North Dakota, Illinois, and Delaware: A Boom State, a Struggler, and a Winner

Three Stories of State Migration Can Change How We See the States

This week, I’ve offered a lot of data about the 50 states and the District of Columbia. I’ve shown how much variation there is in net migration rates, and that the states attracting lots of migration in 2013 aren’t always the ones you’d expect. I’ve shown differences in migration by nation of origin, socioeconomic factors, and age. But for this post, I’m going to take a different approach. This post will make a more detailed exploration of just three states’ migration records: North Dakota, Illinois, and Delaware.

For each state, I’ll provide two maps. The first will be a map of migration into and out of that state as measured by the American Community Survey, the second will be a map of migration into and out of that state as measured by the IRS’ Statistics of Income. Links to this maps will be provided at the end of each state section.

North Dakota: Maximizing Migrant Economic Engagement
Darker blue indicates net migration into North Dakota was large and positive, darker red indicates migration into North Dakota was large and negative
Darker blue indicates net migration into North Dakota was large and positive, darker red indicates migration into North Dakota was large and negative

These two maps of migration into North Dakota have some stark differences. According to the IRS, North Dakota draws migrants from all over the west and much of the midwest and northeast. Its only major losses are in some more southern states and Nebraska. But the ACS suggests North Dakota loses people to some western states, while gaining from most in the south. The key difference between these two pieces of data is that IRS data will understate the migration of people who used to be poor, people filing income taxes for the first time (i.e. people entering the labor market for the first time), and may also miss some farm and elderly migration.

That tells us something important. North Dakota draws salaried folk who’ve been in the labor market before from the whole west and midwest: but it loses some young people to those areas. Meanwhile, it draws a lot of young people from the south.

But the real story, the story that tells us everything we need to know about North Dakota, is actually a story about Minnesota.

Minnesota Miracle or Migration-Dependent Petro-State?

Minnesota’s comparatively robust economic recovery from the recession has led to many other states looking to it for lessons on good policies. The story goes that Minnesota can provide an example for how states with diversified economies without oil and gas resources can see a strong recovery. Commentators have attributed Minnesota’s recovery to its tax policies, revenue-sharing and education, and other factors.

Unfortunately, those theories are probably all wrong. Simply put, the real reason for Minnesota’s relatively low unemployment rate and faster recovery is oil.

According to the IRS, net migration into North Dakota from Minnesota in the most recent data year was 694 people. According to the ACS, it was 5,478. The gross flows show about the same ratios.

The reason for this is obvious if we recall the maps I’ve shown earlier. Minnesota tends to export younger, poorer, less-educated people. North Dakota tends to import younger, poorer, less-educated people.

In other words, what makes Minnesota look like a prosperous hub for highly educated services, what gives it a low unemployment rate, is the fact that all its young, non-degreed people move to North Dakota. They simply exit the Minnesota labor force and enter the North Dakota labor force, in the process becoming employed.

Undoubtedly many of them visit home regularly for family, vacation, or other reasons, and in the process spend money. Many may even send money home regularly (though sadly data on such “internal remittances” is not available, to the best of my knowledge). In other words, Minnesota exports people to North Dakota in exchange for fewer demands on its welfare and unemployment systems and more money sent home to people who stay behind.

But Isn’t Out-Migration A Bad Thing?

No! I said on Monday that which states are winners and losers isn’t obvious. But it’s also possible that everybody can be a winner.

North Dakota’s oil boom wouldn’t be possible without a mobile labor supply. Minnesota’s mid-skilled and low-skilled workers, especially from former mining areas in the Iron Range, are ideal candidates for work in North Dakota, but have few opportunities in rapidly-gentrifying Minneapolis-St. Paul. By remaining in Minnesota, they’re worse off, and Minnesota is worse off due to increased public burdens.

But when people with a high likelihood of being unemployed move to North Dakota for work, everybody wins. North Dakota wins by getting the labor necessary to carry out the economic production necessary to capitalize on the massive oil boom of recent years. Even these lower-skilled workers produce a high-value commodity for export beyond North Dakota. That creates income and huge amounts of tax revenue.

