policies generally allow the market to function, resulting in lower home prices and greater housing choice. Business investment and job creation are also strongly backed. Blacks, like others, are moving to these places for opportunity.

In many cases this means a reversal of the Great Migration and a return trip to parts of the country now far more accommodating to black aspirations than those places which once provided the greatest opportunities.

This piece originally appeared on Forbes.com.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book is The Human City: Urbanism for the rest of us. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

Photo: Ann Fisher, via Flickr, using CC License.

A Tale of Two Socals: Poverty in Southern California

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For many, Southern California is heaven on Earth. For urbanites, it’s a world-renowned capital of art, culture, and entertainment, and technology, rivaled by few locales across the globe. But even for those outside of the cities, the region boasts plenty of natural beauty: From the San Bernardino mountains, to the Joshua Tree desert, to the San Diego beaches, there’s an almost unmatched diversity of nature to experience. The weather is unparalleled, and the attractiveness of the region has led some 22 million people to call it home. Even with the rise of Silicon Valley, Los Angeles and Orange County account for nearly 40% of California’s economy, the 6th largest economy on the planet, more than twice the share of the Bay Area.

But the rising tide of the California economy has not, in fact, lifted all boats. As the Californian economy has expanded in recent years, growth has brought with it increases in the cost of living and widening income inequality.

A Real Cost Measure of Poverty

The official poverty rate in California, according to standards set by the U.S. Census Bureau, currently stands at 14.3%, just slightly ahead of the 12.7% national average. However, the Federal Poverty Line (FPL) is based on national cost-of-living averages, and fails to take into account the exorbitant cost of housing in the Golden State. A study conducted by United Way of California attempted to factor housing costs and produced a measure of California on a county-by-county basis. It showed some dismal findings for most Southern California counties. The problem here is simple: a cost of living more than double the national average, and mediocre income levels.

Overcrowding in Southern California

With an average rent well-above the national average, many Southern Californians have turned to cohabitation as a solution to financial stress. A study from the LA Times examined the nation’s over 30,000 ZIP codes to find the most overcrowded among them. Of the top 331 (1%) most overcrowded ZIP codes in the nation, an astonishing 134 (nearly half!) of them are found in Southern California, primarily in Greater Los Angeles and San Diego. Take a look at the concentration of overcrowded neighborhoods below:























Figure 1: 134 of the most overcrowded ZIP codes are in Southern California.

Southern California contains more than triple the concentration of overcrowded ZIP codes found around the second-place region, New York City. Nearly one in six homes are considered “severely overcrowded,” with more than two people per room. According to Jason Mandell of United Way, "This is an example of poverty that can go unseen in our communities…It's easy to miss if you're not paying attention." Overcrowding has been found to be detrimental to child development by hurting tests scores and concretely impacting both physical and mental health, further lessening the chance that a child born into poverty will escape the cycle. However, living in these conditions is not a choice: In the words of Josefina Cano, a resident of one of most overcrowded neighborhoods of Los Angeles, “What can we do? It's better than being on the street." But what about those even less fortunate?

Homelessness in Southern California

It’s no secret that California is in the midst of a housing crisis, and skyrocketing rents across the state have sent many in search of greener pastures and cheaper homes. A study out of the Center for Continuing Study of the California Economy found that net domestic migration has been negative every year since 2000, with only natural births and immigration accounting for the overall population increase. However, for some of those that have remained, the American dream of home ownership is further away than ever, and, for others, even finding a place to call home is a struggle.

According to a 2017 HUD report, California has the largest homeless population in the United States, coming in at around 134,000 homeless individuals. California’s rate of homelessness is more than double the national average, and more than two in three homeless individuals live in the streets. Los Angeles County alone is home to over 57,000 homeless individuals, and some 3200 live on the streets of San Diego County. Anaheim, Santa Ana, and Costa Mesa are all hotspots of homelessness in Orange County, numbering over 4000, and even the Inland Empire has thousands of homeless individuals of its own.

The rising homeless population is costing Southern California municipalities an enormous amount of resources. A study out of the University of California at Irvine found that Orange County spends some $300 million in the form of services (public services, hospitals, etc.) to its homeless population each year, despite the fact that it would cost drastically less to place the entire homeless population of Orange County in permanent housing arrangements. In addition, San Diego recently underwent a massive public effort to eradicate an outbreak of Hepatitis A, which required spraying streets with a bleach solution, installing public washing stations, and administering over 100,000 vaccinations at a cost of $4 million to the public.

Several cities across California have declared states of emergency due to their homelessness issues, even in the wealthiest of municipalities. Clearly a collective, long-term solution is necessary to deal with the issue. But before solutions can be addressed, it’s critical to understand the root causes of the problem.

Causes of Poverty in Southern California

Housing, first and foremost, is the principle cause of financial distress in Southern California. The average price for a home in all of Southern California in July of 2017 stood at $500,000, nearly twice the level from just five years prior. The rapid rate of increase doesn’t seem to be slowing down either: According to the Case-Shiller index, considered to be one of the most accurate representations of home values, home prices in Southern California could climb 5% per year for the foreseeable future (compared to a 3% national average). More than a third of homeowners in Southern California already allocate more than 30% of their income on housing, along with nearly 50% of renters.

Figure 2: The median home price in Southern California has doubled since 2012.

To make matters worse, wage growth has paled in comparison to the increase in home prices. A 2016 study conducted by PolicyLink and the University of Southern California found that the Los Angeles region ranks 7th out of the 150 most unequal metros in the nation. As Southern California has grown since 1979, the highest-paid income earners have seen their incomes increase by 13%. However, the lowest-paid income earners have actually seen their wages decrease by 25% in the same time frame, even as the cost of living has gone up.

Figure 3: Southern California created over 291,000 jobs in the last decade.

