May 30, 2006
Hog Butchers No Longer?
In his description of Chicago, Carl Sandburg poetically referred to it as the “city of the big shoulders … stacker of wheat … tool maker … player with the railroads … hog butcher.” At the time, this description fit Chicago’s economy just right as a place of muscular blue-collar industries such as rail freight, steel making, and meat packing. But today, Chicago’s economy has morphed into a city of more genteel, white-collar professions and industries. Infrastructure, such as a global airport and a significant broadband communications capacity, have helped to develop industries that are knowledge-based rather than commodity-based.
The chart below compares the Chicago metropolitan area’s employment with the nation’s across broad industry sectors. The bars measure the share of total employment in a given industry so that, for example, the top maroon bar illustrates that 14 percent of U.S. employment can be found in government sectors, while 11 percent of the Chicago area employment can be found in government sectors (purple bar).
The purple bar that illustrates Chicago’s long suit is “professional services.” Most of these industries are business services, including accounting, management consulting, advertising, temporary services, legal, and research and development. To a large degree, these industries are staffed by educated professionals. In comparison to the overall nation (maroon bar), Chicago’s economy is more highly concentrated in these industries. The same can be said for the finance, insurance, and real estate (FIRE) sector comparison that can be found below professional services on the chart. The FIRE group includes Chicago’s world-leading risk exchanges and related businesses.
To staff its new economy, many young and educated workers are migrating to Chicago, especially from surrounding states. In addition to career opportunities, they are attracted by amenities such as lakefront parks, renovated neighborhoods, lively nightlife, operas, ballet, and orchestras. In a recent news article, journalist David Greising playfully rewrote Sandburg’s poetic ode to Chicago to reflect its new economy: “Hog belly trader for the World, Writ Writer, Consultee of Companies, Builder of Airports, and the Nation’s Intermodal Carrier, Prideful, Anxious, Hopeful, City of the Stringed Orchestra.”
The service orientation of Chicago’s economy has come about in a remarkably short time. It was not so long ago that Chicago’s employment concentration closely resembled the surrounding Midwest economy, especially its sharp concentration in manufacturing employment. The chart below tracks the manufacturing share of Chicago’s economy from 1969 onward and compares it to the overall U.S. As recently as 1969, both Chicago and the surrounding Midwest were significantly more concentrated in manufacturing jobs than the U.S. But steadily over time, Chicago’s concentration has converged with the U.S., while the Midwest as a whole has maintained a higher proportion of jobs in manufacturing.
What does Chicago’s divergence from the Midwest mean for its economic performance and prospects? For one, it means that Chicago may maintain a healthy pace of population and income growth although it is shedding manufacturing jobs at a rapid clip. In comparison, other Great Lakes manufacturing cities such as Buffalo, Cleveland, Detroit, and Milwaukee have not been as successful in replacing lost manufacturing jobs with high-end services.
But this performance does not necessarily mean that the Chicago region has cut loose its ties to the surrounding Midwest economy. During the 1990s, many observers hailed Chicago’s strong economic performance as an indication of its arrival as a global city rather than as a midwestern city, a city with strong trading linkages beyond the immediate region. However, over the past 5 years, Chicago’s employment growth has slipped to a tepid pace of approximately one-half the nation’s, which is much like the pace of the overall Midwest. Even the performance of its business service sector has been lagging. Could it be that Chicago’s service sectors continue to sell to surrounding Midwest businesses such as agriculture and manufacturing rather than to the nation and the world?
The answer to this question is important in assessing Chicago’s growth prospects. The answer is far from crystal clear. In part, Chicago remains and will remain the commercial center of the surrounding Midwest for many years to come. And so, the sagging fortunes of Michigan's automotive companies to Chicago’s east will likely be felt in the capital markets and consulting offices of Chicago. However, it is also the case that many Chicago business activities are now broadening out farther afield to global markets. For example, Chicago’s risk exchanges and its world-class universities are aggressively extending business lines and services to Asia.
