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December 15, 2006

A Chicago-Milwaukee Region?

Could cities located near one another, Milwaukee and Chicago for example, enhance their respective growth and development through closer linkages? Why might a greater Chicago–Milwaukee metropolitan area want stronger ties, and what policies, if any, might be considered to bring about such a union?

There are several reasons why larger metropolitan areas are generally leading U.S. economic growth. In recent decades, larger metropolitan areas have typically become more specialized in managerial and technical occupations, while smaller metropolitan economies have become more specialized in production activities. For example, one recent article found that those U.S. metropolitan areas having a population above 5 million had increased their concentration of management to production workers to 39 percent by 1990 from 10 percent in 1950. In part, this increasing concentration in larger cities is due to advances in communication and transportation that have allowed companies and organizations to administer and manage from a central location or to travel easily to multiple production locations.

In this light, it is understandable, then, that larger cities have also tended to grow more rapidly in terms of income and/or population. That is because specialized professional and managerial occupations tend to pay more than production. Moreover, since at least the late 1970s in the U.S., economic returns to labor, including wages and salaries, have generally been growing faster for managerial, technical, and other occupations attendant to higher educational attainment.

A second reason for such shifting specialization and growth owes much to the growth in work force participation of women. In the U.S., the labor force participation of working age women rose from 37.7 in 1960 to almost 59.6 percent today. Moreover, the educational attainment of women has also been rising such that it now exceeds men among the younger age cohorts. Since young singles tend to marry someone with similar education, this has given rise to growing numbers of “power couples” who often must find not one, but two, specialized jobs in the same labor market. Because large metropolitan areas have both deep labor markets and more specialized occupational opportunities, these places have become magnets for such “power couples.” In turn, firms respond to the greater labor supply of professionals by siting their establishments in larger metropolitan areas, and thereby transform local economies.

There are several reasons to keep an eye on the greater Chicago and Milwaukee areas to examine the prospects that they will someday become a single labor market and benefit from the attendant economies of larger scale and scope of such a merger. The Chicago and Milwaukee areas are only 86 miles apart, as measured from city center to city center. The Chicago metro area is more populous at 9.4 million as compared to 1.5 million in Milwaukee, but together they yield a population of 11.0 million.

Historically, Chicago–Milwaukee work force linkages have been limited. Only 13,000 Milwaukee residents commute to Chicago, daily, as of year 2000, up from 1,600 in year 1990. The reverse commute is even smaller. However, commuting in both directions is growing rapidly.


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Still, a closer look at some important subsectors of professional industry workers is suggestive of the greater work force that may soon arise from combination. The chart below combines industry employment for Chicago and Milwaukee metro areas across several professional, management and business service sectors. As combined, for example, employment in the Chicago–Milwaukee “computer systems design” sector would rank second to New York, allowing Chicago to bypass both the San Francisco and the Los Angeles metro areas. Other sectors of mutual benefit in Chicago and Milwaukee can be seen at the Midwest Economy website.


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While such stronger within-industry labor markets might be advantageous, the additional attraction across multiple sectors may be greater still. For households with members having differing but specialized occupations, the possibilities for a multiple match of people with jobs in a combined Chicago–Milwaukee metro area labor pool could be great. This would enhance companies’ ability to attract and retain skilled labor in both regions.

So too, not all jobs within the professional and business services sectors require the very highest educational attainment. For example, according to recent estimates of the U.S. Bureau of Labor Statistics, office and administrative support jobs comprise one-third of all employment in the combined professional services, finance, and management of companies when measured in industry sectors. So too, spin-off employment would also generate a wide range of local employment as the spending of added service professionals ripples through the local economy. This feature is especially important since job needs are great for lesser-skilled labor in both markets.

How might Chicago and Milwaukee push along their destiny as a combined metropolitan area? One low-cost way is to publicize their mutual proximity in marketing each region to prospective employers and to job recruits. Both Chicago and Milwaukee are highly active in economic development marketing. Of course, private sector employers and employment intermediaries may also be effective in spreading such information about the greater breadth of employment opportunities.

Another policy avenue may be greater investment in transportation between the metro areas that would facilitate commuting flows. Both interstate highways and train transportation are now in service. The possible labor market advantages of easier and more dependable auto and passenger train travel might weigh significantly in the consideration of any future roadway/rail expansion and maintenance decisions. Combined efforts in applying for federal transportation grant monies to serve a large and more closely-integrated Chicago–Milwaukee market might also be effective—for both personal travel and for freight transportation including railroad.

Milwaukee’s major airport is also located between downtown Milwaukee and downtown Chicago. At a time when the Chicago area’s air travel capacity is strained, better access to Milwaukee’s Mitchell field could be advantageous.

Other cooperative ventures and ideas have yet to be identified. The absence of organized efforts to do so is a bit puzzling in the Chicago–Milwaukee corridor. In contrast, the advent of the trade agreements between Canada and the U.S. has sparked any number of private and private-public associations to promote natural trade flows across the border within local corridors. As the chart below shows, the progress of employment growth has not been especially robust in either metropolitan area over the past 15 years. Perhaps a little détente along the Illinois-Wisconsin border might be advantageous to all.


Click to enlarge.


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Posted by Testa at 9:02 AM | Comments (3)

December 4, 2006

Chicago Plans for Freight

The Chicago area economy developed on its ability to move freight. With heightened global trade, Chicago area freight transportation has grown rapidly and it is projected to continue to do so, leading to added congestion on highways that are shared by automobile drivers and trucks alike.