Inequality in Southern California isn’t a product of overall job loss: in fact, the three largest SoCal counties added over 291,000 jobs between 2007 and 2016, despite actually losing some 41,000 jobs with incomes over $70,000/year in the same timeframe. However, the bulk of this growth was concentrated in low-income professions. One of the principal causes of this inequality is the loss of middle-income jobs, a phenomenon seen other portions of Coastal California as well. Los Angeles alone lost over a quarter of its jobs in the construction, manufacturing, and healthcare industries between 1990 and 2012. These industries typically require vocational training as opposed to a college degree, and with the rising costs of college, are more accessible to those on the lower rungs of the socioeconomic ladder. As middle-income jobs become automated or relocate offshore or out of state, lower-income Southern Californians face fewer opportunities for social mobility. The result is a more economically polarized Southern California, similar to trends observed in places like Silicon Valley, but with a smaller upside.

With high housing prices, a widening wage gap, and limited job opportunities that pay livable wages, the financial situation of millions of Southern Californians is precarious. A single job loss or prolonged illness could require a low-income family to cohabitate with other families, move out of state, or even be forced onto the streets. The cycle of poverty is becoming increasingly harder to escape, as social mobility in Southern California dwindles. The impetus is therefore on leaders in the worlds of policy, business, and communities to develop cohesive strategies to help the most financially vulnerable SoCal residents.

Alex Thomas is currently a junior at Chapman University pursuing a major in Political Science. He is originally from San Jose, California, before relocating to Orange County, and has worked extensively within both of the surrounding areas. He hopes to further his interest in public policy through continued study and community involvement in the upcoming years.

Photo: Via Los Angeles Wave, originally from Fifth Avenue Times.

Metropolitan New York and San Jose: Highest Property Tax Burdens

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This article examines median residential property tax levels and rates among the nation’s 53 major metropolitan areas (over 1,000,000 population). The data is from the 2016 American Community Survey and is self reported by consumer respondents (not from governments or public records).

Highest Property Tax Burdens

Property owners in the New York, NY-NJ-PA metropolitan area pay by far the highest real estate taxes among the major metropolitan areas. New York, at $7,471, is the most expensive by a wide margin. Second place San Jose is about a quarter lower, with a median annual property tax of $5,705. Third place Hartford is another 11 percent lower, at $5,092. San Francisco ($4,957) and Chicago ($4,938) are slightly lower (Figure 1). Each these metropolitan areas has much of its population in a state with generally high taxes, and the one interstate metropolitan area (New York), is split principally between two states with solid reputations for high taxes (New York and New Jersey, ranked worst and second worst by the Tax Foundation).

The second five among the highest median property taxes are also generally in higher tax areas, with one exception, Austin, Texas. Texas is generally a lower tax state, so Austin's rank as the seventh most expensive may be surprising. Property taxes are comparatively high in Texas, which does not have an income tax. Sixth ranked Boston (MA-NH) has the sixth highest property taxes, while Rochester, Philadelphia (PA-NJ-DE-MD) and Milwaukee occupy positions 8 to 10.

The third five also includes high tax areas, including Washington (DC-VA-MD-WV), Los Angeles, Providence (RI-MA), Seattle and Buffalo.

Among the 15 most expensive metropolitan areas for property taxes, six are among the 10 largest in population, New York, Chicago, Boston, Philadelphia, Washington and Los Angeles.

Three of California's major metropolitan areas are also in the most expensive 15. As a high tax state, this is not surprising, but California has often been characterized as a low property tax state (due to Proposition 13). California's far higher property values drive its larger tax bills.

Lowest Property Tax Burdens

All of the least costly property tax metropolitan areas are in the South or the intermountain West. Birmingham has the lowest median property taxes, at $775 annually, and is alone in having annual taxes below $1,000. New Orleans, Indianapolis, Louisville (KY-IN) and Phoenix make up the balance of the lowest five. Eight of the metropolitan areas ranked from 6th to 15th lowest are in the South, including Nashville, Oklahoma City, Tampa-St. Petersburg, Memphis (TN-MS-AR), Charlotte (NC-SC), Jacksonville, Atlanta and Orlando. The intermountain West is represented by two, Las Vegas and Tucson (Figure 2). The least expensive 15 metropolitan areas include only one of the 10 largest in population, Atlanta.

Highest Median Property Tax Rates

The median tax rates are estimated based on the reported median house values from the American Community Survey (these reflect survey results, not tax rate information from primary assessment sources).

The highest estimated median property tax rates are Rochester and Buffalo, at approximately 2.8 percent and 2.5 percent respectively. Chicago and Hartford also have rates exceeding 2.0 percent. Milwaukee and Cleveland are ranked with the fifth and sixth highest rates. The two Texas metropolitan areas, both among the largest five in the nation, are ranked seventh and eighth highest, Houston and Dallas-Fort Worth. San Antonio has the tenth highest estimated median property tax rate. However, none of these three Texas metropolitan areas appear among those with the highest property tax burdens, in part because Texas property values that are lower and more reflective of the national market (Figure 3).

New York, which has the highest property tax burden (above), has the ninth highest estimated property tax rate. The one Texas exception is Austin, which has the 12th highest estimated tax rate and also has among the highest tax burdens in the nation (seventh highest).

Five of the nation's 10 largest metropolitan areas (in population) are among those with the highest estimated median property tax rates, Chicago, Houston, Dallas-Fort Worth, New York and Philadelphia.

Lowest Estimated Property Tax Rates

The effect of California's Proposition 13 is evident among the 15 major metropolitan areas with the lowest estimated median property taxes. All six of California's major metropolitan areas are on the list, San Francisco at fourth lowest, San Jose (5th), Los Angeles (8th), San Diego (10th), Sacramento (12th) and Riverside-San Bernardino (14th). However, all but Riverside-San Bernardino have actual median property tax burdens at least 40 percent higher than the national major metropolitan area median ($2,502). Riverside-San Bernardino scores at the median. Moreover, California's generally higher property tax burdens combine with its progressive income tax, with rates that outstrip those of the other two most expensive states, Oregon and Minnesota, by more than one-third.