So too, the recent slowing in Chicago’s economic performance may reflect some special developments that are not likely to be repeated. In particular, business travel is a key service activity of Chicago’s economy that was stiffly impacted by the national business slowdown in 2001-2004 and especially by the 9-11 air travel slowdown. At the same time, the national post-Y2K decline in computer and computer-system investment likely impacted business consulting companies in Chicago as well.
More generally, many business and professional services are purchased for the same reasons and with the same timing as capital investment. That is, as the capacity of firms begin to be stretched thin during times of ongoing economic expansion, firms once again purchase business services and capital equipment alike in order to expand production capacity and to find and serve expanding markets. In turn, the strong business investment that has been taking place in the U.S. economy should continue to be felt in the office buildings of the Chicago economy.
May 23, 2006
Connecting to achieve tech commercialization
Several cities and metropolitan areas in the Midwest are actively encouraging startup technology companies. Not all of these cities are likely to succeed, but those that have a prodigious base of basic research activity have the best prospects. The Chicago metropolitan area has long been one place where the strong flow of both federally-funded and large-company R&D in the medical and life sciences suggests that there could be greater potential for technology startups as well.
A number of recent efforts in the Chicago region are specifically focussed on technology startups. These efforts include new technology parks, cooperative university R&D consortia, new venture funds, and entrepreneurial assistance. On May 15, technology leaders gathered at the Federal Reserve Bank to discuss the formation of a Chicago-based network that might better link and connect technology commercialization efforts to like-minded organizations in the metropolitan area. Places such as San Diego and Cambridge, England, are notable locations where such connecting organizations are reputed to have stimulated growth in technology startup companies. What can the Chicago area learn and adapt from such models?
The program began with the observations of a technology founder and business builder in both Seattle and in Chicago. Wilbur H. (Bill) Gantz, Chairman of the Board of Ovation Pharmaceuticals, Inc., in Deerfield, Illinois, emphasized how very difficult it is to successfully bring a new company to market. Raising funds is very difficult, but building a company with a profitable product is even tougher. As a result, life-sciences startups “can never get enough support.”
Life-science startups in the pharmaceuticals arena go through many distinct phases, each with unique support needs. University scientists may be needed early on. And in following stages, competent partners must be close at hand to assist with financing and protection of intellectual property. At later stages, product development, marketing, and manufacturing expertise may be crucial.
In Gantz’s Seattle startup, PathoGenesis Corporation, the University of Washington was a helpful partner in sharing university faculty in research and development. Local financing was also key to the startup there. However, the Seattle location presented challenges in local availability of pharmaceutical chemists. For that reason, such personnel were recruited from the Midwest and East Coast, and product marketing expertise needed to be outsourced to the Chicago area.
Gantz further emphasized that Chicago tends to be very strong in such basic business services as marketing, public relations, and intellectual property. Moreover, the metro area is rich in technical personnel that can be hired as necessary from the large life sciences companies Baxter and Abbott and local universities, or else recruited back to Chicago from former Searle employees who left the area when their facilities closed. Despite access to such personnel, recruitment of cutting-edge university scientists is more difficult; Chicago’s university scientists tend to be more adverse to risk and to commercial ventures than those in Seattle.
Nonetheless, Gantz sees the Chicago environment as strong and getting stronger. The real estate end has been expanding with the establishment of a research park at the Illinois Institute of Technology as well as one at the former Searle facility, along with expansion of the Chicago Technology Park. So too, Chicago’s early stage capital scene is now brighter as so-called angel investor networks are forming. Government support of an appropriate nature has also come around, as evidenced by the city’s competent hosting of the nation’s premier business conference in the life sciences, BIO2006.
