New Geography

Author: William Sander and William A. Testa

  • Divergent Demographic and Economic Trends in Chicago

    The fortunes of the city of Chicago have become clouded in recent years as concerns over its weakening finances and heavy debt obligations have grown. The tally for the unfunded public employee debt obligations of Chicago’s overlapping units of local governments (including those for public schools, parks, and county services) is now approaching $30 billion. Moreover, the city government has been criticized for its practices of funding current public services with proceeds from the issuance of long-term debt and the long-term leases of public assets (such as its parking meter system). However, faith in Chicago’s ability to address its debts has not fallen so far as that in Detroit’s, chiefly because the Windy City’s economic trends display more vibrancy.

    Population change is a prominent indicator of the health of an urban economy because it reflects a city’s ability to hold on to its residents (as opposed to losing them to the suburbs or other locales). Over the past few decades, similar to other central cities, Chicago has experienced an erosion in its population share of the broader metropolitan statistical area (MSA);[1] in contrast, the surrounding suburbs have seen their share climb. According to the U.S. Census, Chicago held 38% of the MSA’s population in 1980, with this share falling to 35% by 1990; in the subsequent 20 years, Chicago’s population share of the MSA decreased another 3 percentage points per decade, reaching 29% by 2010 (see table below). During the 1980–2010 period, Chicago lost a total of over 300,000 residents. At the same time, suburban Chicago gained close to 2 million in population. Since 2010, the city of Chicago’s population and population share of the MSA have strengthened somewhat, though the (off-Census year) estimates are probably not as reliable.

    While population trends can be telling for a city’s prospects, they can also belie changes in its residents’ wealth and income. Despite the city of Chicago’s population loss over the past few decades, its economic trends have been generally more encouraging.[2] Household income is an important indicator of Chicago’s fortunes relative to those of its suburbs. In 1990, median household income in the city was just 67% of the median household income in suburban Chicago. By 2010, this income ratio had climbed to 73% (see table below). Decomposing household income statistics by (self-reported) racial/ethnic group reveals that this trend was pervasive for the three largest groups: non-Hispanic white, black, and Hispanic. The ratio of city median income to suburban median income among white households experienced the greatest change; it rose from 77% in 1990 to 98% (near parity) in 2010.

    These robust trends are echoed by Chicago’s rising share of adults aged 25 and older who have attained at least a bachelor’s degree. In 1990, among adults aged 25 and older, 19% of those residing in the city had attained a four-year college degree versus 28% of those residing in the suburbs (see table below). By 2010, Chicagoans in this age demographic had almost reached the same share in this regard as their suburban counterparts (33% for city residents versus 35% for suburban residents). The non-Hispanic whites again experienced the greatest change among the three largest racial/ethnic groups. In 1990, 29% of the white city population aged 25 and older had a four-year college degree—the same percentage as the white suburban population in this age demographic; however, by 2010, 55% of such white city dwellers had a bachelor’s degree, while 39% of their white suburbanite counterparts did. Between 1990 and 2010, the city’s black population also made substantial gains in education, as evidenced by the share of black adults aged 25 and older with a bachelor’s degree having risen from 11% to 17%.

    By “drilling down” through the data to examine specific neighborhoods, we can see how geographically concentrated the city’s gains in college-educated adults aged 25 and older have been. These gains have been highly concentrated in Chicago’s central business district (“the Loop”) and the surrounding areas, as well as the neighborhoods west of Chicago’s northern lakeshore. As shown in the table below, dramatic gains in the college-educated population were seen in the Loop and the neighborhoods just south, west, and north of it. For example, the Near South Side saw an increase in the share of adults with a four-year college degree climb from 9% in 1980 to 68% in 2010. No less dramatic were such gains in Chicago’s neighborhoods west of its northern lakeshore: The shares of the college-educated population there typically doubled or tripled between 1980 and 2010 (in the case of the North Center neighborhood, this share increased sixfold—from 11% in 1980 to 66% in 2010).