Some of that income leaves North Dakota and returns to Minnesota. That helps boost incomes in Minnesota as miners send money home or increase Minnesota-specific consumption.

In the end, everybody wins. This is migration (and federalism) at its best. But there are policy implications too. Minnesota and North Dakota’s records can’t be perfectly duplicated elsewhere. Large states like Texas or California can experience these dynamics internally if they permit hydrocarbon exploration and extraction (easy in Texas, hard in California), and some other states may benefit from local booms, but overall this phenomenon is mostly out of policymakers’ hands. Stringent regulations could nip a boom in the bud, but it’s unlikely any particular policy could create such a boom.

Key policy tools and goals to increase benefits from the ND-MN migrant circulation could include maximizing potential daily flights between the two areas, working to minimize regulatory barriers for companies that provide money transfer services, increasing financial inclusion, advertising “return tourism” in Minnesota, ensuring that I-94 is consistently open and well-maintained year-round, and similar policies. The right policy goal for regions with such extreme sector-specific migratory patterns is maximized bilateral economic engagement, not “retention” or a fixed net migration target.

Illinois: Losing Migrants Nationwide

Migration into Illinois shows a fairly simple pattern. The Prairie State sees some net in-migration from pockets of the midwest, but, by and large, loses migrants to the vast majority of the country, regardless of what data source is used. As we saw earlier this week, Illinois especially lost low-income, educated, and young individuals, but it had negative migration to one degree or another for almost every group measured.

In many states, it’s possible to find pockets of strength, and that’s possible even in Illinois: central Illinois, for example, has seen some positive migration, though much of it is just people relocating from Chicagoland. But by and large, there is almost no category of people for which Illinois has positive net migration.

Some of this is simply demographic: an aging population, changing international migration flows, reversal of Jim Crow-era out-migration of blacks from the south, etc. But some of it is less destined: changes in Great Lakes shipping patterns, decline of the local consumption and production base, and persistent mismanagement of Illinois and Chicago government finances. Policy competition throughout the midwest undoubtedly plays a role as well, with Indiana, Missouri, and Wisconsin all evidently welcoming thousands of former Illinoisans each year. This is partly because Illinois’ major city, Chicago, is close to state borders with numerous transportation links, and because another major city (St. Louis) sits just across another one of its borders.

Border metro areas exacerbate policy and economic competition by creating exceptionally prominent policy differences on the frontier. State and metro tax differences, regulatory differences, and spending priorities stack one on the other, leading to starker contrasts than when metro areas are located within the heart of a state. Some metro areas thrive in this competitive environment, especially if they have relatively decentralized control, like the DC metro area, Portland, or NYC. Other border metros struggle, like Toledo, Detroit, or El Paso.

In other words, if you’re a metro area near a high-traffic border, you have to be at the top of your game in terms of governance. Taxes provide an illustrative example. While there is plenty of legitimate disagreement about the exact role taxes play in driving interstate migration, one area where the role of taxes has been clearly and convincingly demonstrated is with border metros. Tax differentials can drive trends in urban density, commuter times, and residential choices. This is because policy differences can create widely varying costs and quality of life across very short distances, encouraging migration.

This is pretty grim news for states like Illinois where huge amounts of the population are in near-border or cross-border MSAs. It means that if they slip up for just a little while, or even if they just fail to compete hard enough, the consequences could be larger and longer-lasting than in other areas.

I’ll leave it to experts in Illinois’ governance to offer greater detail on what’s going on in their state. But in Illinois, unlike in North Dakota and Minnesota, it makes sense to look for the root of the migration problem at least partly in policy choices.

Delaware: The Last Best Hope of the Middle Class?

Because of Delaware’s small population, the ACS and IRS give very different migration estimates for many states with small sample sizes. But what may be the most important is to look at Delaware’s immediate surroundings, from Virginia to Maine. IRS and ACS data agree that Delaware receives many migrants from its nearby states, with the one possible exception being Connecticut, another smaller state. Meanwhile, Delaware loses people to many southern and western states.

Many of the people Delaware loses, as I’ve already shown, are richer people. That is to say, Delaware is exporting its richer people (many of them retirees) to states like Arizona, Florida, Virginia, and Texas. Meanwhile, it is inundated with floods of lower-income, somewhat less-educated individuals. Delaware’s in-migration includes very high rates of retiree migration and migration of the young.