The lowest tax rate, like the lowest tax burden, at 0.5 percent in Birmingham, while Denver has the second lowest tax rate (Figure 4).

Use of the Data

This kind of data is important to corporations as they site new facilities, consider moves and expand or contract the size of their operations as they consider factors likely to impinge especially on labor compensation. However, at the metropolitan area level, median property tax data is only one of many indicators, and comparisons limited to this (or any other state and local tax indicator below the aggregate level) can be misleading. Moreover, median home owner property taxes may have little correlation with commercial or industrial property taxes, which are of particular importance in business investment. And, of course, that doesn’t include income taxes, a quite onerous burden in some states.

Further, all of the metropolitan areas have multiple local property tax jurisdictions. This starts at the state level, where, for example, Philadelphia is in four states as is Washington, which is also in the District of Columbia. States (and DC) rely to varying degrees on property taxes. This limits the effectiveness of property tax comparisons, because the "bottom line" of taxation, the total tax burden, includes many taxes. Moreover, governmental responsibilities vary considerably between the states. For example, one of the largest state and local expenditure categories is primary and secondary education. In Hawaii, this is a state function. In most other states, primary and secondary education is a local function, usually independent school districts, but in some case, county run schools, while in others, municipalities perform that function. Most states have state income taxes and sales taxes. All of this complicates consideration of state and local taxes and expenditures.

In a report for the Association of Towns of the State of New York (Government Efficiency: The Case for Local Control), we found that local governments were spending from a low of 20 percent of state and local taxation in Hawaii to 68 percent in Nevada. Local tax revenues were similarly dispersed, with a low of 13 percent of state and local revenues in Vermont to 55 percent in New York. Because of these variations, comparing state or local taxation and expenditures is generally invalid except within the same state. Comparisons between states, even at the local level, should include both state and local spending. Even so, caution is required in state to state comparisons.

Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

Photograph: New York City Hall
https://upload.wikimedia.org/wikipedia/commons/thumb/b/b6/New_York_City_...

Chicagoans Are Getting Older And Smarter

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Chicagoans are getting older, as is the rest of the United States. The median age of Chicagoans has increased from 31.5 in 2000 to 34.4 in 2016. What is particularly noteworthy is that Chicago is losing school-age children while it is gaining young college graduates and seniors.

The growth in college graduates living in the city has resulted in the highest percentage of adults with at least a bachelor’s degree among the largest 7 cities in the United States. Chicago beats New York City and Los Angeles! If the sample is limited to non-Hispanic whites, Chicago even beats San Jose and San Diego. However, smaller cities like Boston and San Francisco have higher levels of educational attainment. This is good news for Chicago because economic studies show that education is an important key to urban economic growth.

Although Chicago is attracting young college graduates, the number of children in Chicago less than 15 years old has declined by 25% since 2000 (Table 1). The decline has been particularly large for African-Americans followed by Hispanics. At the same time, there has been a small increase in non-Hispanic white children living in the city. The number of non-Hispanic white children living in Chicago is too small to offset the declines in African-American and Hispanic enrollment in Chicago’s public schools. Further, about half (51%) of the school-age non-Hispanic white children in the city attend private schools. One of the consequences of this is declines in enrollment in Chicago public schools.

As the number of school-age children living in Chicago has declined, there has also been a decline in 35 to 54 year olds. This is partly a result of the parents of school-age children moving to the suburbs. They move there because the amenities of the suburbs are relatively more attractive including less crime and better schools. Recent trends in families with school-age children moving from the city to the suburbs of Chicago are consistent with previous trends that William Testa and I have documented in several academic papers and in a previous post (“Children and Cities”) in 2013.

Since 2000, there has also been in a decline in pre-school age children in Chicago. This implies that public school enrollment will continue to decline going forward.

Apart from revenue consequences for the Chicago public school system, one of the other consequences of declines in school-age children living in Chicago is increases in school-age children living in some of the suburbs of Chicago. For example, Evanston Township High School, the suburb just north of the city of Chicago, has the largest enrollment in 30 years.

While Chicago has been losing children, it has been gaining older residents. Two changes stand out. First, there has been a modest increase in the number of 25 to 34 year olds living in Chicago since 2010. While the number of African-Americans and Hispanics 25 to 34 living in Chicago has declined over the past 10 years, the number of non-Hispanic whites living in the city has increased considerably. Many in this group are college educated and are populating areas in and around the central business district and trendy neighborhoods such as Lincoln Park and Lakeview. Growth in this cohort is the key reason why the city of Chicago has one of the highest levels of educational attainment among large cities. The Chicago economy would probably be weaker without these changes.

This past year, a little over 2 of 3 college graduates 25 to 34 in Cook County lived in the city of Chicago. The city only account for about half of the population in Cook County. The attraction for this group includes good jobs and the amenities that the city has to offer. In-migration of 20-somethings into the city is additionally indicated by increases in the size of the 15 to 24-year-old cohort from 2000 to 2010 and since 2010 (Table 1).

The other key change is growth in the number of older Chicagoans. Since 2000, the number of adults 55 to 64 has increased by more than one-third. While the number of seniors 65 and older decreased between 2000 and 2010, it has increased since 2010. Overall, the number of 55 and older adults living in Chicago has increased by about one-sixth since 2000 (Table 1). The growth in the senior population is mostly a result of natural increase because the size of older cohort in 2000 has decreased.

However, there has been growth in the size of the senior cohort living in the center of Chicago (The Loop and surrounding community areas). These are mostly highly educated, affluent households some of whom have second residences elsewhere. The amenities of the city are apparently attractive to a relatively small number of older individuals and families as well. Data in Table 2 show that the Central Business District of Chicago (The Loop) and the community areas surrounding the CBD have been gaining population since 1990. Further, the size of older cohort living in the central areas of Chicago have increased since 2010. The one exception is the Near West Side that has a particularly young population.