    As one might expect, many college-educated Chicago residents work in proximity to their residence. Of those living in the Central Area and Mid-North Lakefront, an estimated 57% work in the Central Area of Chicago and 79% work somewhere in the city.[3] Of those who do work in the Central Area, an estimated 19% travel to work by driving alone (as opposed to walking, public transit, bike, and carpooling); this percentage is much smaller than the nearly 70% of metropolitan Chicago workers who travel to work by driving alone.[4] The trends highlighted thus far point to the fact that the city of Chicago draws and retains many jobs. By one count, the city of Chicago’s Central Area is the domicile of over half a million jobs. As seen below, job counts in the Central Area have remained fairly constant over the past 13 years, even while job levels in the remainder of the city and in the remainder of Cook County have been falling.

    Meanwhile, compensation levels per job have continued to climb in Chicago’s Central Area, reflecting a work force with greater skills and education. Annual compensation per worker on the payroll in Chicago’s Central Area exceeds that of the overall MSA by 50%.

    Many of the trends shown here bode well for the city of Chicago, despite the fiscal challenges it currently faces. To be sure, many large central cities in the Midwest, including Detroit, are experiencing strong growth of both jobs and households centered around their central areas and downtowns. In this, the central Chicago area enjoys a strong start.

    William Sander (Ph.D., Cornell University) is professor of economics at DePaul University in Chicago.  He has also taught at the University of Illinois at Urbana-Champaign and the University of the Philippines.

    William A. Testa (Ph.D., Ohio State University) is Vice President and Director of Regional Programs, Federal Reserve Bank of Chicago.  He has also taught at Tulane University.

    Flickr photo by Chris Smith: Pritzker Pavilion, Millennium Park

    ________________________________________

    [1] Current and historical delineations of MSAs are available atwww.census.gov/population/metro/. (Return to text)

    [2] This is not to say that all parts of the city have been on the economic upswing. Several Chicago neighborhoods have seen severe deterioration in wealth and income, as well as in living conditions, as evidenced by increasing incidences of homelessness and crime in certain areas in the past few decades; see, e.g., http://danielkayhertz.com/2013/08/05/weve-talked-about-homicide-in-chicago-at-least-one-million-times-but-i-dont-think-this-has-come-up/. (Return to text)

    [3] This statement covers 113,000 workers living in these areas as of the year 2000. Estimates were pulled from www.rtams.org and are based on the Census Transportation Planning Package (CTPP), “which is a special tabulation of the decennial U.S. Census for transportation planners” and “contains detailed tabulations on the characteristics of workers at their place of residence (‘part 1’), at their place of work (‘part 2’), and on work trip flows between home and work (‘part 3’)” (see www.rtams.org/rtams/ctppHome.jsp). Workers who work at home are excluded. See also http://definingdowntown.org/wp-content/uploads/docs/Defining_DowntownReport.pdf; this report ranks Chicago second among major U.S. cities in terms of the percentage of residents living within one mile of downtown who work downtown (figure 3 in the report), and ranks Chicago first in terms of population growth in the downtown area over the period 2000–10 (figure 4 in the report).(Return to text)

    [4] Estimates are from www.rtams.org and are based on the Census Transportation Planning Package (CTPP). (Return to text)

    This post originally appeared in Chicago Fed Midwest Economy on December 3, 2014.

  • Children and Cities

    Central cities are not likely to regain their former population. However, some of them may have reached an important inflection point—population growth has returned to at least some of the largest (and longest-declining) cities. For example, New York City’s population has increased by more than one million since 1990, after declining by about one million between 1950 and 1980. Over the past decade, nine of the ten largest (and 17 of the 20 largest) cities in the United States have gained population.

    Many observers attribute the population turnaround to changes in the residential attractiveness of the city, although cause and effect are blurry since new residents themselves have instigated many changes to the urban landscape.   Prominent urban researchers have described particular features of urban areas that have attracted households back to the core. These features include new housing in city centers, amenities such as specialized restaurants and night life, restoration of architectural gems, and myriad cultural activities. Such features are enticing increasing numbers of (mostly young) college-educated singles to call city centers home.

