Factors that Haunt Chronically Distressed Metro Areas

6.25.2012 | Some cities just can’t catch a break. We’ve written recently about cities that are drawing the best and brightest and that are growing into vibrant hubs of innovation. But what about the other end–those cities where youth are leaving and the good times never quite come?

As research has shown, innovation clusters like Portland or Silicon Valley don’t spring to life out of thin air. They emerge only when there’s enough economic activity to support new markets and sufficient links between and across businesses. If cities can’t get any traction in building businesses and industry, boom times will bypass them once again.

A recent BRR working paper by Network members Howard Wial, Hal Wolman, and Travis St. Clair looks at the factors that land metro areas into the “chronically distressed” camp.  According to their analysis, struggling cities would do well to invest in capital–human, social, and economic– if they want to return to better days. 

In Chronically Distressed Metropolitan Area Economies, the researchers define “chronically distressed” as metros whose employment growth rate over eight years lags behind the national eight-year growth rate by 50% and is at least one percentage point less than the national growth rate for seven consecutive years. They measured distress both by job growth and gross metropolitan product (GMP). Based on that measure, 89 metro areas in the U.S. are “chronically distressed.” That’s about 25% of the 361 metro areas in the United States.

Poor Danville, IL. It has seen 29 years of consecutive stagnation–the worst record of the lot. Danville, about 115 miles due south of Chicago, once had a strong manufacturing base. Its median income is well below the state’s median, as are its education levels. Both education and industry are factors in its chronic distress.

Others in a similar boat include Lawton, OK, Anderson, IN; Weirton-Steubenville, WV-OH, Johnstown, PA; Wheeling, WV-OH; and Youngstown-Warren-Boardman, OH-PA. All have suffered 13-16 years of chronic struggle.   Like Danville, many of these metros have legacies of manufacturing, but not all. Like Danville, they also have lower-educated populations. Interestingly, those metros that were able to rebound had higher shares of Hispanics. As the authors note, it’s difficult to know whether this is because growing regions attract more job seekers or whether Hispanics somehow boost the economy.

Regionally, the Northeast has the most chronically distressed metros. Of the 45 metros in the region, 60% are chronically distressed. The Midwest is next, with 37% of its 90 metro areas flagging. (The Midwest, however, has the highest number of chronically distressed metros.)  The West is the most resilient in this case, with only 9% of its 79 metro areas persistently distressed.

The factors that make regions less resilient include education, income inequality, wages, and distance from other metros.

A population with lower levels of education is associated with slower growth, both in jobs and GMP. This is not so surprising given the shift to higher-skilled jobs. If metro areas have fewer people to fill high-skilled jobs, employers will locate elsewhere to be sure they have the ready workforce.

The authors join other research in pointing to the social unrest and political fragmentation and strife that can come with greater income inequality and lopsided opportunities. That said, inequality is associated with a greater ability to recovery from a slump.

Higher wages are also a hindrance to growth, although as the authors note, this indicator is probably capturing the fact that employers in stagnant economies have laid off lower-skilled workers in struggling industries while higher-skilled (and better paid) workers are better able to remain working.

Finally, distance to other metro areas contributes to chronic distress because of the lack of nearby industry and supply chains that businesses need to thrive and grow.

So what is a metro area to do to pull itself out of its funk? As the authors say,

“These findings do not present any simple policy solutions. For the most part, they affirm the importance of capital investments, infrastructure, and human and social capital to the ability of regions to maintain economic growth. If anything, these results bolster the case for capital investment even more than has been previously documented. Without resources to draw upon–be they in the form of an educated population or seed money for investments–metropolitan areas in the United States have few opportunities to escape a cycle of decline.”

This paper is a complement to a prior paper, Economic Shocks and Regional Resilience,  by the authors, which is also now a chapter in Urban and Regional Policy Effects, vol 4 (Brookings Institution Press).

See also, Spurring Rebound in Chronically Distressed Regions

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