This raises important questions as to how the Chicago region should plan future modifications to its transportation infrastructure. The answers are not completely obvious for several reasons. To some degree, Chicago’s economy is shifting toward high-valued service production and away from freight-laden manufacturing. As a result, the value of Chicago’s existing roadways to bring workers to and from their offices is rising in relation to their value for moving goods around and through Chicago. And even with some concerted and likely expensive actions to expand and reconfigure infrastructure, there does not appear to be room for all roadway (and rail) traffic.

Building roadway capacity to serve all possible traffic is not an option. To do so would be too expensive in both construction costs and in taking up limited urban land. Yet, the region will want to act to maximize its ability to handle as much freight (and auto traffic) as possible. And so, in addition to some expansion of transportation capacity, the region will need to determine the most critical infrastructure to repair and build. So too, the region will need to engage in more efficient planning on the location of housing and commercial activity in order to economize on overall travel demand. Finally, more rational operational and pricing policies allocating existing transportation infrastructure will need to be adopted.

Rising global trade has dramatically added to cross-continental freight traffic through Chicago from imported goods landed on the East Coast going west and from the West Coast headed east. Much of this freight activity takes place in Chicago’s large railroad yards and side tracks. Chicago is also a major destination and transfer point for freight carried by truck. Because highway overpasses and underpasses for rail have not been constructed everywhere or they are of insufficient height, auto and truck traffic becomes further congested and delayed.

Adding to local truck-related congestion is the fact that, in order to accommodate rising freight traffic in a cost effective way, goods are now hauled in standardized containers. These containers are often transferred between transportation modes within Chicago, especially by “lifting” containers from truck to train and train to truck. According to World Business Chicago, the Chicago area now ranks among the top five cities in the world in container “lifts” behind Hong Kong and Singapore, where freight lifts mainly take place onto and off of large ocean-going vessels.

The strongest impulse of local policymakers is to find ways to keep transportation flowing through Chicago and possibly build on it as the opportunities arise. By one estimate, rail freight companies and their suppliers employ about 37,000 workers in the Chicago area, while trucking accounts for another 50,000 jobs.

In addition, proximity and low-cost access to delivered goods support income and jobs in related industries. The Chicago region and surrounding Midwest continue to host one of the nation’s largest concentrations of manufacturing establishments, in part due to these transportation advantages for bringing in raw materials and shipping out more-finished products. So too, Chicago remains a major center of wholesale and warehousing operations for its own manufacturing companies and for the greater Midwest region. Even aside from these related industries, as the nation’s third most populous metropolitan area, Chicago needs significant local freight capacity just to supply goods to its own consumers and households. Such freight-carrying ability translates into lower cost of living and greater variety of goods in generally attracting workers and other residents.

Further opportunities for Chicago to handle freight are in the offing. Much global freight now travels through the Panama Canal. Over the next few years, the canal will reach maximum capacity, while its ability to handle large vessels is becoming somewhat obsolete. Although Panama is planning to upgrade the Canal, during the interim the demands on overland inter-continental freight as a possible alternative will rise considerably. Here, Chicago’s history as a railroad town figures prominently, since the nation’s major railroad lines converge in Chicago. Much of the nation’s long-haul railroad freight now travels through the Chicago region, with much of it being transferred from one line to another, or to and from another mode of transportation, especially trucks.

To make headway in accommodating freight, local initiatives have been formed as public–private partnerships. One such partnership is the CREATE rail infrastructure improvement program. The program is a cost-sharing partnership among the Chicago region’s railroads, the City, and the State of Illinois, which will loosen bottlenecks in railroad freight flow through the city.

More comprehensive approaches are also underway to plan for and accommodate more transportation. A new agency (CMAP) has recently been created, consolidating the Chicago area’s existing transportation planning agency with its land use authority. It is anticipated that more careful and coordinated consideration of the region’s land use, housing, and transportation will reduce overall highway travel demand in the region by both cars and trucks. Freight traffic considerations and opportunities are also explicitly on CMAP’s agenda as the agency works to promote collaborative planning in the Chicago region.

From a cost–benefit standpoint, it would be foolish, even it were feasible, to expand infrastructure to meet all possible freight traffic. Land is scarce and expensive in Chicago, which argues against unlimited expansion of land for use in freight transportation. Local benefits of infrastructure expansion may be especially limited for freight that flows through Chicago without off-loading. In these instances, the benefits of Chicago’s freight capacity are more national in scope, or perhaps of benefit to the broader Midwest region. For this reason, projects such as CREATE are requesting that the federal government as well as private freight carriers help finance local infrastructure.

New pricing policies that charge freight users for roads and rail can also help to ration limited roadway capacity and allocate it toward its highest value use. For example, the Illinois State Toll Highway Authority now charges higher fees for driving during peak traffic times on its highways in and around Chicago. At the same time, electronic payment of tolls helps to speed both cars and trucks through toll stations. In looking for further improvements, policy makers in the Chicago region can examine a host of models and experiments from around the world that are pricing highway congestion, often in combination with privatized ownership or operation of transportation infrastructure.

The Chicago region cannot probably accommodate all of the nation’s freight needs in coming years, nor would it want to do so. Still, Chicago’s built legacy of infrastructure affords it opportunities for further growth and development in the freight arena and in spin-off economic development activities. Through thoughtful planning and evaluation, cost-effective operation, and well-structured pricing mechanisms, the Chicago Region can realize a broader scope of development opportunities.


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Posted by Testa at 10:04 AM | Comments (3)