    If one goes back in time, studies on urban household location tended to focus on the tradeoff in the cost of commuting from suburban areas and the lower price of land and housing in suburban communities.  Research indicated that about half of the suburbanization in the post-World War II period was driven by higher income that increased the demand for suburban housing relative to city housing.  It is still the case that suburbanization is partly driven by the demand for larger, detached houses that are more prevalent in suburban communities.   

    To be sure, amenities alone do not explain recent trends. Other studies have documented the ability of urban cores to foster jobs and businesses characterized by intense information exchange and creativity, thereby attracting college-educated workers to live in nearby neighborhoods. In a recent study, we show that central cities are an increasingly important work site for the most highly educated workers in all of the metropolitan areas that we examined, even bankrupt Detroit.¹

    Income, education, and human capital are all important elements in city revival. In a recent study, Alan Ehrenhalt calls the return to city living the “great inversion” that reverses trends present in cities since the mid-twentieth century. He hypothesizes that some American metropolitan areas are beginning to resemble nineteenth century European cities, where the more affluent lived in city centers and households of more modest means lived in the suburbs. Some of the reasons that he offers for the heightened attractiveness of many central cities as a place to live are the decline of manufacturing in cities (making them more livable); lower crime rates; growth in the single, never-married population; lower fertility rates; and a bulging cohort of relatively affluent and educated seniors.

    Although many cities still have a disproportionately number of the poor, poverty has become more suburban over the past decade.  For example, the number of poor in suburbs of Chicago about doubled over the past decade.  Thus, although the poverty rate in cities such as Chicago remains much higher, it has declined relative to suburban areas.

    Conspicuously absent from recent discussion is the role and attractiveness of central cities for families with children. In the past, research and observation both indicated that suburbs provided families with cheaper land and housing, as well as safer neighborhoods and higher quality schools.

    In many MSAs, the central city’s share of college-educated adults approaches or exceeds the city’s share of all persons aged 25 and older, with the exception of some older industrial cities, such as Detroit, Milwaukee and Philadelphia (see table). But for educated adults with children, only Seattle and Charlotte buck the trend, or come close to it.                                  

     

    Percent of MSA residents aged 25 years and older living in central cities, 2009

     

     

    All Persons Age 25+

     

     

    All College- Educated

     

    Parents with School-Age Kids

    College-Educated Parents with School-Age Kids

    Baltimore

               17

               14

              17

                6

    Boston

               19

               20

              13

                8

    Charlotte

               31

               38

              28

              33

    Chicago

               30

               30

              27

              16

    Cincinnati

               13

               16

                 9

                7

    Detroit

               22

               12

              24

                9

    Milwaukee

               25

               19

              27

              11

    Minneapolis

               19

               22

              16

              13

    NYC

               49

               46

              47

              36

    Philadelphia

               33

               24

              30

              13

    Pittsburgh

               12

               14

                 8

                8

    Seattle

               24

               33

              14

              21

    St. Louis

               16

               14

              13

                7

    San Francisco

               22

               27

              14

              12

    Washington, D.C.

               14

               16

                 8

                5

    Source: American Community Survey 2009.

                   

    Yet today, central cities undoubtedly have more to offer households with children. Many cities have made significant strides in improving their public safety, or they have simply benefitted from general trends toward lower criminal activity. However, with regard to public education, it is unclear whether most cities have achieved much traction in this regard, though efforts towards these ends are widespread.  In the case of the city of Chicago, more affluent and educated families with school-age children continue to migrate to suburban communities.  This has resulted in a 16.5% decline in the school-age population in the city of Chicago over the past decade.

    Urban school improvement initiatives range from a host of teacher pay-for-performance reforms, to “small schools” reconfiguration, to charter school choice and high-achieving academies.  In some instances, where highly educated parents with children have chosen to live in the city, parents have opted out of the public school system. For example, in Manhattan about 1 in 4 school-age children attend private schools. In the more affluent areas within Manhattan the percentage is much higher — about 1 in 2 children in families that live in either the Upper East Side or Upper West Side.

    As they aim to encourage further population growth in city centers, policy leaders would do well to understand the residential choices being made by affluent and educated households with children and work to provide the amenities and services important to these families. They represent a population segment that may be significant in attracting jobs and building a tax base to provide public services for all city residents.  Otherwise, working parents who must commute from suburb to city may demand higher wages as compensation for the additional time and cost of getting to work, thus having a negative effect on employment and investment in the city.