The next conference speaker was Stuart Henderson, Partner and Biotechnology Practice Leader for Europe at Deloitte, UK, who offered his insight and experiences with Cambridge’s connecting organization, Cambridge Network. The initial conditions in the Cambridge area were not so different from Chicago, prodigious university research but comparatively less commercialization. Also similar to Chicago, there was no “burning platform” of general economic demise in the Cambridge area 20 years ago, but simply unfulfilled economic potential. Yet today, Henderson claims that there are 1,500 technology companies in a town of 200,000 people (though perhaps 6.5 million people reside in its labor market area), including global companies such as BP-Amoco, Schlumberger, 3M, Amgen, and Pfizer.
Henderson reported that a well-conceived organization called Cambridge Network was key to bringing about this success. The network was founded by a small group of highly passionate and committed leaders who put up only modest funding at the outset. He described it as “a simple meeting of minds.”
Henderson further described the Cambridge Network as serving as a window to the world into Cambridge technology capabilities and activity—a vehicle to showcase the Cambridge brand. Most importantly, the Network’s organization built a community of many other organizations who came to share information and to cooperate. The Network’s success depended on listening carefully to their members’ needs and responding quickly with appropriate services. These services included directories of who was who in technology, a continually-updated virtual (online) press room, training materials, benchmarking surveys of progress, open meetings, formation of special interest groups, and events to bring new and younger members into the mainstream.
Henderson cautioned on the pitfalls into which their organization sometimes stumbled along the way. His suggestions included being ruthless in keeping non-contributing government officials and other “hangers-on” away from discussions and events, along with entrepreneurs who had been “one-hit wonders” who monopolized discussions with poor advice for others. As always, the leadership of the network also needed to be constantly vigilant against turf-fighting behavior among membership organizations while promoting partnership and consensus instead.
San Diego’s over-arching organization, called CONNECT, is highly renowned as a prototype to facilitate interchange among technology interests leading to commercialization of technology. Unlike Cambridge’s motivation to build on untapped potential, the original impetus for San Diego’s actions was a rapidly-sagging economy in the mid-1980s that was impacted by the Savings & Loan crisis, military base closings, and reductions in national defense spending.
According to CONNECT's CEO, Duane Roth, CONNECT’s purpose is to facilitate the spawning of commercial enterprises from the region’s R&D base. Over the past 20 years, the region has experienced 1,000 company startups, a rate of about one per week. The public and quasi-public research base is now comprised of over 40 institutes and centers including Scripps Research Institute, Salk Institute, and the University of California, San Diego. Both major institutes and many companies are located close to each other in the San Diego area which Roth considers an important precondition for the continuous inter-personal communication and collaboration that ultimately gives rise to innovation and new ventures.
Duane Roth characterized the collaborative culture that has been achieved in San Diego by describing how local entrepreneurs first market themselves to visitors. Unlike most other places in which a company director will begin touting their own enterprise to visitors, Roth claims that San Diego companies will instead begin touting the San Diego cluster and working environment.
As a former Iowan, Roth also made a clear cultural distinction between the Midwest and the West Coast. Midwesterners are, on average, less likely to take the risks that lead to new enterprises. The reason is that, in places such as San Diego, failure is not a cause for personal condemnation, and so, entrepreneurs are willing to just try again after failure. To a greater extent, at least in Roth’s experience in Midwest agriculture, the fear of failure and the resulting shunning by the community tends to create a culture where people are afraid to take risks in the first place. In order to build and nurture a risk-taking culture, the community must also support entrepreneurs of well-crafted failures in the aftermath.
Roth also mused that, because changing an existing culture is so very difficult, it may be easier in the Midwest to “start a new one.” By this he meant that entrepreneurship should especially be pitched to the young and, more generally, to as many willing listeners as possible in order to generate the critical mass of people that are necessary.
In addition to the celebratory and risk-taking culture in San Diego, some of the key processes that give rise to new companies and enterprises are rigorous and intense. Of these, a “springboard” program sets up panels of critics before which would-be entrepreneurs vet their business plans in two-hour sessions. Review panels are comprised of volunteer “entrepreneurs in residence” along with financial company reps, professors, angel investors, and business professionals. To prepare for such rigorous reviews, CONNECT offers many short and intense educational programs on starting and building a successful technology enterprise.
