America’s Economic Divide, as told by the 2020 Election
How geography is widening the economic and political gap.
The Rural-Urban Divide is the Big Story of American Politics
We’ve all heard the warnings about regional inequality in America. Globalization is here, and it’s drastically reshaping the economic tapestries of cities and small towns alike. The signs of change are hard to miss: high-wage, white collar jobs driving innovation in urban areas; the iconic blue-collar workforce fading away in rural America; the once-almighty manufacturing industry that employed close to 20 million employees in its heyday shrinking by almost half.
We’ve also known how regional divergence are associated with political ones as well. A Brookings study of the 2020 election results showed just how neatly political ideologies fall along economic lines. Biden-voting counties — just 500 of them — accounted for 70% of our GDP, while Trump’s 2400 counties made up 30% of GDP. In other words, places where the majority of voters support Biden account for a much bigger share of economic activity than those that supported Trump.
Though we’ve come to accept this divide as a reality, what we often never think about is how regional and political differences relate to each other. To illustrate this point, let me pose a simple question: do people make cities liberal, or do cities make people liberal?
This distinction between causes is important, because it suggests which policy solution can bridge the divides in our country.
Understanding Where We Became Divided
The first scenario — that more liberal people tend to cluster in cities — is at best a pessimistic view of globalization and at worst a harmful myth, seeking to widen the political divide between rural and urban areas. A myth that a globalized economy will only transform in ways that disproportionately impact lower-skilled workers. A myth that the Democratic Party represents the wealthier and more educated, while those in struggling small towns and rural areas get left behind. A myth that delivered 73 million popular votes for Donald Trump in 2020.
This perspective misses the reality, though, by faulting one’s political ideologies rather than acknowledging larger structural shifts at play.
Namely, globalization has led to a geographical realignment that has been inadequately address by our public policies. It is true that globalization has tremendously benefited high-skilled workers, yet it is also true that for each new tech job in the city, five additional jobs are ultimately created in other sectors (teachers, nurses, waiters, carpetenters). In contrast to the first narrative, this spillover effects ends up benefiting both skilled and unskilled occupations in many places.
At the same time, urban areas come with its own challenges: lack of affordable housing, inadequate public transportation and infrastructure systems, and increased racial complexity — all of which demand increased government intervention to overcome market failures, provide public goods, and address police brutality concerns. The same kinds of problems the Democratic Party has focused its platform on.
On the opposite side of the coin, this geographical alignment also means that rural areas face an inevitable exodus of workers. For each new tech job in the city, that’s five additional jobs lost. Those who stay behind also miss out on the benefits of a larger job market that exists in cities, acting as a form of partial insurance against unemployment; more employers mean more job opportunities even if there are more competition. Having to contend with these economic anxieties, it’s easy to see why the average person in rural America feels alienated, and why they might be drawn to ideas like “America First”.
From this perspective, the new geography of jobs indicates that the second scenario — where cities are making people more liberal — seems to be a more accurate description of our reality. As cities and small towns become farther and farther apart, so do our political ideologies.
Solving America’s Economic Discontents
Marx once argued that the greatest source of economic discontent arises not out of inequality but alienation — the separation between workers and communities at large. Understanding what drives this divergence is the first step to understanding its solution. Rather than asking why America has become so different in our political beliefs, we should be asking how we can bridge the urban-rural economic divide.
One potential solution could come in the form of a mobility voucher, suggests economist Enrico Moretti. Taking inspiration from the Trade Adjustment Assistance program, the mobility voucher would provide a relocation allowance to any laid-off workers to move out of rural areas as part of their unemployment benefits. This policy would benefit the workers who are willing but unable to relocate, but also those who remain by giving them a better chance of finding a job.
Another solution is already underway: the work-from-home trend that has taken place as a result of the pandemic. As workers relocate away from urban areas, smaller cities can benefit from an influx of people, local spending, and jobs to their economies. Some cities are already offering cash as a relocation incentive, expecting that the returns in tax revenues and jobs will be 10x their investments. Meanwhile, metropolitan centers can also see advantages of a tech exodus, such as lower housing prices and less congestion and pollution.
Of course, communities will need to do more than just put a few thousand dollar incentives on the table to encourage a more even distribution of jobs. It will also require massive investments into our schooling system to train skilled workers and limit segregation along educational lines. And most importantly, it will demand patience and foresight from all of us, to focus on deeply structural problems that cannot be solved in one program or one election alone.