    The recent influx of young (mostly well-educated) adult singles represents an opportunity for central cities. These urban homesteaders begin with a preference for urban living; policymakers might want to consider ways to keep them in the city as they marry and raise children.

    In a current study, we are exploring the relationship between higher education, income, and the location of families with school-age children within a city-suburban area context for 15 large metropolitan areas in the United States, including Chicago, New York City, Philadelphia, and San Francisco.² In particular, we highlight the effects of various levels of higher education on household location and how education effects vary for different types of households. We compare our results with estimates for married respondents without school-age children and for never-married respondents without school-age children. Thus, we are able to highlight the heterogeneity in the effects of education on household location by household type and city-suburb location.

    A key variable in our study is whether adults have at least a bachelor’s degree. In about half of the metropolitan areas we examine, educational attainment levels of householders are higher in central cities than in suburban areas. In some cases, the differences are relatively large—for example, the share of population with a college degree is 15 percentage points higher in the city of Seattle than in the suburbs. However, the share is 18 percentage points higher in the suburbs of Detroit than in the city.

    But when it comes to college-educated parents, the apparent residential advantage of the city mostly evaporates. In most cases, college-educated parents with school-age children are far less concentrated in central cities relative to all parents with school-age children, with the exceptions of Charlotte, Pittsburgh, and Seattle. For example, 30 percent of college graduates in the Chicago MSA live in the city of Chicago, but only 16 percent of college-educated parents with school-age children live in the city. About half of these parents send their children to private schools.

    On the face of it, the key reason that parents live in central cities is the location of their work. A high percentage of parents who work in central cities also live there. For example, 59 percent of parents with school-age children who work in the city of Chicago also live there. This declines to 43 percent for college-educated parents with school-age kids.

    How do these numbers hold up to closer statistical scrutiny? To put them to the test, we conducted multivariate analyses with respect to individual household location in city versus suburb. We analyzed each of 15 city-suburb MSA pairs separately for the very recent past. Our study data are drawn from the Census Bureau’s American Community Survey for 2009. According to our results, the ongoing migration of educated, mostly young, adults into the city has not carried over into their child-raising years. Our findings are negative for higher education and income effects on living in a central city for families with school-age children for the largest cities within metropolitan areas in our sample, including Chicago, New York City, and Philadelphia. This contrasts with more positive higher education effects on living in cities for married and never-married respondents without school-age children.

    In most of our study MSAs, households with high educational attainment lead the way in living in central cities, but the presence of school-age children negates this effect. Overall, having either a bachelor’s degree or a master’s degree has a negative effect on families with school-age kids living in a city, although there are a few cases where the effect is positive. Having very high levels of educational attainment (a professional degree or a Ph.D.) is negatively associated with living in a city only in a few cases, suggesting that parents with the highest levels of educational attainment tend to have a greater preference for living in cities than other college-educated parents.

    To what extent should cities pursue households with children as a focus of strategic development? Clearly, the benefits of good schools and safe neighborhoods accrue to all population segments, so these are important goals for policy in any case. Social returns to education and safety are high; today’s children are tomorrow’s citizenry and work force. Now that more college-educated households are choosing to live in the city during their pre-child-raising years, city leaders may want to explore ways to entice more of them to remain in the city after they become parents.

    William Sander (Ph.D., Cornell University) is professor of economics at DePaul University in Chicago.  He has also taught at the University of Illinois at Urbana-Champaign and the University of the Philippines.

    William A. Testa (Ph.D., Ohio State University) is Vice President and Director of Regional Programs, Federal Reserve Bank of Chicago.  He has also taught at Tulane University.

    References:
    ¹William Sander and William A. Testa. 2013a. “Education and the Location of Work: A Continued Economic Role for Central Cities.” Annals of Regional Science.
    ²William Sander and William A. Testa. 2013b. “Parents’ Education, School-Age Children, and Household Location in American Cities.” Paper prepared for the European Regional Science Association Congress, Palermo, Italy.

    Crossing the street photo by Bigstock.