“Although still high in absolute terms, GDP and labor productivity growth rates are sluggish – both by US and international standards. The Chicago Tri-State metro-region’s contribution to national growth has slowed over the past decade and the region does not stand out as a top knowledge hub. Despite a dynamic and numerically large labor force, the region has experienced virtually no growth in the size of its prime working-age population and displays limited ability to attract and retain talent when compared to its US peers. More worrisome are the persistence of unemployment and the lack of sufficient job creation.” – OECD Territorial Review, The Chicago Tri-State Metropolitan Area
The Organization for Economic Cooperation and Development (OECD) is an international organization that has its roots in the administration of Marshall Plan aid to rebuild Europe after World War II. The OECD was invited by the Chicagoland Chamber of Commerce* to perform a “territorial review” of Chicago’s regional economy. I believe this is the first such review the OECD has ever undertaken in the United States. The results were released a couple months ago. The Chicagoland Chamber graciously sent me a copy. (The report is available online here – thx Jim Russell for the link). I did a read through of this inch-thick, 332-page report and wanted to share a few observations about it. As the quote at the top might indicate, this report, like Rahm Emanuel’s economic strategy, was fairly gloomy. My points will be topical and not an integrated narrative as I did not get to undertake as thorough a review as I might like.
Interesting Statistics
The OECD review amassed quite a bit of interesting statistical data on Chicago and puts them in the context of other major cities in the 34 countries that comprise in the OECD. I think that by itself made the review worth doing. I might suggest other cities take a look at this to determine if such a study would be relevant to them, particularly as international comparisons can be difficult to pull off.
This report is a goldmine of stats and there’s way too much to list here, but a few things that jumped out at me:
- The OECD report benchmarked labor productivity, which is less commonly looked at in economic studies. Chicago’s is above average but growing more slowly than average.
- Chicago has trailed the nation in job growth. Had Chicago simply matched the national average in job growth since 1990, the region would have 600,000 more jobs than it does today.
- There was quite a bit of sectoral analysis of Chicago’s economy. In fact, they actually normalize the sectoral composition of Chicago’s economy when looking at job growth to see if its under performance in job growth was due to concentration in slow growing sectors – but it was not.
- Chicago is known for having America’s second largest business district, but it ranks only fifth out of the top ten regions in America for the percentage of its jobs in the core city. Between 1960 and 1990, over 96% of new regional jobs were created outside downtown.
- There were many other interesting statistics around labor force participation, mobility of educated labor, elderly dependency ratios, educational attainment, poverty, patents, the structure of governments, taxation, etc.
Excess High End Talent
According to the OECD, Chicago suffers from a skills mismatch in its workforce. This is not just true at the bottom end of the economy as might be expected, but also at the top end, where there is a surplus of highly skilled labor:
At the high end, there is a large pool of high-skilled, highly educated workers, in principle more than sufficient to fill the jobs available at that level … at the high-skill end, data for the tri-state region points to an apparent oversupply.
To some extent this shouldn’t be a surprise. Chicago is a desirable city for people to live in, particularly for educated workers inside its heartland catchment area. As with other big city talent magnets, the economy doesn’t always supply the right employment for all the people who want to live there. The many articles about unemployment in Portland, for example, illustrates this, and Chicago is similar. In that regard, you might see the skills surplus as a sign of local strength.
However, the skill concentration in Chicago isn’t producing the type of high end innovation economy seen elsewhere. As the OECD notes, “Indicators suggest that the Chicago Tri-State metro-region does not rank as highly among the US knowledge hubs as one might expect, given the size of its economy and population and its concentration of world-class research universities.”
Also, Chicago may not be as attractive a talent hub as its aggregate numbers indicate. Again per the OECD:
To be sure, the Chicago Tri-State metro-region remains an attractive place for many migrants, but it is less attractive than many of its US metro-region peers. Moreover, if the analysis is confined to highly educated people of prime working age (25+, with at least a bachelor’s degree), then the picture is even more problematic. During 2005-09, more such people moved into the area than left it, but the net gain was relatively small compared with other large US metro-regions. Los Angeles, for example, benefited from a net gain of nearly 80,000 highly educated people in 2009, compared with 3,500 for the Chicago Tri-State metro-region.
When you under-perform as a talent magnet and still can’t put high skilled labor to good use, that’s a definite sign of trouble. This was one thing that was eye opening for me in the study as I’d previously assumed the high end of the market was in pretty good shape and that skill mismatch problems were the result of a large under-educated population vs. open jobs requiring mid-tier skills.
Policy Prescriptions
The OECD’s recommendations were not nearly as strong as its assessment of the region’s conditions. This shouldn’t be surprising as it is easy to look at data and see what may be wrong, but it is not always obvious what to do about it. The recommendations fall into five broad categories:
- Better Skills Matching
- Improving Innovation and Entrepreneurship
- Investments in Transportation and Logistics
- More Green Industry Growth
- More Effective Institutional Arrangements
First off, including “green growth” as one of only five major chapter headings is a joke. The aggregate number of jobs identified as specifically green is small. And as I’ve noted many times, there’s no such thing as green industry. Pretty soon there will just be industry again – it will all be green. So if Chicago and the US aren’t doing well at today’s industries, why would we think they would do any better at tomorrow’s? “Green” isn’t some sort of fairy dust you can sprinkle on and work wonders with. If anything, the acceleration of transition to more green practices will only drive more manufacturing offshore, exactly as it did with light bulbs. The track record of trying to create “green jobs” almost everywhere has been poor and has failed to live up to the hype, so I can’t believe the OECD is doubling down on this snake oil.
For the other areas, the OECD doesn’t break much new ground, though does highlight some interesting international case studies of regions getting it right. The sections more or less regurgitate the laundry list of organizations and initiatives already in place, then tag on “do more and coordinate better.” Examples include, “create region-wide capacity to match skills supply with demand” and “broaden the innovation focus [to include] non-science-and-technology-based innovation.”