Despite its success, San Diego’s technology industry currently faces challenges if it is to sustain its growth. In particular, work force availability is tight and high housing costs limit the recruitment of new personnel to the area. Industrial land for later stage operations, including manufacturing, is also very tight and restrictive.
Partly for these reasons, Roth foresees a deconcentration of technology activity to other regions of the U.S. Perhaps places such as Chicago, Indianapolis, and St. Louis, can most easily enter the small company technology arena by specializing in those business stages such as marketing, scale-up development, clinical testing, or manufacturing where they currently have an advantage, and then possibly expand from there to other (more innovative) niches.
In any event, the successful experiences of San Diego and Cambridge have given interested Chicagoans much to consider as they build a CONNECT-type organization. Existing features that have been successful elsewhere, and those that have flopped, offer many practical clues. However, adaptations will be necessary because some features are different in the Midwest, such as a more spread-out geography of existing technology activity. Still, the basic and most important precondition of a large R&D base would appear to be here already, in addition to the region’s added strengths in business services, transportation, and manufacturing.
Can these strengths be successfully connected and appropriately commercialized?
May 18, 2006
Small Towns, Big Headquarters
Two corporate headquarters location developments made Midwest headlines on May 10. One was the news story that UAL, the holding company for Chicago-based United Airlines, was considering moving its corporate offices from Chicago's suburbs to the city's central business district or possibly to another city. On the same day, Whirlpool announced a restructuring that will close the headquarters offices of recently acquired Maytag in Newton, Iowa, and consolidate them in Whirlpool’s headquarters location in Benton Harbor, Michigan. Of the two announcements, the Maytag closure illustrates an important trend for small towns and less populous metropolitan areas; large company headquarters are shifting toward more populous metropolitan areas.
Many small towns and smaller metropolitan areas in the Midwest have historically been home to large company headquarters, especially of industrial companies. In fact, some highly successful companies were founded in these places, and they subsequently maintained their headquarters operations there even as their production operations and sales expanded to be national and even global scope. To illustrate, below is a partial listing of Fortune magazine’s top 1,000 companies that can be found in smaller cities and metropolitan areas in the Seventh District states of Illinois, Indiana, Iowa, Michigan, and Wisconsin.
Places that host large company headquarters often fare well in several respects. Headquarters are renowned for funding local charitable and civic programs. In addition, headquarters employees tend to be highly educated and committed to social and public service. Accordingly, the loss of such a headquarters by a small town or metropolitan area can be a difficult blow.
Even after a loss, headquarters towns can be more fortunate in the aftermath than towns that experience large production plant closures. Headquarters sometimes leave behind a substantial legacy, such as philanthropic foundations or founding families, or important institutions, such as hospitals or colleges and universities. In the recent wake of Upjohn/Pharmacia’s headquarters pullout of Kalamazoo, Michigan, an anonymous donor(s) has funded The Kalamazoo Promise program which has promised to pay for college tuition (in-state) for local students who complete high school in good standing. This scholarship program is not necessarily funded by anyone associated with Upjohn, since the town also hosts headquarters of other large companies such as Stryker and other wealthy individuals. However, the original Upjohn Company has left other more apparent legacy assets. For example, the Kalamazoo area hosts the Upjohn Institute, an important labor research organization that was begun by the company’s founder. And the new owner of the former Upjohn-Pharmacia facilities, Pfizer, is assisting the town in several ways including in the creation of local spin-off technology start-ups.
Nonetheless, the departure of the Upjohn/Pharmacia headquarters will be felt. The list below illustrates some of the places that have been or will be struggling to close the civic gap left behind.