The data also indicate large increases in educational levels in the population living in and around The Loop. Roughly 3 out of 4 adults living in this area have at least a bachelor’s degree (Table 3). The Near West Side and the Near South Side have experienced particularly large increases in college graduates living in these areas since 1990.

Growth in the population living in the central part of Chicago is associated with growth in employment in the Central Business District and the Outer Business Ring. Private sector employment in central Chicago is at an all-time high, at least over the past half-century (up 24% since 2010). On the other hand, jobs in the rest of the city have declined over the long haul although they are up slightly since 2010 (Table 4).

One of the consequences of this is growth in suburban residents working in the city. Census data indicate that there were 50,000 more suburban residents working in the city of Chicago in 2015 relative to 2010. The largest growth in suburban commuters was in Evanston and Oak Park, suburbs that border the city of Chicago. Both have good public transit access to jobs in downtown Chicago and both have tried to foster transit-oriented residential development.

Although the rate of employment growth in the city of Chicago since 2010 is at about the same rate as employment growth in the metropolitan area, suburban employment growth swamps employment changes in the metropolitan area over the past few decades. Since 1990, the suburbs have gain about a half million private sector jobs while job growth in the city has been stagnant (Table 4). In brief, the center of Chicago and the outer ring of suburbs have done well relative to the rest of the city of Chicago and the inner ring of suburbs in Cook County with some exceptions.

Although the center of Chicago is doing relatively well, most community areas in Chicago are not. Since 2000, the vast majority of community areas in the city have lost population. This is particularly the case for depressed African-American communities like Englewood. One of the consequences of this is substantial out-migration especially by African-Americans to suburban communities and elsewhere.

Overall, the Chicago metropolitan area has been a laggard in attracting households and jobs. Further, the city has lost population for the past 3 years although the decline is very modest. Be that as it may, Chicago has many competitive advantages including a relatively high level of educational attainment although further progress will require continued improvement in other areas including primary and secondary education, safety, and government finances. That is, although education is a necessary condition for economic progress, it is not a sufficient condition.

Regarding the public school system that was once called “the worst in the nation,” high school graduation rates, the percentage going on to college, and test scores are up significantly over the past ten years. A study by Stanford researchers notes that the Chicago public school system is one of the fastest improving in the United States. Although violent crime rates had been declining in Chicago since the 1990s, by about one-half, the rate including murders increased dramatically in 2016. Chicago had 765 murders that year. his was more than in New York City and Los Angeles combined and up from 468 murders the year before. This past year the number of murders in Chicago declined by about 100 although the rate is still relatively high. Finally, the city of Chicago has one of the highest unfunded pension liabilities in the United States that is resulting in significant increases in local taxes. This will require additional attention going forward.

William Sander is Professor of Economics at DePaul University in Chicago. He has also taught at the University of Illinois at Urbana-Champaign and the University of the Philippines. He has a master’s degree in regional planning from Cornell University and a Ph.D. in natural resource economics.

Photo: Pedro Szekely, via Flickr, using CC License.

Can the Trump Economy Trump Trump?

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President Trump’s critics find it hard to give him credit for anything, especially given his extraordinary boastfulness. Yet Trump’s economic policies seem to be working. New job numbers are robust, GDP and wages continue to rise, stocks are soaring, unemployment continues to decline, and overall growth is at its highest in 13 years. And this salutary picture is not exclusive to big business; the index of small business optimism, as measured by the National Federation of Independent Business, has reached its highest level in the 45-year history of the survey.

Some positive trends can be traced to the Obama years, but there’s clearly been a shift in trajectory and direction of the economy. As President Obama once noted, “elections have consequences.” Under Obama, federal policies—the “stimulus,” non-regulation of tech giants, ultra-low interest rates— benefited urban core, blue-state bastions that now constitute the unshakeable base of the Democratic Party. Under Trump, most working- and middle-class workers benefit from higher standard tax deductions and energy deregulation, while the affluent in high-tax states like California, New York, and Illinois are likely not to do as well.

Read the entire piece at City Journal.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book is The Human City: Urbanism for the rest of us. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Photo: Via Magoda.com.

Housing Affordability and the Standard of Living: The 14th Annual Demographia International Housing Affordability Survey

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For the eighth year in a row, the Demographia International Housing Affordability Survey shows Hong Kong to be the least affordable housing market (metropolitan area) in nine nations. Hong Kong's Median Multiple is 19.4, up from 18.1 last year. The Median Multiple is price to income ratio used in the Survey, calculated by dividing the median house price by the median household income. The Demographia middle-income housing affordability ratings, as well as the summarized results, are shown in Figure 1. The Survey includes 293 markets in nine nations.

The Very Large Markets:

Hong Kong is among 17 very large markets, with more than 5,000,000 population (Figure 2), included in the Survey. Eight of the very large markets have severely unaffordable housing, with Median Multiples of 5.1 or more. In addition to Hong Kong, the very large severely unaffordable markets are Sydney (12.9), Los Angeles (9.4), London (8.5), Toronto (7.9), the London Exurbs (6.9), Miami (6.5) and New York (5.7), a metropolitan area that is divided between New York, New Jersey and Pennsylvania. The best housing affordability among the very large markets is in Atlanta (3.2), Osaka-Kobe-Kyoto and Philadelphia (3.5), Houston (3.7) as well as Chicago and Dallas Fort Worth (3.8).

The Major Markets

There are 92 major markets: metropolitan areas with more than 1,000,000 population. In addition to the very large markets noted above, the least affordable 10 includes Vancouver, which at 12.6 the third least affordable market, followed by San Jose (10.3), and Melbourne (9.9). There are 28 severely unaffordable markets, which are shown in Figure 4. These include all major markets in Australia (5) and New Zealand (1). Two of Canada's six major metropolitan areas --- Toronto and Vancouver ---are severely unaffordable and six of the United Kingdom's 21 major markets, including London and the London exurbs. The largest number of severely unaffordable markets is in the United States, at 13. This represents, however, less than one-quarter of its 54 markets.