By contrast, there was little focus on what counterproductive initiatives might be trimmed. While, for example, the report notes that many of the excessive numbers of local governmental units probably should be eliminated or merged, it doesn’t really look at how many of the alphabet soup of various non-governmental civic development groups might likewise be better off euthanized. Given the unified civic leadership nexus of Chicago, this should in theory be much easier than killing off governments, which are famously resistant to elimination. It’s hard for civic sector leadership to scold state legislatures about the need to consolidate when they can’t even do it themselves. This shows that the OECD had to deal with local political reality, so it probably pulled a lot punches in the recommendations. Statements of raw flattery such as “All key public and private stakeholders are keenly aware of what needs to be done to address these issues effectively” show the extent to which the OECD wanted to avoid ruffling feathers and challenging the Chicagoland status quo, which is disappointing.
I might also take issue with the way the problems were attributed to these structural factors without addressing at any great length many of the clear drivers of Chicago’s under-performance. For example, Chicago is the regional capital of a greater Midwest that has been struggling as a whole. It’s tough to swim upstream against that. (I’ll have more to say on other underlying factors in a subsequent analysis of my own).
In short, this report got it half right in giving us a very good look at the current conditions, strengths, challenges, and international comparisons. Where it lagged was in fully articulating the structural landscape driving the under-performance and developing compelling strategies for turning the ship around. Still, if I were a region out there looking for a good snapshot of where I stood in the marketplace, the OECD would be on my list of people to call.
* Disclosure: I won a competition sponsored by the Chicagoland Chamber in 2009.
Excellent analysis, as usual. My question is what are the reasons Chicago is underperforming and why are other regions overperforming?
Two comments on two points:
Explaining why, Indiana economic development chief Mitch Roob said, “We don’t do studies, we do deals.”
Translation: “Marsha! Marsha! Marsha!”
Roob or Indiana’s institutions have a serious case of Jan Brady Syndrome.
I bet Indiana would sue to avoid being included in Chicago’s MSA and CMSA, too.
And as I’ve noted many times, there’s no such thing as green industry. Pretty soon there will just be industry again — it will all be green.
For all intents and purposes, the green industry ship has sailed for the U.S. to become a player. Germany and China are so far ahead on all levels on the value chain, from manufacturing to R&D to markets, the U.S. missed its chance. And considering that a significant portion of Americans are too FUDded on the whole “green” thing, the U.S. doesn’t have the necessary uptake to cultivate a green industry.
I think it’s a fair study and I hope Chicago’s civic and business leaders take heed.
Not surprisingly, what plagues Chicago seems to be what plagues the midwest in general.
You know, I find it somewhat interesting that Chicago seems to always look better in person than it does on paper. You walk around in what is clearly a global city full of life and energy, with so much to do. Yet then you sit down and look at the statistics and you find yourself baffled at how the region is underperforming. I continuously find myself wondering if there is data out there that is missing–perhaps some type of measurement in which Chicago does exceptionally well, but we just aren’t seeing it?
Oh well…
urban politician,
I suspect that part of what makes Chicago so dysfunctional is as much a skills mismatch at the bottom as at the top. Just look at the illiteracy rate in Chicago, by some metrics as much at 37% no or limited literacy. Unacceptable in the 21st century economy.
http://www.care2.com/causes/fighting-chicagos-53-illiteracy-rate-what-does-it-take.html
That is higher than the rate in 1900:
http://query.nytimes.com/mem/archive-free/pdf?res=F70816FA3F5911738DDDAC0994DD405B808CF1D3
Chicago is also a magnate for young college grads, who often make it the first stop after graduation. The small college towns in the Midwest feed it, but there hasn’t been a growth of jobs to match those skills. Outside of a few notables like Groupon, there isn’t much in the way of dynamic new startups. I have to wonder how much of that is due to the high startup costs in Chicago. The rents aren’t cheap unless you go to high crime neighborhoods, and there is often a large political barrier to doing business in Chicago because of dysfunctional bureaucracy. More startups and business growth would take care of the mismatch at the top. Unfortunately I don’t see low skills jobs like manufacturing coming back. What happens to the people at the bottom?
One of the biggest things that stands out to me is the lack of regional cooperation. Wisconsin and Indiana have both made poaching industries from Illinois a priority. I don’t always agree with the sentiments on this blog, but that sort of infighting is not innovation or job growth, and hurts the Midwest as a whole in the long run. With this I concur. Funny to see Indiana spell it out so explicitly.
If we know what causes the underperformance than we can try to fix those issues.
Some causes for underperformance may be the extreme racial segregation, accepted corruption and poor governance at the state and local level, a culture that does not embrace change and risk-taking, a reputation for having bad weather, and a mismatch between federal dollars sent to Washington and those received back. I am sure there are more that I have missed.
However, Chicago also has numerous strengths. It is one of the most beautiful cities in the world (in summer); it is the Rome of modernism. It is the home to numerous international-minded Fortune 500 companies. It has several excellent universities. It is the talent magnet for the Midwest and Big 10 schools. It has excellent cultural institutions. It has high quality transportation connections. It is a hub of the high-end service economy.
Agreeing with the urban politician, seems like a vital major city when you are actually in it.
However, as someone who about two years earlier was job hunting both in New York and Chicago I was shocked how shallow the Chicago job market was when compared to NYC. I expected something like 40% or at worst a 1/3 of NYC, serious job wise. It seemed closer to 20%. It was not what I expected, it is like the entire Loop was built on sand.
I gather my experiences are not unique among job hunters who are looking in both cities.
Regarding “skills mismatch”: Without a little more data, we’re left to speculate. Here’s my two cents.
I suspect part of the issue is, in fact, cultural. Here are a few “whereases”:
1) New grads are not yet specialized or experienced enough to take certain jobs. (In the Midwest, there is still some “pay your dues” necessary.)
2) Midwestern companies tend to “grow their own”, turning raw grads into competent business-people over 8-10 years.
3) This leads to an oversupply of mid-to-late career (upper-level) professionals, and as a consequence, a thin market for outsiders. Plenty of insiders for most jobs.