What’s happening here?

Once again, like Illinois, Delaware has lots of high-traffic borders and nearby border metro areas, thus we can fruitfully look to policy variables as one part of the explanation. Delaware has income taxes at a similar rate to most of its regional peers (though much higher than Virginia’s) and is in the minority of states in that it still has an estate tax. In that regard, it is peculiar that so many retirees would choose it.

That is, until we recall Delaware’s three most salient tax features: it has no sales tax (thus reducing cost of living), among the lowest property taxes in the nation (reducing cost of living), and funds its infrastructure through tolls and user fees more than any other state (reducing burdens on people who drive less: young and old). Its taxes overwhelmingly fall on businesses, but it attracts businesses by offering highly favorable legal and regulatory conditions.

The net result of Delaware’s policy choices is that “New Economy Index” produced by the liberal-leaning Progressive Policy Institute ranks the 2nd best in the nation, the conservative-leaning American Legislative Exchange scores 27th in their “Rich States, Poor States” publication, the business-backed Tax Foundation (disclosure: my former employer) ranks 14th-best, and even the libertarian Mercatus Center identifies as 17th “most free” in their Freedom in the 50 States report. A report by 24/7 Wall Street found Delaware to be the 13th best-run state in the nation, and academic measures of state corruption rank Delaware no worse than middle-of-the-pack. In fact, it is a real challenge to find any organization that scores Delaware poorly on any major policy metric or index.

Likewise, Delaware has one of the lowest average price levels of any state in the region (except Virginia), and that price level is lowest in southern Delaware, where in-migration is highest.

I’ve repeatedly cast Delaware as a state that’s providing opportunities: for the young, for the less educated, and also for regional retirees who may not have the money for a bigger relocation to Texas or Florida (or who may not want to pay property and sales taxes in those states). That’s because Delaware’s migration record is simply the strongest across the most different categorizations of almost any state, especially among states without major oil and gas reserves. I’d love to hear more from people familiar with Delaware on how the state attracts people: beaches with rising popularity? corporate headquarters? retirement communities? strong university recruitment? sprawl from Philadelphia?

Because of its strong migration record in a highly competitive area, other states could benefit from studying Delaware’s experience and determining which policies they can adopt for their own states.

I’ve focused on three specific states in order to dive deeper into the story of American migration in 2013. The result was a set of concrete conclusions: suggesting a role for migrant engagement-focused policies in Minnesota and North Dakota, emphasizing the need for sound and competitive governance in Illinois and Chicago, and making a first stab at figuring out what makes Delaware tick. Undoubtedly there’s more to these stories, and indeed more that only locals are likely to know.

These stories show the need for region-specific migration studies. Migration in Minnesota and North Dakota has next to nothing in common with migration between Illinois and its neighbors. Different theories explain these migrations, different factors influence them, and different policies should respond to them. In order to understand what role migration can play in their state or city, policymakers need local experts who can analyze in a national context: what makes their area different? They should keep up-to-date on who’s coming and going from their states with regular, detailed study, complementing the established work of national organizations and research groups.

Much of this good work is already being done by local data journalists, city journals, and urban planners: and kudos to them! But more can and should be done, and done in such a way that it lands on the desks of mayors, state legislators, and governors. Until that happens, American state and urban policymakers will continue to be sailing rudderless in the shifting sea of domestic migration.

Next week is Thanksgiving, so I’ll only be writing on Monday and Tuesday. Monday’s post will take an even deeper look at the most important part of the United States, the beating heart of true America, the one and only Commonwealth of Kentucky. I’ll use the case of Kentucky to explore regional trends in migration within a state, the role and formation of domestic diasporas, and a few more key concepts. Then, on Tuesday, I’ll have a very special Thanksgiving-themed post.

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Follow me on Twitter. Follow my Medium Collection at In a State of Migration. I’m a grad student in International Trade and Investment Policy at the George Washington University’s Elliott School. I like to write and tweet about migration, airplanes, trade, space, and other new and interesting research. Cover photo from Unsplash.

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