The least expensive major market is Rochester, New York (2.6), for the second straight year. Cincinnati (OH-KY-IN), Cleveland, Buffalo, Oklahoma City, Pittsburgh, Detroit, St. Louis, Grand Rapids and Indianapolis are also among the most affordable, all having Median Multiples of 3.0 or less. All 10 affordable major markets in the Survey are in the United States.

All Markets

Among the 293 markets in the Survey, 76 are severely unaffordable markets, with 30 in the United States (out of 175), 15 in Australia (out of 22), 14 in Canada (out of 46), 10 in the United Kingdom (out of 33) and six in New Zealand (out of eight). There are no severely unaffordable markets in Ireland or Singapore.

There are also 62 affordable markets (Median Multiple of 3.0 and less --- 49 in the United States, 11 in Canada and two in Ireland.

The Spread of Unaffordable Markets

The number of severely unaffordable housing is growing, particularly in markets close to ultra-expensive areas like Vancouver, Toronto, San Francisco and San Jose in the Bay Area. Victoria, Kelowna and Nanaimo have followed nearby Vancouver into severe unaffordability. Hamilton, Kitchener-Waterloo, Oshawa, St. Catharines-Niagara, Guelph, Barrie and Cambridge have followed Toronto. In recent years, Sacramento, Fresno, Merced and Modesto in California's Central Valley --- despite their severe economic troubles --- have become severely unaffordable, as some leave the San Francisco Bay Area to find cheaper housing. California continues to be in a serious housing crisis, with its major market Median Multiple having risen more than 7.5 times that of liberally regulated US markets.

Introduction by 3 Top Housing Economists (from the London School of Economics)

Three of the world's leading housing market analysts, economists Felipe Carozzi, Paul Cheshire and Christian Hilber of the London School of Economics (LSE) have provided the Introduction to this year's Survey.

Consistent with their substantial international work, they note that the need for "good measures" of housing affordability. Moreover, their contribution is especially appropriate coming from Britain, which they characterize as "the cradle of housing unaffordability and the originator of the ideas and mechanisms of planning which have contributed so much to the problem: Green Belts and planning by unpredictable political processes!" From an examination of the British markets last year's Demographia results and their own analysis, they conclude that "that housing is most unaffordable for the lower income groups even though they buy cheaper houses."

Housing Affordability and the Standard of Living

This year's policy focus is impact of severely unaffordable housing increases the cost of living. Far more than any other household budget item, higher costs in housing can boost the cost of living and lead to greater levels of poverty. As housing costs increase relative to household incomes, severely unaffordable housing --- also related to increases in rents --- retards the standard of living. For example, in the United States, among the 107 metropolitan areas with more than 500,000 population, there is a 0.83 correlation between higher costs of living and more severe housing affordability (higher Median Multiples) for new household movers to housing markets. This is a very high correlation, with perfect correction being 1.00 and negative correlation being minus 1.00.

For example, in the San Francisco metropolitan area, housing costs more than cancel out the more than 50 percent household income advantage it enjoys over the Atlanta metropolitan area (Figure 5).

The Housing Affordability Crisis: A Standard of Living Crisis

The housing affordability crisis translates ultimately into a standard of living crisis. It results from demand that continues to exceed supply. Virtually all of the severely unaffordable markets have urban containment policy or the equivalent. Urban containment severely limits or even prohibits building the low-cost housing tracts that have contributed so much to rising home ownership rates and greater affluence since World War II.

If supply is not materially liberalized, worsened housing affordability is likely. Former Governor of the Reserve Bank New Zealand Donald Brash indicated: "...the affordability of housing is overwhelmingly a function of just one thing, the extent to which governments place artificial restrictions on the supply of residential land."

Policy Responses

There is an emerging understanding that more new housing supply is required to address housing affordability. However, in urban containment metropolitan areas, interest in new supply has been largely limited to higher density infill, while leaving the urban periphery restrictions in place. This seriously diminishes the potential for improving housing affordability, because the lowest land prices tend to be on the urban periphery (Figure 6). For example, Ryerson University research indicates a need to increase the supply of new ground-oriented housing (detached, semi-detached and townhouses) to improve Toronto's deteriorated housing affordability, which is fundamentally a land cost problem (as it is in other severely unaffordable markets). Unless urban fringe restrictions are relaxed enough to restore the competitive market for land, housing affordability is unlikely to improve and could continue to worsen.




At least one government seems determined to tackle severely unaffordable housing. The new Labour government of New Zealand takes office with a mandate to squarely address both housing supply and infrastructure finance for new development. We should all hope them success.


14th Annual Demographia International Housing Affordability Survey

Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

Photograph: Hong Kong (least affordable market)


The Millennial Dilemma: A Generation Searches for Home… On Their Terms

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In the latest release from the Center for Opportunity Urbanism, "The Millennial Dilemma: A Generation Searches For Home... On Their Terms," Anne Snyder and Alicia Kurimska examine how millennials are affecting the housing market, especially as the older tier begins to settle down.

Rarely has a generation spawned such a cottage industry of profiling. The largest and most diverse generation in American history, millennials are also the most contradictory, sparking endless intrigue, analysis and caricature. They’re at once idealistic and anxious, wholesome and distrustful. They consistently clamor for meaning and community while the polls show an unprecedented exile from the institutions (e.g. marriage and religion) that traditionally offered both. They’re the most educated and socially conscious generation to date, and yet with the help of social media, millennials are being driven to unprecedented levels of anxiety and loneliness.