All of this is plays out alongside several (at least) macro factors: the thinning/hollowing out of corporate staffs generally, the region’s loss of banking HQ’s to big mergers (Bank One, Harris), the decline of old-line retail (Sears, Montgomery Ward, Marshall Field), the increasing regionalization of law firms based in second-tier cities in the region, and the decreasing importance of place-based commodity trading.
Every one of these macro factors takes a small bite out of Chicago’s hide and leaves fewer options for mid-career professionals. At the macro level, what once were growth engines are no longer so.
None of this means we shouldn’t see a vibrant Loop today, or that Chicago will look like Detroit next year.
Here is the report online, if anyone else would like to read it:
http://www.oecd.org/dataoecd/24/59/49912798.pdf
I wonder what a study that looks at the ratio of foundation and civic-organizations to private sector activity would say about development? My guess is that the more “do gooder” money there is floating around, the less actually gets done. The civic/philanthropic nexus is medieval in nature, not a good fit for a market-based economy.
I agree that Chicago looks great from the ground…as long as you’re in the Loop or the north side. Looking at the south or west sides of the city, or some of the other troubled inner burbs, or the devastated northwest Indiana “rust belt of Chicago” then it might just as well be Detroit. Yes there’s a lot of good stuff in some areas, but there’s also so much decay, depopulation, poor education, and crime in other areas that it’s not enough to yield a net positive result.
re: “the devastated northwest Indiana “rust belt of Chicago” ”
Looking at houses and people, devastation is apparent. But in terms of capital investment, NW Indiana still has one of the world’s largest (and expanding) oil refinery complexes, and it is still North America’s leading steelmaking region. Indiana as a whole still has a higher percentage of workers in manufacturing than any other state.
Indiana’s mills, refineries, and factories just don’t need a million semi-skilled high-wage employees anymore. The output per worker-hour (labor productivity) is high. Income per capita for NW Indiana and the whole state, not so much.
Amazon and FedEx warehouse and handling jobs don’t pay nearly as well as factory jobs at the Big Three, USSteel, and Amoco used to. Reality of the “flat world”.
I can’t help but think that at least a good proportion that is going wrong for Chicago is self-afflicted.
Aaron, you once said that LA’s problems are self-afflicted, but to a certain degree I think the same can be said about Chicago. Chicago can’t change that it’s in the midwest or that it sits in New York’s shadow, nor can it change that manufacturing has gone overseas and that Chinese labor is much cheaper than our own.
But Chicago enacts policies that scare private investment away. If Chicago was the headquarters of 50 private equity firms that earn billions in revenue as well as the world’s largest banks, then sure, it could get away with it.
But what Chicago needs more than ever is PRIVATE investment from smaller businesses. The city seems to be getting it right as far as promoting technology startups and incubators, and I think Chicago is hitting some great strides with this. For example, 2 of the most successful tech startup incubators in the nation are in Chicago, according to a list published last week by Forbes. This is very good to see.
But what about everybody else? The meat and potatoes still sits there rotting away. So much land and so much property sits there rotting away on the south and west sides, and without subsidies from the city you are unlikely to attract a private investor into these areas. And that’s the problem–why do we need subsidies? Subsidies mean “favoritism”, and this feeds into a culture of political corruption that continues to drain the city.
It sucks.
Why can’t there just be a level playing field? Chicago keeps making its landlord-tenant ordinance more and more unfavorable for landlords (so now if I have a poor family leasing an apartment that I own, and they aren’t paying rent, it gets harder to evict them and I of course absorb the losses). Thus nobody wants to own property in areas other than Lincoln Park, Lakeview, etc where you are almost certain to have creditworthy tenants who pay on time. In addition, the cost of rehabbing ANYTHING is prohibitive. The Department of Buildings just has no concept of peoples’ budgets–things that they require you to do are so over-engineered and cost so much extra that it’s better to just tear the damn thing down and leave it as a pile of dirt, especially in areas where you aren’t going to get very good rental income. Why should anybody take a chance with their hard earned money to invest in these areas of the city when the city makes private investment a “bad” investment for anybody?
Most of you here don’t live in Chicago and I’m sure you will come up with some esoteric reasons, sitting at a desk far away, for why Chicago is struggling. But I now have first-hand, on the ground experience with how things work in Chicago, and I can see with my own eyes exactly what needs to change in order to at least move the needle in the right direction.
Chicago is a two-tier city, as others such as Aaron and Richard Longworth have noted in the past.
One part is a global city with one set of challenges that are international in scope. The other and much larger portion is classic rustbelt, where the quality life is determined by one’s ability to access basic services and resource necessary for survival and/or advancement up the economic food chain — food, shelter, clothing, healthcare, security, education, jobs. For many in Rustbelt Chicago, daily life can be a supreme struggle.
We are living in era in which both the public resources available for investment in human capital and infrastructure improvements, and private sector economic opportunities (good paying jobs) are both in steep decline. These are not at all unique to Chicago or Midwestern cities in general, but, because many of them have been in decline for decades, the affects here are perhaps more deeply felt because they are piling bad news on top of bad news.
There are no magic bullets. Each community area and each neighborhood in Chicago is unique, and each requires its own set of strategies and priorities. A lot of the challenges are similar, but the opportunities are more unique because of existing strengths and resources.
I think Mayor Emanuel and the Chicago power structure should limit their worries about the big picture and take the long view of how Chicago can advance — one community area and one neighborhood at a time. For many of these places, little things mean a lot. The key is to have a plan with reasonable community support and a continuous supply of public improvement projects in the pipeline — many small ones and at least ONE large project (and, hopefully many more) coming online in all 77 community areas each year.
The hope and enthusiasm that these kinds of projects can generate at the grassroots level because of their visibility is infectious. And hope breeds hope.
Chicago has already been doing a lot of this for thirty years. The current administration needs to take it up a notch and bring it to the forefront of their agenda. The optics of ribbon cuttings are very, very good for everyone in the ceremonial photos.
Never seems to be any mention of new reports/rankings in which Chicago does well. At least one can find a few in the comments such as the aforementioned “Top Startup Incubators And Accelerators” in which Chicago makes a strong showing.