It appears that the tendency for less populous areas to lose these headquarters, which usually happens amidst a merger or acquisition, is part of a broader trend. Studies examining such events over the past 40 years indicate that nonmetropolitan counties in the U.S. are losing share of large company headquarters. The gainers have been metropolitan areas of 1 million or more. Metro areas of this size have been growing in number, especially in the Sunbelt. With their larger population sizes, these metro areas typically have the features that are attractive to headquarters operations, namely diverse business services such as law and accounting, as well as significant air travel capability for headquarters executives.
It remains to be seen if smaller metro areas in the Midwest will be able to reverse or compensate for this trend in other ways. To date, as the chart below illustrates, places of smaller size have generally grown less rapidly over the past 15 years.
May 10, 2006
Economists and Rising Energy Prices
With energy price spikes grabbing the headlines, economists are rushing to provide perspectives and context on the impacts of today’s fossil fuel scarcity. Because energy prices were so low for such a very long time, some of us had gotten out of the habit of focusing in our policy discussions on the role of markets in determining price and availability, and how market prices can help economies adjust to temporary scarcity. Now, to our general horror, there are scenes of people picketing gasoline stations in protest of high prices and the like. Perhaps we have neglected to educate the public about how energy prices are generally set competitively in global markets. More importantly, from a longer term perspective, we need to remember that rising energy prices are often the best policy to encourage conservation by consumers and to enhance supply by producers.
By the standards of recent history, households are not generally in an energy crisis. In a recent Chicago Fed Letter, staff economists David Cashin and Leslie McGranahan examined U.S. household energy consumption over time and across groups. They report that recent shares of household expenditure on energy have not approached their historic highs. Energy consumption amounted to roughly 7% of household expenditures between 1990 and 2004, on average, versus the highs of 11% experienced in the early years of the 1980s. As of 2005, the share had only crept up to 8.5%. While the authors offer no projection for 2006, I can offer a rough appraisal.
Rising prices for gasoline will likely raise these 2005 consumption shares somewhat, though not up to the 11% range. The most recent forecast of gasoline prices for this year by the U.S. DOE suggests a 13.4% increase over 2005 (below). Motor fuel comprises the largest share of consumers’ annual average expenditure share, at about 4% of annual household expenditures. The second largest energy consumption share, at 3% to 4%, is spent on home electricity. Price averages for electricity across the U.S. for 2006 are forecast to be essentially flat. Home heating fuel costs are up moderately, but their shares of household energy consumption are modest in comparison to gasoline and electricity. Accordingly, if recent DOE forecasts hold for 2006, energy consumption shares would rise by another one-half percentage point, to the 9.0% range.
Of course, averages often belie the varying impacts that high energy prices exert on different households. Cashin and McGranahan address these impacts by examining the consumption shares of identifiable groups. For example, poorer households—especially the working poor—tend to spend a larger share on energy both because energy in general is a necessity that comprises a large share of modest incomes and because of the more specific necessity of driving to the workplace. Accordingly, the working poor are being more sharply impacted by recent hikes in gasoline prices and home heating fuels. In contrast, elderly households tend to spend more on home heating, yet this is largely offset by lower motor fuel spending on transportation, presumably because commuting to work is less common. Such findings suggest that individual circumstances will vary considerably with respect to price hikes of particular fuels.
The impacts of energy price changes also vary geographically. A few regions remain energy producers, whose economies may be helped by rising energy prices. Texas has long been notable as a petroleum and natural gas producer. Yet Steve Brown and Mine Yucel of the FRB of Dallas have found that the salutory impact of rising oil prices on the Texas economy is now a small fraction of what it was in the years from 1970 to 1987. Apparently, the Texas economy that we once thought of in terms of oil fields and cattle has given way to computer peripheral production and semi-conductors.
Chicago Fed economist Rick Mattoon has recently examined energy markets and the Midwest economy. From a household consumption side, there are offsetting factors across regions that dampen price and price-impact differences. On the household side, Midwest households demand more fuel (principally natural gas) for home heating, but also benefit from fewer cooling degree days in non-winter seasons.
