America's Heartland Is Critical to Our Future
The results of the 2016 presidential election have been ascribed -- by the winner’s critics -- to racism, hysteria, stupidity, or nostalgia. But what the results most reflected was a looming economic divide. Essentially, Donald Trump won in the parts of the country that grow most of the food, drill for oil and gas, and produce palpable things. The places that went for Hillary Clinton are where intangibles such as media, software, and financial transactions drive the economy.
Blue America elites denigrate, and even pity, the vast American heartland for its lack of hipness and dependence on more traditional industries. Inconveniently, however, the vast region located between the Appalachians and the Rockies -- and from the Gulf of Mexico to the Canadian border -- is also home to roughly half the country’s population and electoral votes.
Not content merely to attack Trump at every turn, frustrated liberal elites compete with each other to heap scorn on those who voted for him. “These are the folks who think intellectualism is a sign of weakness,” scolds Gentleman’s Quarterly in a recent piece that calls Trump voters “bigoted morons … who stay willfully ignorant as a point of cultural pride.” Trump voters, adds Salon, should not hope for an industrial revival, since these jobs “are never coming back.” Rather than hope that jobs created by industry will return, one Berkeley economist suggests these voters pack up and move to San Francisco — notwithstanding median housing price approaching $1.2 million.
Stuff Still Matters
Yet despite these attitudes, the heartland may yet prove the key to restoring a prosperous and more egalitarian future. As Michael Lind and I show in our new report for the Center for Opportunity Urbanism, heartland-centered industries provide far wider and better-paid work for those without a four-year degree. They also provide more opportunities to blacks and Hispanics, who account for less than 5 percent of workers in Silicon Valley’s top firms while accounting for 25 percent of those in manufacturing and over 20 percent in the energy sector.
Nor are these opportunities disappearing as rapidly as either blue state pundits (or Trump himself) would have us believe. Since 2011, all but 18 of the country’s 70 largest regions, according to Pepperdine University economist Michael Shires, have seen an uptick in industrial jobs. Nor does this trend seem to be fading; openings for new industrial jobs are at the highest level since the onset of the Great Recession.
Since 2011, nine of the fastest growing industrial areas in the U.S. are in red states, notes Shires. Between 2010 and 2016, the top four – Michigan, Indiana, Ohio, and Tennessee – have accounted for nearly 40 percent of the nation’s new manufacturing jobs.
These regions once were fertile ground for Democrats, and could again with a shift in attitude. Allied with trade unions, Democratic candidates took tough stands on international trade and openly promoted expanding manufacturing and energy jobs. Yet increasingly the Democratic Party has abandoned these concerns, preferring to talk about putting “coal miners out work,” imposing strict regulation of oil and gas industry growth, and curbing the auto sector. This explains, at least in part, why such states voted against Hillary Clinton in 2016 (while supporting the more populist-theme candidacy of her husband two decades earlier).
Why the Heartland Matters to the Economy
Although the industrial workforce has fallen from 10.5 percent to 8.5 percent of all nonfarm employment since 2005, manufacturing contributes to the economy far out of proportion to its shrinking share of employment. In 2013, notes economic historian Lind, the manufacturing sector employed 12 million workers, but generated an additional 17.1 million indirect jobs.
Far from being technically regressive, manufacturers also employ most of the nation’s scientists and engineers. Regions in Trump states associated with basic industries -- Houston, Dallas-Fort Worth, Detroit, Salt Lake City, Dayton -- enjoy among the heaviest concentrations of STEM workers and engineers in the country, far above New York, Chicago and Los Angeles.
For many communities, manufacturing matters because it creates so much additional output in the rest of the country. Overall, according to the Bureau of Economic Analysis, the multiplier effect for manufactured goods is more than twice that generated by retail, trade, or the professional and business services sector.
The contribution of manufacturing to U.S. productivity growth is also disproportionate. From 1997-2012, labor productivity growth in manufacturing — 3.3 percent per year — was a third higher than productivity growth in the private economy as a whole. Manufactured goods also accounted for 50 percent of all exports. By way of contrast, intellectual property payments for services such as royalties to Silicon Valley tech companies and entrepreneurs amounted to $126.5 billion in 2015, which represents less than 6 percent of the $2.23 trillion in total exports that year.
Finally, there are the natural resource industries, to which the blue state punditry -- and unfortunately much of the political class -- are largely indifferent, if not openly hostile.
The Mississippi Basin produces 92 percent of the nation's agricultural exports by value, as well as most of the feed grains, soybeans, and livestock and hogs produced nationally. Sixty percent of all grain exported from the U.S. is shipped via the Mississippi River through the Port of New Orleans and the Port of South Louisiana.
The most rapid gains, however, stem from the upsurge in American-produced energy. Now that fracking appears to have turned the corner, the U.S. is on its way to becoming a major exporter of natural gas and petroleum-refined products. And energy jobs pay as well or better those in the heralded occupations, such as finance, business services and information. Although down from its peak, energy sector employment remains at 2.2 million, well above 2010 levels. Low energy prices and stable sources of supply are among the reasons that industrial firms, including those from abroad, have flocked to large parts of the heartland, notably Texas and Ohio, where energy is a primary generator of high-paying manufacturing employment.
Last Hope for America’s Middle Class?
The heartland most important contribution may be in providing a new opportunity for the country’s diminishing middle class. An array of scholarship, including a recent study by James Galbraith, a progressive University of Texas economist, has shown that the coastal states have the dubious honor of leading the way in increasing income inequality over the past 15 years. For all their progressive fulminations, cities such as San Francisco, New York and Los Angeles are now the most economically imbalanced in the nation.
Increasingly, people seeking opportunity are leaving in large numbers from New York or California and heading to places such as Tennessee or Texas. Even traditional large losers of domestic migrants, such as Michigan and Ohio, have seen their out-migration rates drop since 2000. The migration trend has now tipped in favor of the region’s resurgent cities, including Midwestern cities such Des Moines, Indianapolis, Louisville (pictured), and Columbus.
A critical factor here is the cost of living, particularly housing. In most cities, the price-to-income ratio, called the “median multiple,” is around 3 to 1. This ratio is two or three times higher in the prime regions of California or the Northeast.
Perhaps most revealing of the future are changes in youth migration, notably those with college degrees. Research conducted by Cleveland State University suggests a sea change since 2010 in the migration patterns of educated millennials towards heartland cities. In earlier periods the strongest growth did indeed go to hip locals such as San Francisco, San Jose, Washington D.C., Los Angeles and New York. More recently, the big growth has been in such Rustbelt redoubts like Pittsburgh and Cleveland, as well as Sunbelt standouts San Antonio, Houston, and Austin. These trends foreshadow likely migration patterns, and may become more pronounced when the younger cohort begins to start families and seek out homes.
These trends suggest that, rather than remaining a hopeless backwater, the heartland could increasingly provide a major contribution to the country’s economic future. These regions may not replace Silicon Valley or Manhattan as generators of hyper-wealth, but seem more likely to offer opportunities for the next American middle class. So, don’t cry for the heartland, or hold it in contempt. Rather than detritus of a fading economy, the middle of America may well hold the key to the future prosperity and American opportunity for the coming decades.