But yes, Chicago has some problems and I think this OECD report is perfectly fair in its conclusions. All things considered most cities in the US would consider themselves lucky to have the weaknesses of Chicago including the “problem” of over-abundant talent.
If people and businesses gravitate towards urban areas going forward, as is expected, then Chicago has a very bright future despite its many shortcomings. Yes, NYC may have brighter, as well as Silicon Valley/SF Bay Area or others, but Chicago sits close enough to the top. Not every city can be the best or even second best, that’s just not how rankings work.
What is so “bad” about ranking between #2 and #5 among US cities depending on criteria, for example?
Uffy, I agree with you, but I also think Chicago shouldn’t rest on its laurels either.
Chicago is making strides in some areas. For example, it is actually doing well in the ‘creating new business’ category, better than some of the people here may expect. It always does pretty well in those yearly Inc. Fastest 500 surveys, which post the 500 fastest growing private companies in the nation.
However, that doesn’t seem to be overcoming what is dragging Chicago down–large amounts of poverty, unemployment, and rust-belt decay that afflicts much of the metropolitan area.
Oops, in post #12 I kept saying “self-afflicted” when I meant to say “self-inflicted”.
Pardon my misuse of words…
Does anyone think, the Great Recession had an impact on the outcome of this report?
uffy, there’s nothing wrong with celebrating good news. But I think rankings need to be seen in context, particularly when looking at rankings that measure the total of something. Chicago is the third largest city in the US. So it should in theory rank #3 on most total measures even if it just holds its own. So I think you need to size adjust before getting too happy. But again, if you are doing well on something, why not tout it? Chicago has the most green roofs it seems, for example, so there’s nothing wrong with being proud of that.
I think it simply boils down to the fact that we’re resting on our laurels and not actively competing or changing anything more than we have to. It’s great to revamp the Loop, or Northside, but we’re still ignoring the rest of the city and not actively promoting people to move and stay in the city or metro. Yes, we’re the 3rd largest city, in the middle of a region with not a lot to compete with, but in the end, we’re still competing against the coasts too. NYC isn’t our only city to stand up against. On some level I feel like Chicago sticks its head in the ground and waits until things pass.
Jim Russell has a post up.
What Chicago Can Learn From Cleveburgh
http://burghdiaspora.blogspot.com/2012/05/what-chicago-can-learn-from-cleveburgh.html?utm_source=twitterfeed&utm_medium=twitter
Take it for what it’s worth. I’m not sure there really is that much official collaboration, but many actors in the region are starting to think about assets in a more regional way.
@Peter, the recession certainly hurt, but I don’t think was a huge factor in this study since it focused on longer time spans and did a comparative not just absolute analysis. I do think that if the macro-economy picks up, Chicago will benefit. But that might actually prompt the powers that be to reform and change even less.
@Robert, part of it is when you are located where Chicago is, you aren’t part of what’s going on on the coasts. This means you aren’t as aware of the competition (both domestically and internationally), and you tend to implicitly compare against regional cities, which frequently perform poorly in urban life where Chicago excels. Thus you end up with a low perception of the need for change.
Thanks John Morris for that link. It shows exactly the sort of nonsense conclusions being made based on the many very negative discussions of Chicago on this site. Apparently combining Cleveland and Pittsburgh makes a clearly more impressive metro than Chicago now that “Chicago is failing”. This all because Chicago lags in educational attainment despite the fact that 34% of the metro population has a bachelor’s degree compared to 29% for Pittsburgh and 27% for Cleveland. The same pattern holds for graduate degree attainment with an additional 2-2.5% achievement in Chicago versus both other metros.
Pittsburgh does rank above LA though.
This said, I certainly agree that regional cooperation could and should benefit Chicago and the Midwest in general. I wish Jim Russell well in getting Pittsburgh and Cleveland to cooperate until they are clearly superior to Chicago in many other non-existent ways.
Yes, Chicago has had a rough decade. Surprisingly little was accomplished between 2000 and 2010 (the city mirrors the country as a whole in this regard). Nonetheless, businesses seem to keep investing in the area at a rate well above average as shown numerous times by Site Selection magazine’s top ranking of the metro, for example. Chicago definitely cannot afford to tread water indefinitely; I don’t think anyone is saying that it can. My contention is simply that as of right now Chicago is much more a successful behemoth than a “failure”.
Poverty on the south and west sides is definitely a problem, as well as still unacceptably high crime rates and comparatively weak K-12 schools. It would also be quite nice to increase net immigration. Surely there are many other soft spots as well.
Rahm seems to be a vast improvement, despite any/all of his shortcomings. Manufacturing is set for a resurgence. Chicago amenities absolutely cannot be beat for the price and are only getting better. The metro economy is quite well balanced yet also maintains a clear edge in certain sectors such as medical and shipping. The population is widely regarded as personable.
Maybe this website should institute a moratorium on Chicago stories for a few years and then we’ll reassess because, to me at least, there is just too much negativity and not much new ground being covered.
uffy, I agree Rahm is welcome change. I don’t think everything he does is great, but he’s been a breath of fresh air in many ways.
Sorry to disappoint but I do have a couple more Chicago pieces en queue. Once they are done my Chicago pipeline is pretty dry however.
“Surprisingly little was accomplished between 2000 and 2010 (the city mirrors the country as a whole in this regard).”
I think this discussion begins and ends right here.
“part of it is when you are located where Chicago is, you aren’t part of what’s going on on the coasts”
Really?
http://www.theatlantic.com/business/archive/2012/05/what-is-the-worlds-most-economically-powerful-city/256841/
In which the Chicago economy ranks in the top 10 on a global basis by any methodology. Does not look like failure to me (or any of the organizations putting out the rankings apparently). Again, none of this means Chicago is without weaknesses, but it also seems to potentially be the second strongest city economy in America.
I’m really just kidding with the moratorium idea.
uffy says
“It shows exactly the sort of nonsense conclusions being made based on the many very negative discussions of Chicago on this site.”