From the perspective of the energy impact on a region’s industries, Mattoon finds that there are again offsetting effects that tend to mitigate overall regional differences in economic impact. As an input to production, manufacturing activity tends to consume more energy than other major sectors. But, while manufacturing remains much more concentrated in the Midwest, the sector’s share of total output has been falling (as it has elsewhere), even while the sector’s energy efficiency is much better in comparison to the early 1980s. So too, there are significant producers of mining and petroleum extraction equipment found in parts of the industrial Midwest, and their business activity is booming.
Still, several individual industries continue to be energy-gobblers in the Midwest, such as steel and aluminum production in Indiana and forest products in Wisconsin. Moreover, the automotive fleet composition of the domestic automakers—Ford and GM—tends toward larger energy-hungry SUVs and full-sized pickup trucks in comparison to competitor fleets. To some extent, rising motor fuel prices are holding back sales of these particular products and softening Midwest automotive production.
In general, economists are correct in concluding that the sky is not (yet?) falling with respect to rising energy prices. Yet, Mattoon may have put his pen down on the important element—energy price volatility. Energy shocks—should they take place—remain a prominent risk to the forecasts of most economists. Adjustments to higher prices for fuels such as gasoline are fairly small and ineffective in the near-term period following energy price spikes. For example, at least for the first year or two, household driving behavior is little affected by rising gasoline prices. And on the supply side, as the early OPEC experience showed, it can take several years before (inevitably) fossil fuel discovery and enhanced delivery take place. In some cases, such as for the liquified natural gas that is globally available for importation to the U.S., it will take years to site and construct the docking and unloading infrastructure.
And so, while current energy price impacts are not yet outsized, concern and worry over potential energy shocks that may arise from political instability around the world are not misplaced. And unlike previous price shocks, rising global demand for energy rather than supply interruptions has helped to bring about energy scarcity. Such market pressures may prove to be more long-lived than the cartel-induced oil price spikes of the 1970s.
Even so, if fuel scarcity does develop, we must be patient in allowing markets themselves to untangle the knot. As Tim Schilling has recently brought to our attention in a quote by Charles Woodruff Yost, one time writer for the Christian Science Monitor, in his book The Age of Triumph and Frustrations, "Any system that doesn't take the long run into account will burn itself out in the short run."
If we are to avoid policy blunders by political leaders, we economists need to educate the public about how well markets can work to solve problems of scarcity when left to their own devices. When a commodity such as fossil fuels is scarce, the market mechanisms by which rising prices encourage producers to eventually supply more fuels and encourage households and industry to conserve energy will typically bring about the best result. That result is (1) greater energy conservation (2) expanded supplies of fuels and (3) lower price and greater availability at lower overall cost in comparison to any other policy.
On the other hand, mis-informed policies to short-circuit rising prices through the legal system and populist legislation frequently prove to be counter-productive. Palliatives such as the wellhead natural gas controls that were in effect for much of the 1970s and early 1980s only aggravated scarcity and ultimately drove prices higher for consumers.
May 5, 2006
Immigration and Chicago's Growth
In preparing for a presentation to be delivered before the ARS National Forum on Regional Stewardship this week, I was prepared to expound on the superior economic performance of Chicago in comparison to neighboring cities. After all, John Grimond’s recent review of Chicago for Economist magazine recently stated that “Chicago has come through deindustrialization looking shiny and confident.” I must admit that I, too, often characterize Chicago’s performance as robust, and I have observed that both Chicagoans and other Midwesterners believe this to be the case. Much to my surprise, however, in examining total payroll employment trends, I discovered that Chicago’s growth fell short of the neighboring East North Central (U.S. Census division) states region during the 1990s and since that time as well! And in comparison to the nation, Chicago’s per capita income has been flat to slightly declining. What gives?
I believe that part of the answer can be explained by the robust influx of immigrants to the Chicago area, along with the high birth rates of recent immigrants, which have made for a more complex story than the payroll employment and income trends suggest.