How does all this play out in the housing market? As millennials come of age and the older tier in particular begins to settle down, there are four key trends worth noting. The first is that, for millennials, dollars have replaced relationships as the primary basis for security. The second is that they are leaving big and established coastal cities for smaller and reviving inland cities. The third is that many increasingly prefer to live in hybrid arrangements that integrate one’s life, work and play, which, along with costs, may explain the revived embrace of suburban amenities, albeit in fresh forms. And the fourth is that while this generation is less mobile than previous generations, there is a crucial divide between millennials who have agency to follow their desires – who some call the “supermobile” – and those who don’t.

Read the full report here.

Photo: Shuttershock via For Harriet.

Housing And The California Dream Are At A Crossroads

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“The Plains of Id, urbanophiles might sniff. Can anything good come from suburban Nazareth? Yes, the suburbanites were responding. Everything good was coming from this Holy Land: a house, a job, the quiet enjoyment of one’s premises …” — Kevin Starr, Coast of Dreams, 2004

For generations, California has offered its people an opportunity to own a home, start a business, and move up, whether someone came from Brooklyn, east Texas, Morelos or Taipei. That deal is still desired by most, but in a state that increasingly sees such activities as socially regressive and environmentally disastrous.

In new legislation, and supporting narratives from the academy and media, what most Californians have long sought out, a home of their own, is being legislated out of existence for all but the very rich and those who, 50 and older, got in when the getting was good.

Read the entire piece at The Orange County Register.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book is The Human City: Urbanism for the rest of us. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Photo: Tony Hoffarth, via Flickr, using CC License.

Hamtramck: Scale and Institutional Frameworks

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I recently published an article that explored some of the ways regulations make it difficult for small businesses to get off the ground and function. Among the examples I used from around the country was Bank Suey in Hamtramck, Michigan. My story was subsequently reposted on various other sites which the owner, Alissa Shelton, read and objected to. She felt I hadn’t accurately described her experience as a business owner and that I didn’t present her town in the right light. Her critique can be found in the comments section of the old post.

She’s a smart, dynamic, capable young woman who’s committed to building up her community and I owe it to her to get this right. We need more people like her in all our towns. I’ve also had people write stories about me where they got the details wrong, so I understand her position. But I honestly don’t think we’re disagreeing. It’s more a matter of subtle interpretations viewed from slightly different perspectives.

I’ll start by saying that I enjoyed my time in Hamtramck and would be happy to live there. I’ve highlighted the town before on a couple of occasions, always as an example of a place that worked really well in the past and has all the right ingredients to continue to thrive.

Hamtramck’s Polish history is still well in evidence. Polish food, Catholic services, and cultural events persist, although in somewhat reduced form. Poles have largely dispersed over multiple generations and filtered out across the country by now.

The void left behind by departing Poles has been filled by new immigrants from Somalia, Iraq, Pakistan, and Bangladesh. Without them many more storefronts and homes would be vacant and in decline.

One of the things I love about Hamtramck is the availability of good quality food and groceries that aren’t always available at national chain stores. The fact that ethnic mom and pop shops exist within walking distance of most families is very appealing and is reminiscent of my own neighborhood in San Francisco. And as Ms. Shelton states with some pride, it’s possible to eat at a different restaurant every day of the month in Hamtramck and enjoy every kind of cuisine from Lebanese to Chinese to Italian.

So… Now that I’ve clarified my position and reinforced my appreciation of Hamtramck as a pleasant and viable town I can get on with the finer points of regulation as it relates to small scale situations – which was the primary subject of my older post.

A significant amount of the properties in Hamtramck – like many many similar Main Streets all across the country – are vacant and unused for any productive purpose. Is this simply because regulations are preventing new businesses from opening? Yes and no…

Ever since World War II all our national economic policies have heavily favored and seriously subsidized a particular kind of growth involving mergers and acquisitions, vertical integration, and ever larger economies of scale. The demise of mom and pop shops in our traditional downtowns was a consequence of this intentional long term economic strategy. And it worked perfectly for those enterprises that could effectively scale up and take advantage of the tax code and institutional financing. I’ve described what this does to our towns in previous posts here, a href="https://granolashotgun.com/2016/07/07/your-town-is-a-financial-time-bomb/">here and here.

The relatively small local supermarket chains of the 1960s were replaced by larger regional chains by the 1980s and then by even larger national big box stores by the 1990s. Today we’re seeing a rapid shift toward even more consolidation with on-demand shopping via the interwebs. Giant distribution systems eliminate physical retail altogether in favor of home delivery. So we now have a trail of tears as more and more redundant commercial properties rot – not just downtown, but all up and down our suburban arterials.

This isn’t simply a result of consumer preferences or entrepreneurial best practices. The transfer of wealth from small family operators to huge consolidated multinationals is a structural choice we as a society have made. It’s great if you want really cheap cases of toilet paper and increased shareholder value. But our traditional towns have been hollowed out as a direct consequence – and the suburbs are next.

One of the few niche markets to persist on Main Street are places that sell specialty items like traditional Polish pierogi or halal meat which are unlikely to be carried at the Dollar Tree or 99¢ Store. But there are only so many of these places to fill the void.

So when Ms. Shelton says local regulations aren’t preventing her from opening a new retail enterprise in her building she’s right, but only if national tax and investment frameworks are ignored. You can listen to an interview with Catherine Fitts for one interpretation of the macro situation.

Hamtramck is working passionately to fill empty storefronts with anything that will activate the space and keep the lights on. Art installations, community groups… That’s all well and good. But there’s a limit to what this approach can provide. It’s a necessary stop gap, but toward what? Which takes me back to local regulations.

These old retail buildings are zoned for commercial use. Market demand for commercial property is essentially zero and the corresponding property value is in keeping with that reality. There’s just too much of it everywhere and the situation is likely to get worse nationwide. The obvious parallel is the glut of warehouse and industrial space that emerged when a previous generation of commercial buildings were abandoned during the national transition away from manufacturing. The best case scenario for these places is that they get used for something other than retail or office space.

