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Can the Great Lakes Shake Off the Rust?

The decline of manufacturing in the Rust Belt is more recent than we think, and jobs are slowly returning. But the region desperately needs a youth revival to balance national population trends.

Vehicles drive through downtown Flint, Michigan, the original home of General Motors, on Jan. 21, 2016. (Paul Sancya/AP)

“Rust Belt” has proved to be an exceptionally useful moniker for the narrative of industrial decline in Middle America. It provides a symbol for the long decay of productivity and power in the region since the 1970s. But rust isn’t the whole story: The disappearance of manufacturing jobs isn’t quite the same as inevitable, unfixable corrosion. Those jobs can come back.

That’s the glimmer of hope that steely-eyed Rust Belters should take out of a new report from the Urban Institute. The report takes a look back at industry and labor statistics for the states that surround the Great Lakes—Illinois, Indiana, Michigan, Minnesota, Ohio, and Wisconsin—and makes economic, demographic, and social projections for how those trends will play out through to 2040. Overall, the report conveys the impression that it’s possible to fix up the region’s sputtering economic engine.

One key starting point: That manufacturing decline started more recently than we think—in 1999. “The big surprise for me looking back was how severe the manufacturing loss was between 2000 and 2010,” says Rolf Pendall, one of the report’s authors. “The narrative that I always understood wrongly about the Great Lakes was that there's been this steady loss of manufacturing jobs pretty much since the 1970s. I thought that people may be nostalgic for something that really wasn’t there.”

Note: In the late 1990s, the United States reclassified all its economic activity from the Standard Industrial Classification (SIC) system to the North American Industrial Classification System (NAICS). (Urban Institute)

“In fact, there was a 15-year period between about 1985 and 2000 when the total employment in manufacturing was pretty steady,” says Pendall.

By 1999, the industry had reached its highest employment level since 1980, but during the first decade of the 2000s, manufacturing employment in the six-state region fell, shedding about 1.6 million jobs.

A major factor that led to decline was the Asian financial crisis of 1997, which caused the value of the dollar to rise. Exports from the United States (see: cars) suffered abroad while imports became more attractive to consumers. From 1998 to 2010 Michigan lost 45 percent of its manufacturing jobs—912,000 to 499,000—while Ohio, Illinois, and Indiana lost over 30 percent. “Manufacturing jobs just went into a freefall,” says Pendall. “They dropped by about 35 percent in just a decade—that was huge.”

The global financial crisis also took a toll on the region; median household incomes fell more sharply in five of the six states compared the rest of the country. Manufacturing jobs have increased by 12 percent from 2009 to 2014, but the recovery hasn’t been able to make up all that lost ground: There were 22 percent fewer industry jobs in the region in 2014 than in 2000.

And this region is particularly vulnerable to the loss of those jobs. In 2015, about 10.5 percent of Great Lakes jobs in 2015 were in manufacturing, compared to 6.9 percent nationally. Manufacturing accounts for a higher proportion of jobs and gross regional product also. Job growth in the Great Lakes has lagged a bit since the Great Recession, but Pendall and his co-authors find the main challenge isn’t so much creating jobs: It’s bringing people back to fill them. “Employers are saying, ‘We would love to expand more but we can't find the labor force here to do it.’ The idea is that these jobs have been outsourced or offshore, that the region has no manufacturing future—that's just not true. “

Data from the 2000 US decennial census 5 percent sample and 2015 one-year American Community Survey sample. (Urban Institute)

But stagnant wages and economic distress have contributed to population decline in the region, especially among young people. Low-wage work has been the greatest source of employment growth in the region. “The problem with the bounce-back is that it's mostly been in low-wage jobs,” Pendall says.

The report estimates that the region will see its population increase by only about 6 percent between 2015 and 2040; while in the rest of the country, growth is expected to be about 21 percent. The Great Lakes are getting grayer, too: The number of residents age 65 and older will grow about 62 percent between 2015 and 2040, from 8 million to over 13 million. “There are a whole lot more older people, and that’s not balanced by young adults and children as much as the rest the United States,” Pendall says.

These states are currently older and whiter than the rest of the country, and they will remain that way unless they can boost immigration. At the current rate, it will take until 2040 for the Great Lakes to become as diverse as the United States is right now.

(Urban Institute)

“The region does not get as much immigration from abroad as some other regions do and there’s net out-migration of people domestically. That means slower population growth and strain on resources with aging population.”

People of color will drive the region’s population growth between 2015 and 2040. “The non-Hispanic white population in the region will decline from 39 to 36 million, while the number of people of all other races and ethnicities will grow from 13 to 19 million,” the study states. The Great Lakes is not keeping pace with the rest of the country in attracting foreign-born populations, with 8.5 percent of residents in 2015 having been born abroad compared to 16.2 percent elsewhere in the United States.

Poverty-stressed county seats either have more than 20 percent of residents below poverty on average from 2011 to 2015 or experienced at least a five percentage point increase in poverty from 2000 to 2011–15. (Urban Institute)

What’s the role of Rust Belt cities in this story? Many rural counties, as the above map shows, have lost population or are poverty-stressed. To keep more young people in the region, the region will also have to grapple with the challenges of entrenched segregation and poverty in Chicago, Cleveland, Detroit, and Milwaukee, so that its residents can take the jobs that are available. “The secret for success in that region is investing in the kids and the young people who already live there,” Pendall says.

The challenge of tackling distress runs deeper than just fixing big cities, he adds. “Chicago has those kinds of resources; some place like Lancaster, Ohio, where Anchor Hocking glass is still based, doesn’t. It's been really hollowed out by restructuring. The answer has to has to be found, not just in Lancaster, but also in Columbus and to some extent in Washington, D.C.”

A broader approach to tackling these challenges, rather a policy of place-based company poaching, means taking a good look at the future of people who live near the Great Lakes. The Rust Belt’s revival won’t be delivered by the old time religion of protectionism and chasing the ghosts of jobs cannot work without people there ready to take them.

“We tend to notice the things in our community that are missing or new,Pendell says. “We lose sight of the people who are there, who have been there, and who are going to be there.”

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