Owing to immigration, the Chicago area’s population growth has exceeded the surrounding region since the 1990s, as the chart below suggests. The Chicago metro area is now ranked fifth nationally in proportion of foreign-born population, adding 537,000 between 1990 and 2000—an expansion by over one-half. As of the 2000 U.S. Census, 17.5% of Chicago’s population were foreign born, many of them young families with children. And so, the rapid expansion of the region’s housing stock, revitalization of many older neighborhoods, and home appreciation have not been simply the figments of imagination or the heady boosterism by residents and observers of the Chicago region.
The growing immigrant composition of Chicago's work force, and the way we measure it, may also explain part of its tepid payroll employment growth. Owing partly to language barriers, immigrants are more likely to be self-employed rather than work for a firm as a "payroll" employee. So too, to some extent, immigrant payroll employment may also tend to be casual or uncounted by government payroll employment surveys. An alternative way to estimate employment is conducted by the U.S. Bureau of Economic Analysis (BEA) which takes some account of self-employed workers. In contrast to payroll employment, trends using BEA data (below) suggest that the Chicago area’s employment growth exceeded the East North Central states of Ohio, Indiana, Michigan, Illinois, and Wisconsin in the early years of this decade, and its performance during the 1990s also converges somewhat with the national average.
A moment’s reflection on the measurement of per capita income may also shed light on Chicago’s seeming lack of per capita income expansion during this period. Immigrant groups vary greatly by educational attainment. A recent paper prepared by Sapna Gupta prepared for Chicago Metropolis 2020 reports that almost two-thirds of working age adult immigrants to Chicago from India have college degrees versus only 3% to 4% of Mexican immigrants. Yet, Mexicans are the dominant immigrant group to Chicago in recent years. Accordingly, since education increasingly determines wage and salary income in our economy, Chicago’s immigrant influx has tended to pull down average income. Of course, immigrant household income, even of the least educated, is likely much higher for them than it would be had they remained in their home country. Accordingly, the attendant diminishment of average per capita income in Chicago does not really reflect falling standards of living of Chicago residents.
So, too, as illustrated below, the age of Chicago’s immigrant households, especially Hispanics, is much younger than the pre-existing population. This will also tend to diminish per capita income, since immigrant households will tend to have many more members who are too young to be earning income. Figures reported by the U.S. Census do show that the share of the Chicago area’s population younger than 25 years of age is greater than the U.S. for the year 2000. This gap between the area and the nation has widened since 1990. In contrast, the surrounding East North Central region reports an older population share than the nation, a gap which developed during the 1990s.
The Chicago area has become a different place in many respects over the past 20 years as the foreign-born population has expanded. Not everyone has benefited economically from change, but it is quite likely that, on average, Chicago area households have experienced climbing economic well-being. So, too, Chicago’s economic growth has likely exceeded what it otherwise would have been in the absence of immigration.
While the nation currently debates immigration and southern border reform in the U.S. Congress, Chicago’s primary challenges are of a different order. Many recent immigrants face the typical historic barriers to financial and economic assimilation into the Chicago mainstream: lower beginning levels of income, lesser work force skills, lesser knowledge of customs and procedures, and lower education and school readiness. At a time when much of the Midwest region’s existing population is shifting to Sun Belt locales, many foreign born continue to see opportunity here. To bolster the Chicago economy’s prospects, what actions can Chicago pursue to make the most of these immigrants’ energy, ambitions, ties to their countries of origin, and differing skills and culture?
One arena in which the Chicago area and other immigrant centers has been quite active is in facilitating immigrant access to financial channels. On May 4, the Federal Reserve Bank of Chicago and Brookings Institution issued a major study on enhancing the ability of the foreign born to access financial institutions for savings, wealth building and homeownership, payments transactions, and business creation. The study documents the state and progress of immigrant financial practices and access in the United States, along with many lessons learned from diverse perspectives.