Wow, this is rather defensive.
I think what comes accross is that Chicago seems to be underperforming given the assets everyone knows it has. This was after all, America’s number two city for many years.
If you want a medal for doing better than Detroit, Milwaukee or Pittsburgh you have to cast it yourself. don’t get me wrong, Pittsburgh is also silly for wanting to be recognised for all kinds if silly, marginal progress. It also was endowed with amazing assets.
Peter said,
“Does anyone think, the Great Recession had an impact on the outcome of this report?”
Meaning, we are only supposed to judge cities during booms? Obviously, the great recession continues to expose the bathers who were wearing no clothes when the tide was high. A lot of the exposed flaws in places like Las Vegas are really, really deep.
A lot of the weaknesses are just starting to be play out. Let’s see how the Eds, Meds cities fair as budgets are slashed -which they will be.
John Morris,
How about a medal for doing better than LA, Boston, Houston or DC?
The PricewaterhouseCoopers rankings taken together with the five rankings referenced in Richard Florida’s article have Chicago doing just that. Handily I might add.
Yes, I am definitely being defensive, but someone has to be. This site (and http://www.newgeography.com and your site) is wholly negative on Chicago whenever the city is mentioned. It’s just silly.
Unless commentators are going to qualify their proclamations that “Chicago is failing” with “to live up to its potential” or similar, they will continue to be unequivocally wrong.
Rather, the site you linked to.
I can’t speak to some of the negative threads on this blog about Chicago. Some comments do seem too negative.
Mostly this is a case of expectations and comparison to the importance the city once had. Honestly, I think that’s fair, the city should not be graded on a curve.
Chicago, is not Boston, or Pittsburgh and those cities could never reach the scale of Chicago. Pittsburgh’s benchmark is more like San Francisco.
We also, have to take a cold view of Chicago’s position in the world foodchain relative to it’s strengths. Closed societies and quasi police states like China, will obviously have a big problem creating truely global cities. The percent of highly educated Chinese who would like to live elsewhere is pretty high. Both Hong Kong and Singapore limit population inflow and likely could never sustain, truely huge mega populations. Japan, is a very closed society. India is still swaddled tightly by it’s corrupt, nanny state and is not open to large scale immigration.
Given those facts, the true pool of contenders for globally important cities is actually pretty small. Pretty much one has cities in the U.S., the U.K. and Canada as places open to having really big, globally open cities.
Given that Chicago was, not very long ago the number two city in what is still a pretty strong immigrant magnet, makes it’s performance poor.
Chicago is Rahm Emanuel’s purgatory.
It’s the place the gods have sent him to determine whether or not his his neoliberal economic advocacy, as evidenced by his role as “godfather of NAFTA,” can succeed at the local municipal level for a great American city.
Will he at long last become an advocate of the people and take steps to reverse “the great sucking sound” — so clearly predicted by Ross Perot way back when — that destroyed thousands of Chicago jobs that paid living wages?
Or, will he focus on pursuing Federal funding for the expanding Security State that loves to play wack-a-mole with the dirty hippies who challenge the status quo?
It seems to me that he can’t have both. Lines are being drawn in the sand. It’s not too late to be on the right side of history.
@City Signs, you speculate on the role of nonprofit money in a city (“I wonder …, “My guess …”) and then conclude with a pretty bold declaration that the idea of nonprofit money is “not a good fit for a market-based economy”.
You could approach it academically, and argue it in a way that’s testable and verifiable. I’ll try that by offering a rebuttal and showing that nonprofit money has a positive effect on cities.
First off, “not a good fit” in what sense? An economic sense? Or is it a Culture War argument, which could fit in with political science or sociology?
The economic argument would be that the costs of philanthropy burden private, profitable economics. A Giving USA report prepared by the University of Indiana estimates the 2010 value of philanthropic contributions at $290.89 billion. If philanthropy were a private, for-profit venture, that value would make it the third largest business in the U.S. behind Apple ($532B) and ExxonMobil ($397B). So, does money in philanthropic hands mean it’s used worse than had it been deployed for a profitable venture? Did philanthropy crowd out a for-profit venture?
Answer: No and no. Philanthropy is subject to the same economic laws and effects as any other actor. It doesn’t do anything magical or sinister. As for crowding out, it’s an phenomenon in poor societies where economic alternatives are scant. In societies with even a small degree of wealth and stable social organization, philanthropy does not take away a profitable economic opportunity.
Also, that $290 billion U.S. philanthropy holds is a force multiplier. That means that the $290 billion creates its own economic transactions that end up creating more value as the money is spent. In its absence, you would have to find a substitute in the quantity and quality that would substitute for philanthropy. In the U.S., the $290 billion could paper over some of the wealth destroyed in the Great Recession, but you’ll find no substitute for the artistic, educational, religious and civic goods and services produced.
The Culture War (“not a good fit”) argument implies that the act of philanthropy makes society squishy. You’re overlooking the fact that philanthropy is basically a byproduct of wealth. Corporations give a portion of their earnings out as grants. The wealthy also allot their hard-earned gains to philanthropic efforts that outlive them. Individuals who work for either of the two give their income in direct donations or religious contributions. These contributions grow as the economy grows. So isn’t philanthropy slowly sowing the seeds of civilization’s end?
Economically, the answer is no. (There’s no crowding out.) Otherwise, it’s a values argument, which is unverifiable. Political scientists and sociologists can test for quantifiable outcomes, such as Culture Warriors winning and maintaining political power, or a sociologist who correlates philanthropic contributions with something like GDP growth, military enlistment or war outcomes.
@John Morris,
My point is that you will likely see a very similar economic performance across the country if you look at the last decade.
Yes, but we are not exactly seeing that. A whole lot of places like inland California and Las Vegas are doing really bad. Then we have a large baseline average of OK, which actually means pretty bad.
“the region has experienced virtually no growth in the size of its prime working-age population and displays limited ability to attract and retain talent when compared to its US peers.”
The OECD report seems to compare Chicago to other peer metros in the US and it underperforms against many.