I’ll use this building as an example because I like the location near the grocery store and other functioning shops and restaurants. It’s a solid 1920s brick structure with what looks to be about 2,500 square feet of space and a nice big flat sunny roof that could be pressed in to service as an urban garden. And it’s magnificently cheap so I could pay cash and skip the whole mortgage debt thing. Would I legally be allowed to use this building as a primary residence? And since there’s more space than I need and there are already two front doors… could I use this space as a legal duplex and rent one half to some likeminded individuals? I’m truly ignorant of the answers to these questions in Hamtramck. But every other place I’ve ever been all around the country has always said, “NO!!!!!!!!!”

Here’s where zoning regulations, building codes, and most importantly cultural norms and expectations kick in. “People living in storefronts will lower the tone of the neighborhood.” (Lower than vacant spaces that have remained dark for years with plywood on the windows?) “People living in such places will be low class. They’ll deal drugs and contribute to crime and delinquency. Empty buildings are better than buildings harboring unsavory individuals.” (Anyone who has ever been in a basement rumpus room in a wealthy white suburb with bored teenagers can tell you drugs and delinquency spring up in all kinds of places.) “If people live in shops it will cause a fire safety problem.” (A brick building with a domestic kitchen stove is more of a hazard than a restaurant or bakery?) “What this town really needs is more tax revenue and employment, not more residents who require more municipal services.” (Try bulldozing the old buildings to make way for a new subsidized casino, convention center, sports hall of fame, auto dealership, aquarium, or premium outlet mall. Works every time!)

This takes me back to scale and the larger regulatory framework. If a large production builder arrived in town and announced plans to redevelop a chunk of Hamtramck as a lifestyle center with new condos and apartments, would the rules be different for them? A 200 unit complex with five stories of structured parking would be “transformational” and “catalytic.” Institutional money would be combined with pro-business government incentives and tax breaks. That’s my point.

This piece first appeared on Granola Shotgun.

John Sanphillippo lives in San Francisco and blogs about urbanism, adaptation, and resilience at granolashotgun.com. He's a member of the Congress for New Urbanism, films videos for faircompanies.com, and is a regular contributor to Strongtowns.org. He earns his living by buying, renovating, and renting undervalued properties in places that have good long term prospects. He is a graduate of Rutgers University.

Would You Move to Wisconsin to Save Ten Minutes?

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Next City pointed me at a new ad campaign the state of Wisconsin is running aimed at luring Chicago Millennials to move north.

The focus of the campaign is on Wisconsin’s lower cost of living and shorter commute times vs. Chicago. The state says:

"The messaging conveys the central idea that Wisconsin is “more you.” You can be more here, mean more, create more impact, and have more, making Wisconsin a better fit for you. To drive this point home, specific ads contrast life in Wisconsin with that in Chicago, highlighting the state’s shorter commute time, lower cost of living, lower taxes and numerous recreational, social and cultural opportunities."

I find this interesting because, other than potentially outdoor recreation, the campaign does not really attempt to convince you that Wisconsin is better than Chicago in any respect, merely that the costs of living there are lower. In terms of product, the campaign imagery portrays Wisconsin in two ways: as a place for outdoor recreation, and as a facsimile of urban Chicago.

Here are some clips from their pre-roll ads. First, an urban rooftop bar in what appears to be Madison:

Here’s a stylishly dressed couple heading to a swank restaurant.

The image at the top of the post shows outdoor recreation. Here’s another example.

One thing about a campaign like this is that attempting to lure residents to a state, as opposed to a specific locale, is an intrinsically difficult task. Wisconsin has multiple urban centers and diverse rural type areas as well. State agencies have to be fair to all areas of the state. But it’s impossible to represent all areas equally well in a campaign of this type. So they have a hard job.

I’d also give them kudos for the outdoor focus. Wisconsin is already known to Chicagoans as a place for outdoor recreation, weekend homes, etc. Chicago has the lake, but otherwise much of northern Illinois is flat. So it’s natural to highlight the easy availability of outdoor activities in selling the state. It’s interesting to see that the campaign appears to steer clear of hunting and fishing, two great Wisconsin pastimes.

Unfortunately, they are attempting to compete against Chicago where Chicago is actually pretty strong. The Windy City is more expensive than Wisconsin, but probably has America’s best “Quality-Price Ratio” of when it comes to truly big city urban environments. The reality is that someone with a professional income can live pretty well in Chicago. Also, you aren’t going to live in one of nicer urban precincts of a city like Milwaukee for the ridiculously cheap rent you might imagine, particularly if you want to live in one of the high quality apartments or homes showcased in the video.

As I always remind people, choosing a place to live is more like buying a house than buying laundry detergent. For Tide, all you care about is the price tag on the bottle. But I’m guessing very few of us live in the cheapest home we could find. It’s more likely the opposite, that we live in the most expensive one we can afford, in the best neighborhood, with the best schools, the nicest amenities, etc. Price is a factor, but not the only one. Also, if cheap is what you are looking for, America, and even the Midwest, is replete with low cost communities.

Another of their focus areas is commute time. They claim that, ““Chicagoans have the longest commute times in the country.” I thought this was curious, but perhaps it came from this survey. By contrast, they note that Wisconsin’s average commute time is 22 minutes. It’s not fair to compare a city against a state in commute time. But even so, per that survey that says Chicago has the worst commute, the average commute time there is only 32 minutes. Are people really going to move to another state to save ten minutes?

Some people in Chicago undoubtedly have long commutes. But some do in Wisconsin as well. I never had an L commute of anywhere near an hour, not even when I lived in Evanston. So I don’t think the hour commute they talk about in at least one of their ads will even resonate with most Chicagoans. Also, their shots of the L make the principal negative feature boredom. But otherwise it actually looks quite pleasant, with no crowding at all – maybe even better than reality.

