Life is actually better in Middle America

Note: The views expressed in this article are my views alone and not the views of my employer or anyone else.

This election was about the great American divide, between the coasts and the heartland of America, between Urban and Rural America. The overall theme of the election was basically that Rural is hurting economically with decimated factories, a shrinking population and an opioid epidemic. They argue that is all happening while Coastal Areas are booming with innovation, culture and growth. All of this seems true on the surface but it is very important to unpack and dig a little deeper into the data.

When it comes to Coastal Areas, there are pockets of very high growth areas such as Silicon Valley, Hollywood, Wall Street and others. These areas are booming and are sprawling with young people and bursting with new innovations and businesses. Some in the media say that this is where the future is being invented. This is true for those parts of the Coasts. Those places are not representative of the state at large. Take for example California; California gets the most attention for Silicon Valley and Hollywood as being one of the most innovative states in the country and justifiably so given its innovation in Technology, Entertainment, Healthcare and Research. It houses some of the largest Venture Capital money in the world. There is a lot of truly groundbreaking work going on in that state.

There are other problems though that are often not highlighted or overlooked. First is cost of living; The Bay Area is creating a lot of jobs but it is also not creating jobs for which people feel comfortable living there because the cost of living is so high. San Francisco now has one of the largest homeless population of anywhere in the United States [1]. Many people who move to the Bay Area don’t fully understand how expensive it is and are simply stunned by the 6-figure salary offer they receive and accept it. Others are aware but use their first job as a tool to jump to other jobs later on or use it as a networking opportunity. Either way, people might have good jobs but they don’t feel economically stable when you factor in housing, taxes and the overall cost of living.

Blue States like California, Illinois, New York, New Jersey, etc. have long been magnets for high paying jobs in technology, finance, pharmaceuticals, etc. But for every high paying job they create, they are losing even more lower and middle class jobs. States like Illinois and New Jersey have not created a net increase in total employment in 20 years, states like California and New York are not far behind [4]. What’s even more amazing is that states like Texas and other rust belt states are actually pulling up the average for this country. According to an AEI study, Texas accounted for all net employment gains up to 2015. If you looked at the statistics without Texas, there would be no change in net employment up to 2015 [5]. Some people might dispute that exact claim but the overall evidence shows the same thing — for the average person, there are more opportunities in Middle America than on the coasts.

There are 3 things that are separate but are often conflated — Rural vs. Urban Divide, overall divide between the rich and the poor and the Coastal vs. Middle America Divide. The first 2 are very legitimate points and are widely discussed. The data shows that the income gains over the last 30 years and from the recent recovery have overwhelmingly gone to the rich particularly the super-rich (Top 0.1%) [2]. Within Urban vs. Rural, the growth in America centers on cities and the suburbs surrounding them. In fact in a recent report by the Federal Reserve Bank of New York, cities and suburbs accounted for most of the new income growth in this country [3]. Those 2 points are not incorrect. The third point about Coastal Areas being where all of the growth is a little misleading. Whenever people talk about the coasts, they say “Coastal Elites”, they never say the Coasts in general. There’s a reason for that. The Coasts are a great place for super star performers who can leverage all of the opportunities in those areas. For the average person, these areas are a nightmare as they just simply cannot keep up with the skyrocketing cost of living there. For the average person, they are significantly better off in Middle America than the Coasts.

The migration patterns show that. People overwhelmingly are moving to the heartland because of the high cost of living [6]. The same patterns are holding between suburbs and cities. Cities are known for hosting superstars but for the average person, the return is not worth the investment. A new report by FiveThirtyEight shows that people are migrating back to the suburbs after getting frustrated with sky high rents [7].

Even with regards to the average vs. superstar divide, it depends on your industry. If you are a technology or finance superstar, then the coasts and cities have more opportunities. If you work in Energy, you’re better off in Texas, if you work in the car Industry, you’re better off in Michigan. The basic point here is that looking at superstars on the coasts as a guideline for a generic person is misleading. If you are not a superstar and you are not in one of those fields, you will barely get by in these areas.

The election centered on the pain of Rural America which is very real and needs to be addressed. That is not the same thing as Middle America. There are many parts of the heartland that are great places to live with many new opportunities. Those should not be ignored in our political discussion.

Sources:

1. http://abc7news.com/news/data-shows-sf-has-2nd-highest-homeless-population-in-us/1407123/

2. http://www.businessinsider.com/income-inequality-charts-2011-10

3. https://www.newyorkfed.org/medialibrary/media/research/economists/haughwout/suburbs_help_central_cities_haughwout.pdf

4. https://www.illinoispolicy.org/illinois-has-zero-private-sector-jobs-growth-in-the-21st-century/

5. http://www.aei.org/publication/texas-great-american-job-machine-solely-responsible-1m-net-us-job-increase-since-2007/

6. https://flowsmapper.geo.census.gov/map.html

7. https://fivethirtyeight.com/features/americans-shift-to-the-suburbs-sped-up-last-year/

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