There are some stats whera a peer to peer comparison between Chicago and other major US cities looks really bad.
Crime is the biggest area.
Chicago is three times as deadly as NYC and twice as violent as LA.
“among the nation’s 10 largest cities, each with a population of one million or more, only Philadelphia had higher rates of murder and violent crime than Chicago. Furthermore, the FBI’s violent crime total for Chicago did not include any of the city’s 1,443 incidents of criminal sexual assault, which is a broader classification than the FBI’s forcible rape category. Including just 700 of those crimes would bump Chicago to 24th on the list for violent crime rate.”
http://www.chicagonow.com/chicago-muckrakers/2010/06/chicago-is-three-times-as-deadly-as-nyc-and-twice-as-violent-as-la/
1990 homicides in Chicago 851 (population 2.8 million)
2010 homicides in Chicago 434 (population 2.7 million)
Pretty much every major American city has seen huge drops in their murder rates since 1990. The NY rate is, I think about a quarter of what it was then. A clean comparison, with the ten largest U.S. cities looks very bad.
NY Homicides in 1990 2,245 not a typo
NY Homicides in 2011 around 500 (sorry, I had a little trouble getting a final number.
Chicago has close to 1/3 the population of NYC and almost as many murders.
Understood John, chicago has a high murder rate. It has improved signicantly from the past.
Peter,
John has been pretty fair in his criticism of Chicago, however I do wonder if he has actually spent much time in the city?
John, I ask this because your points often seem disconnected and arbitrary, as if you’re simply Googling stats and sharing them with us. Your previous obsession with Art Chicago’s decline as some sort of all encompassing indicator of Chicago’s shifting fortunes as a city come to mind.
Again, that is why I question if you’ve even been here or spent any significant time visiting the place. This is a vast metropolis with so much happening at once. Some things are going really well, some are going poorly. You are unlikely to find anybody here who doesn’t agree that Chicago is facing a lot of challenges, and is underperforming other metros in many key categories.
But Chicago also is doing really, really well in some ways. There is not a single downtown in any American city not named New York that is thriving the way Chicago’s is, even in this economic downturn. To this day luxury apartment towers, University dorms, hospital & research facilities, and high end hotels are either under construction or breaking ground in this city. Tony restaurants, lounges, wine bars, etc are sprouting up all over town, and retail construction in the city is back on the rebound. Just today financing was nonchalantly announced in a community meeting for a >600 ft highrise apartment and hotel tower in Streeterville, and for Chicago that’s hardly news. That’s just day to day life in this city. When it comes to Chicago’s central core, by many measures the recession never happened.*
* Okay, the asterisk is to point out that nobody was completely immune to the recession, but you get my drift. Office vacancies rose and job losses abounded, but office vacancies for several quarters has been drifting back down; and by the same token hotel occupancy and rates have continued to trend upwards. Things are getting better.
I disagree that Rahm is good for this city. As a resident of Humboldt Park and a Public School teacher, I believe his allegiance lies with the 1% and the rich north shore bunch. The public schools are being dismantled and privatized through the guise of faulty statistics and the end of tenure, we are endorsing a dubious PPP plan on future infrastructure projects, murders are up 60%, and he faces NO serious opposition from the bloated aldermanic council, the media, or the Democratic Party. New York will have advantages over Chicago for decades to come simply because their mayors did not violate HUD restrictions during The Great Migration (Daley Sr and LBJ) and create huge swaths of the legacy of slavery (arguably a tougher challenge than for NY).
This unique facet of Chicago, that there are intersections in this town where you could walk for miles in any direction and not see a person of another race, an inkling of a small business district, is central to its consistent low rankings for a city its size.
Also with regards to NYC: the tax base is not threatened by the huge deficits arising from privatization deals, politically connected pension fund giveaways, and developer handouts (TIF districts)
May the North Shore reign and its neo liberalism end as quickly as it started
@TUP, John Morris is an artist, so it’s an area he knows well. That may account for why he brought that up.
@royce76, Question: would you rather have Mayor Daley back? If not, what viable candidate would you have preferred over Rahm?
Daley was/is just as corrupt as any city Mayor, his father and Bill Thompson included. I still can’t believe it’s just Blago serving ten years. Daley had less arrogance and the benefit of an inflating economic bubble during his tenure. He now receives close to $200,000/yr for his pension.
The sad thing is that only about half Chicago’s residents voted when Rahm was elected. And he was only elected because of Barack H Obama. That left slim pickings for any minority opposition.
This would be a tough job for ANY person, and Rahm probably has some of the qualities needed to take action on city budget fraud and waste. Trouble is, he’s way too compromised because of his associations with Wall Street insiders, banking execs, DC insiders, and rich people from places like Winnetka, Lake Forest, etc. Look at our public schools – his appointed board members have come out saying that they will purposefully starve neighborhood public schools to either get them to close or privatize them. His friends will have extreme cash access from overbudgeted and overleveraged public works projects to come. He has shown contempt for Labor leaders and the media, says “F*&k You, Lewis” to the head of my union. The list goes on.
Who’d be better? Just about any well educated person in this city who can see the big picture with more clarity than gain for personal wealth. It might be 1983 all over again in 2015, maybe the Black Community can get behind an opponent.
Royce,
There is no question in my mind that there would be nothing more damaging to Chicago than a “black consensus candidate” type mayor of the mid-20th century civil rights era kind of mentality that has nothing to do with the world of 2012.
The reality is, hand outs aren’t working. The CHA is a miserable failure, and to Chicago’s misfortune instead of eliminating it altogether we are wasting money housing the poor in new neighborhoods that will certainly devolve once again into gang infested ghettos, and we sadly are doing this on what should be prime real estate (the south lakefront).
