Managing Change

Stimson Spotlight

Managing Change

By William Reinsch

Several weeks ago I spent the good part of a day at the Seventh Annual Summit on the Economy, put on by the Economic Innovation Group and the Governor’s Woods Foundation (one of the joys of semi-retirement is time to do this sort of thing occasionally). Many economic topics were discussed, but for me the most interesting ones were about change: location — why people and businesses are where they are and why they do or do not move; mobility — why people do, or do not, move; and income —  why people do, or do not, move up the economic ladder. The undercurrent of many of the comments was that although gross statistics, such as the unemployment rate and GDP growth, are promising, beneath them lie growing concerns about income inequality and regional and urban-rural disparities.

Wages have stagnated, part time and contract work is becoming more prevalent, people are stuck in communities without job opportunities while jobs go begging elsewhere — and rural areas in particular — some not all, are seeing their very survival threatened. Poll data suggests a growing number of people who believe their children will not be better off than they are — matched by the growing number of Gen Xers and millennials who agree. The implication — not shared by all — was that we have lost our way, and the American Dream is no longer what it was.

I don’t know the truth of this — I suspect no one does — but, like most things, it probably lies somewhere in the middle. Things are not as good as a 4.3% unemployment rate implies, but neither are they as bad as they were at the height of the recession. Wages have been largely stagnant for more than twenty years, but there are recent, albeit modest, signs that is changing. A clearer picture, however, may lie in regional disparity. Some areas are pretty clearly doing better than others. To oversimplify, the coasts are doing better than the interior, and cities are doing better than rural areas.

There are doubtless a lot of sophisticated reasons for this. Let me suggest a simple one. People, particularly young people, like to live in or near cities. More job opportunities, more cultural happenings, more varied food, more people their age. Getting away from your parents. As Journey aptly put it:

“Just a small town girl
Livin' in a lonely world
She took the midnight train
Goin' anywhere.”

I previously wrote about declining mobility in the working age population and how unwillingness or inability (because their houses are underwater) to move prevents people from finding jobs that would improve their economic circumstances. That is still true, but we have always seen the young, the ambitious, the footloose, heading off to make their fortune in the big city (this, by the way, is not unique to the United States. In China, for example, you see much the same thing — internal migration to the coastal cities). Part of the American Dream has always been the chance to start over somewhere else — that’s how we populated the country west of the Appalachians. One of my favorite cartoons from the past is the stereotypical long-haired, bearded hippie at the side of the road with his thumb out and a sign that says “Further.” 

So, why is it different now? I think in the past moving was more a choice than a necessity. The population as a whole was growing more rapidly than it is now, immigration, at times, was strong, farming soaked up much more than the one percent of jobs it accounts for now, and industry in the interior of the country was young and healthy. Opportunity was widespread, and people seized it. Now, population growth has slowed, though thankfully it is not yet negative, immigration is under fire, farms have shed most of their permanent workers, and industry is under unprecedented cost pressure. Opportunities outside of urban areas are not growing as fast, so the ambitious leave. Left are the old, the disabled and those who care for them, the tired, and those who have simply had more than their share of bad luck, and that’s not a combination that is well-suited to our increasingly skills-based economy. So the cycle of decline perpetuates itself. 

Meanwhile, “rising” industries tend to congregate together in places where there is an ample pool of skilled and creative workers and available capital. Silicon Valley is the classic case, but there are others, and some of them are not accidents but the result of smart planning and wise policies by local government and business leaders. Pittsburgh is an excellent example of that and proof that old line Rust Belt cities are not doomed but can reinvent themselves. But it’s still a city — sucking in talent from surrounding small towns, most of which see a bleak future for themselves. 

These are not preordained trends, as Pittsburgh demonstrates, but they are hard to reverse, and they are certainly not subject to the quick fixes popular with politicians. They did not arrive overnight and will not go away overnight. While much of what needs to happen depends on individuals and the private sector, government — at all levels — has a role to play. At a minimum it needs to seriously look at what is happening and develop long-term action plans instead of lurching from crisis to crisis or going for cheap remedies like trade protection or anti-immigrant policies. That may be too much to expect at the federal level right now, but city and town managers who get it will find that creative planning now pays major dividends later on. And that’s what government is supposed to be about — creating a better future — not just pandering to the pressures of the present.
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William Reinsch is a Distinguished Fellow with the Stimson Center, where he works principally with the Center’s Trade21 initiative.

Photo credit: Gustavo Gomez via Flickr