The best Wisconsin appeal based on a cost-quality-commute type of evaluation is probably suburb to suburb. The nicer suburbs of places like Indianapolis and Columbus compare very favorably with most Chicago suburbs. I would assume the same is true for Madison and Milwaukee. Of course, in Chicagoland the suburbs are actually seeing declines in college-degreed Millennials, so the pond to be fished there may be limited. Then again, maybe Wisconsin’s best appeal isn’t to Millennials, but to Generation Xers in the 35-55 bracket.

When I think of Wisconsin I think of cheese, beer, Packer nation, pristine lakes and forests of the northern part of the state, the Dells, and Madison’s (deserved) reputation as one of the best (if not they best) examples of a lefty college town. Some of the Wisconsin images, such as beer and brats, also apply to Chicago, making them hard to use as a marketing hook. But many of the traditional ideas about the state are missing from this campaign. Chicagoans, who know those images well, will probably be wondering what’s up. Maybe cheese curds aren’t cool. But then again, either was Pabst Blue Ribbon until some marketing folks made it so.

Marketing to Chicago, and potentially next to Minneapolis and Detroit, makes sense at one level. People tend to move shorter rather than longer distances. People moving to Wisconsin are also likely to have some historic connection to the state, and Chicago is a good place to look for them.

But it’s also an example of the Midwest’s beggar thy neighbor style of economic development. The fight is against the city next door, with the rest of America (to say nothing of the world), not part of the picture. Is there a better market for Wisconsin to try to attract from?

Based on its target geographies and appeals based on cost, this campaign doesn’t appear to becoming from a place of perceived strength.

This piece originally appeared on Urbanophile.

Aaron M. Renn is a senior fellow at the Manhattan Institute, a contributing editor of City Journal, and an economic development columnist for Governing magazine. He focuses on ways to help America’s cities thrive in an ever more complex, competitive, globalized, and diverse twenty-first century. During Renn’s 15-year career in management and technology consulting, he was a partner at Accenture and held several technology strategy roles and directed multimillion-dollar global technology implementations. He has contributed to The Guardian, Forbes.com, and numerous other publications. Renn holds a B.S. from Indiana University, where he coauthored an early social-networking platform in 1991.

U.S. Infrastructure: Not About To Collapse

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A recent report from the RAND Corporation looks at America’s infrastructure and concludes that “not everything is broken.” In fact, what is broken, more than the infrastructure itself, is “our approach to funding and financing public works.” This is largely because governments by-pass market signals and rely on “often complicated and multilayered governance arrangements and competing public goals and preferences” to make decisions about where to spend money.

For example, the report shows that government spending on infrastructure as a percentage of gross domestic product declined from a peak of 3 percent of GDP in 1960 to about 2.5 percent in 1980, and has hovered between 2.5 and 2.7 percent since then. But governments also made a clear trade-off in infrastructure spending: spending on roads declined from 1.6 percent of GPD in 1960 to around 1 percent in and since 1980, while government spending on mass transit grew from 0.1 percent in 1970 to 0.4 percent in and since 1980.

This would be fine if spending on mass transit had been as productive as spending on highways had been. But it wasn’t. Until the 2008 financial crisis, per capita driving continued to grow despite the lack of much capital spending on new roads, while per capita transit ridership was stagnant or declining. The report doesn’t have data after 2014, when per capita driving began to increase again while transit ridership began to collapse.

For highways, the report recommends transition to mileage-based fee collection “that more effectively links revenue collection to highway use.” For other forms of infrastructure, the report says governments should focus on “renewal of aging infrastructure and new infrastructure incorporating advanced technologies.” The report also suggests that maintenance spending focus on “mission-critical military bases, dams, levees, locks, national parks, and other vital federal infrastructure.”

Unfortunately, unless managers can use the kind of market signals generated by mileage-based and similar user fees, terms like “advanced technologies” and “mission critical” aren’t very useful. Many bureaucrats and politicians believe that streetcars are an advanced technology, and everyone likes to believe that their favorite infrastructure is somehow “vital” to the national economy.

The report does make clear that “shovel-ready” was a dumb criterion for selecting projects when Congress passed the economic recovery bill in 2009. Just because someone has written an environmental impact statement for a project doesn’t make that project worthwhile. The environmental impact statement for the Florida high-speed rail project, for example, specifically concluded that the project was not environmentally sound, yet Obama was willing to fund it simply because it was shovel-ready.

In addition to noting that cost and usage forecasts for new projects have been systematically biased to underestimate costs and overestimate usage, the report also observes that there has been a “bias towards capital spending over operations and maintenance.” This, of course, has led to the maintenance debacles in the New York, Washington, and other heavy-rail systems.

Unfortunately, the report does not offer a good solution to these problems. For example, one of its recommendations is that “Congress should require each agency to report on their estimate of funding needs over the next 25 years to sustain the infrastructure under its jurisdiction.” Of course, the result will be that every agency vastly overestimates its real funding needs to make sure they all get their “fair share” of any federal spending.

There’s really only three ways to make infrastructure spending decisions. One is in response to market signals: how much do things really cost and will people really pay for them? The second is in response to political signals: who benefits, who pays, and who is most powerful. The third is in response to religious criteria: which projects are supposedly more sacred or moral than others.

The shift in spending from highways to transit has been sustained partly because the transit industry has made itself appear to be more moral than highways, and used that religious feeling to bolster the political support from contractors who benefit from transit spending. The result has been a huge perversion of spending priorities. The only way to cure this is to go back to a market system of paying for all forms of transportation out of user fees, which would insure both better maintenance and less reckless capital spending.

This piece first appeared on The Antiplanner.

Randal O’Toole is a senior fellow with the Cato Institute specializing in land use and transportation policy. He has written several books demonstrating the futility of government planning. Prior to working for Cato, he taught environmental economics at Yale, UC Berkeley, and Utah State University.

Photo: U.S. Army Corps of Engineers from USA [CC BY 2.0], via Wikimedia Commons

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