What Chicago needs is exactly somebody like Rahm. Stand up to the unions who are draining the region dry, lower the barriers to small business (cutting the employee head tax and, just today, eliminating nearly 2/3 of the necessary business licenses) expanding in this city. No more handouts to the poor, no more handouts to city employees (Rahm is tackling pensions as well, and just yesterday traveled to Springfield to personally argue for pension reform). It is PRIVATE investment that is allowing cities like Houston and Dallas to blow Chicago into dust, not handouts to poor people. For the most part, Houston and Dallas didn’t make the mistake of unionizing and handing fat pensions to city employees, nor are they burdened with housing hundreds of thousands of the poorest members of society; the lack of these legacy costs are one of the big reasons these cities are so attractive to businesses which are creating so many new jobs.
Finally, this whole idea that Chicago MUST have a black mayor because black people say so will never, ever garner even the slightest sympathy from me, and if anything makes me kind of angry–take that kind of talk into a time machine and travel back to 1970 where it belongs. Oh, and I’m also a minority.
Yes, Rahm is so bad for Chicago:
Mayors from Across Illinois Facing Difficult Pension Challenges Join Mayor Emanuel in Call for Reform
Mayor Rahm Emanuel was joined today by nearly 30 Mayors of municipalities representing over 3.2 million Illinoisans who traveled to Chicago to express their support of pension reform to ensure retirement security for their employees and retirees and to urge state legislators to pass legislation that addresses their challenges.
“As I said in Springfield this week, Chicago is not alone. Municipal leaders across Illinois are struggling with the difficult and unique challenges they face with the broken pension systems in their villages, towns and cities,” said Mayor Emanuel. “Together, we urge the state legislature to act and pass meaningful reforms that will preserve retirement security for our employees and retirees and protect our taxpayers. We are here to be partners with state leaders and labor to make sure this gets done. This frank discussion we are having today is a sign that critical changes are underway.”
Mayor Emanuel traveled to Springfield Tuesday to testify at the House Committee on Personnel and Pensions and discuss his Roadmap to Retirement Security with state legislators. Without fundamental reforms to the pension system, the strength of the economy and the quality of life in Chicago and Illinois will continue to be undermined.
http://www.cityofchicago.org/content/city/en/depts/mayor/press_room/press_releases/2012/may_2012/nearly_30_illinoismayorsjoinmayoremanuelinurgingretirementsecuri.html
“The CHA is a miserable failure, and to Chicago’s misfortune instead of eliminating it altogether we are wasting money housing the poor in new neighborhoods that will certainly devolve once again into gang infested ghettos”
The CHA was a miserable failure. Today however, the largest and worst housing projects have been demolished. In place is at most 33% replacement public housing and the Plan for Transformation is about 50% finished. It will take at least another 10 years to fully replace 33% of the demolished units.
Those 70% some odd people left Chicago. Probably never to return. I was talking to a guy from Northwest Indiana just today, there was a surprining correlation of poor African Americans moving into NWI as Chicago lost many of those same people.
Again, to say that any city in America is “blowing Chicago into dust”, or similar, is plainly incorrect unless one is talking about the only city to consistently outrank Chicago, NYC.
Plenty of places have higher growth than Chicagoland, but until Houston or Dallas can outrank Chicago on a consistent basis by many overall metrics this point is simply wrong. This is not to denigrate either city in any way, but the numerous studies performed in this area every year do not place either above Chicago.
Yet.
Somewhere amidst all this bad news, is a sign of promising things still brewing under the surface for Chicago:
CNN’s list of the to 100 fastest growing inner city companies in the US has 12 companies from Chicago, easily beating out every other city. Link: http://money.cnn.com/smallbusiness/fastest-growing-businesses-inner-city-100/2012/full-list/
Compared to other metros, (by my fly-by count):
Metro NY (including Connecticut, Woodhaven, NY): 6
Los Angeles: 5
Washington, DC: I counted 4 or 5
Chicago really blows away the competition in this one. A sign that entrepreneurism is still alive and new ideas are still blooming from the great beast on the prairie.
Thanks for the link. I’m not really sure how anyone can see how quickly downtown is growing and extrapolate that Chicago is failing. If anything there’s a mad rush into the city’s nicer neighborhoods, especially around the loop.
Uffy,
I think you should give more credit to the commentators here. Nobody is questioning the growth and desirability of Chicago’s core. They are bringing up legitimate concerns about metro Chicago’s performance on several key indicators compared to other US Metros.
I just thought that the link I provided above was a nice indicator of new trends which may be brewing under the surface. Chicago has a lot of industries that have left town or collapsed, and that has wreaked havoc upon its economy, but from the ashes we see plenty of signs of new life, and that is crucial.
Aaron mentioned a talent/employment gap occurring in Chicago, but perhaps in part that is contributing to so much entrepreneurship in the city. People are creating their own companies, doing their own thing. I know people who have left or lost their jobs who are simply buying up real estate and making that their way of life. People are out there doing things on their own, and that seems to be reflected in part in the above numbers.
What is nice about Chicago is that when you look at that list of 12 companies, you see a diversity of industries:
manufacturing
logistics
digital media
telecommunications
financial services
web design
marketing
Chicago’s tremendous economic diversity serves it well here.
Interestingly, America’s “dream city” Houston only has 2 companies on the list. Also interesting is Nashville’s performance, with 6 companies on the list. This is impressive considering Nashville’s size compared to all of the big boys.
Here is the same list for last year:
http://money.cnn.com/smallbusiness/fortune/fastest_growing_businesses_inner_city_100/2011/full_list/index.html
Interestingly, Chicago wins in this list as well, but this time its lead is less over its rivals, with 7 companies. In this list, San Francisco has about 5, but if you include Oakland then the Bay Area either ties or wins at 7 or 8.
So Chicago pulled even further ahead of the field this last year, and it also appears that Nashville has recently stepped it up a notch, while the Bay Area took a bit of a hit.
These lists also point to some good indicators for Detroit as well, which seems to have a good handful of companies on the list for each year. Keep in mind that this list is for “inner city” companies only, so the “inner city” of Detroit, which has long been struggling, does show signs of life. Great to see.
Royce,
Here is another example of Rahm Emanuel being such a bad mayor for Chicago:
http://www.ccc.edu/news/Pages/Chicago-Sun-Times-City-to-give-2-million-to-companies-that-hire-City-Colleges-grads.aspx
What a terrible mayor! Clearly he only cares about his wealthy buddies
That linked list is to companies in low-income, high-poverty, high-unemployment census tracts. The same sort of list is used by the US government to determine eligibility for several economic-development tax-credit and grant programs.
I am not sure it reveals anything other than opportunism by start-ups seeking low-cost locations and low-cost capital or debt. In measuring macro trends, I’d rather see the whole picture of start-ups in a metro, not just the ones in the most challenged census tracts.
(Please do not take this as an indictment of Federal programs for inner cities. I work in a field mostly dependent on the same. But I understand that they often influence decisions at the margins: companies that choose to locate in a challenged neighborhood of one metro probably had already chosen that metro. Thus, such neighborhoods compete mostly with other parts of their metro, not other cities’ challenged neighborhoods. So I doubt that this particularly limited ranking really tells us much about Chicago vs. Anywhere.)
Chris,
In most American metros (especially older ones), the central city usually can be characterized as a “low-income, high poverty, high unemployment” census tract relative to its suburbs.
Many of the companies listed in Chicago, however, are anything but that–you have companies listed from the west loop and Ravenswood, for example, that are in more gentrified areas.
Your comments above reflect that you spent little time exploring where these companies are based and that your perhaps have a lack of knowledge about Chicago neighborhoods; Hillard Heintze is one of the top performers and it is headquartered in the heart of Chicago’s financial district downtown; Coyote Logistics (#1 on the list) was started in a wealthy Chicago suburb and has now moved into an industrial space in a gentrified north side neighborhood of Chicago (which is hardly struggling with crime or poverty). I highly doubt that it or most of the other companies got any meaningful Federal grants, and if you really feel that is the case then show me the evidence of this. Finally, if companies wanted low cost locales for startups they would almost all be starting off in Houston or Nashville–the fact that high tax Chicago is creating so many of these companies speaks to the contrary of your argument.
For the most part, Chicago’s performance on this list for the last 2 years speaks volumes. It shows that when the economy collapsed, a lot of talented people stuck around and created their own companies. This shows that the city still has great appeal for entrepreneurs who want to be here and will create new opportunities when none are readily available. Great to see and this bodes well for the city.
TUP, I studied the disclaimer on the Top 100 website to find how they populated their list. Their description of how they determined “inner city” reads very much like the guidelines for determining the list of census tracts eligible for New Markets Tax Credits.
Until recently the list of NMTC-eligible census tracts was updated with the “longform” decennial census data. So a tract could have been considerably gentrified before it went off the list. The fact that an area is gentrified today is irrelevant when the tract’s qualification was based on old data.
In addition, Chicago has several hundred TIF districts to provide other incentives locally. The aid is seldom direct; it may be done through infrastructure improvements or site acquisition and redevelopment.
NMTC are not granted to a relocating company, but to a community development financial institution as an incentive to lend to major employment-generating redevelopment projects in troubled areas.
A company would be crazy NOT to look at NMTC and TIF tools for growth financing. Unless you know the exact details of Coyote Logistics’ relocation, you do not know if they used TIF incentives or New Markets Tax Credits-based financing to do the deal. Such arcana are not generally publicized beyond “a package of incentives” when a project is announced.
I’m saying that when any fast-growing company with significant physical operations moves into a NMTC-qualified census tract, it is highly suggestive that NMTC financing plays a role.
And I think you have inadvertently proved my point: “inner city” Chicago is competing with Chicago suburbs, not with Indianapolis or Nashville or Houston for Chicago start-ups. Displaced employees are more likely to try and grow where they’re planted than to pull up stakes and go somewhere that they have NO network.
I think business start-ups per 1000 population, or the number of a metro’s entries on the Inc 500, would be a better competitive measure among metros than the list you’ve cited.
Chris,
What is your point?
If your argument is that “this company is based here or moved here due to financial incentives x,y, or z and therefore that does not count”, then we might as well discount the gains made by southern cities for the past 3 decades. Much of the entire economic strategy of places like Houston or Dallas has been to poach companies from elsewhere due to thier lower taxes and lower regulation (which is essentially the same as a financial incentive). Does this mean, then, that we should discount the gains these cities have made?
Besides, what city, in some shape or form, isn’t using financial incentives these days? I know that Coyote Logistics received financial incentives, but that does not necessarily mean the same for the other 11 companies listed. In addition, there have been companies that have moved to downtown Chicago lately without receiving any city incentives. Grubhub, a well known internet company, is one example, but there are others.
What is more evident is that Chicago is doing an exceptional job at growing (and in some cases attracting) fast growing startup companies into its inner core, better than any other city in the US. You can go on and on about the reasons, but that CNN list doesn’t lie.
You can argue the means, but you can’t argue the ends.
My opinion is that Chicago is a talent magnet that unfortunately has faced tougher economic times than similar sized cities, and thus a lot of motivated people have had to go out on their own and grow new companies. The fact that so many of them are in Chicago speaks wonders.
Chris,
Take a look:
http://www.chicagorealestatedaily.com/article/20120516/CRED03/120519850/pls-moves-headquarters-to-1-south-wacker
No incentives. Chicago has its share of serious problems, but the core city’s ability to grow, attract, and retain fast growing new companies in the past few years is one of the bright spots.
That part about the Chicago story is real. And just yesterday, a group of large financial institutions announced financing for a speculative office highrise (no tenants signed!) in Chicago’s Loop. How many speculative office towers are going up right now in the United States? Perhaps none?
I call that a major vote of confidence in the city’s future.
Unfortunately, Chicago is losing ground to former competitor cities. The fact is that Chicago is still in the Rust Belt, and is still afflicted by many of the regional ills (declining population, reliance on manufacturing, etc.).
Is Chicago an underpeforming, smaller NYC, or an outperforming, larger Detroit? I would say, on the whole, the latter is more accurate. Look at the homicide numbers, the Census results, the devastation on the South and West Sides.
I think Houston will eventually overtake Chicago, but probably not until 2025 or so. It will happen, though. Dallas probably overtakes Chicago too.