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ESSAYS ON ISSUES

	 THE FEDERAL RESERVE BANK
	 OF CHICAGO

	 MAY 2012
	 NUMBER 298a

Chicag­ Fed Letter
o
Dealing with the impact of manufacturing job losses
in the Midwest
Emily Engel, senior research analyst and Susan Longworth, business economist

The Community Development and Policy Studies division (CDPS) of the Federal Reserve
Bank of Chicago hosted the Industrial Cities Initiative Symposium (ICI) on February 28, 2012.
More than 50 economists, development professionals, city representatives, and analysts
from business, academia, and city government attended the symposium.

This Chicago Fed Letter provides a brief

overview of the Industrial Cities Initiative
and summarizes discussions from
the symposium.

Access materials from
the conference at
www.chicagofed.org/
webpages/events/2012/
ici_symposium.cfm. Read
more about the ICI on the
CDPS blog at http://cdps.
chicagofedblogs.org/?cat=3.

CDPS initiated the ICI in order to better
understand the economic, demographic,
and social trends shaping industrial cities throughout the Midwest. Although
the initiative is ongoing, the symposium
provided a forum to share our methodology and findings to date, draw on
complementary academic and policy
research, and explore policy initiatives
that might foster economic growth in
former industrial hubs. For the purposes
of this project, we define a manufacturing
hub as a city that had a population of
at least 50,000 in 1960, with at least 25%
of its employment concentrated in
manufacturing. Forty-seven cities in the
Seventh District fit those criteria.1 We
used statistical regression analysis to
identify cities with outlying levels of “wellbeing,” holding constant respective
declines in manufacturing. The wellbeing metric was based on three criteria:
1) change in population; 2) change in
employment; and 3) change in median
family income.
This process allowed us to narrow our
sample to the following ten cities: Cedar
Rapids, IA; Waterloo, IA; Aurora, IL;
Joliet, IL; Fort Wayne, IN; Gary, IN;
Grand Rapids, MI; Pontiac, MI; Green

Bay, WI; and Racine, WI (see figure 1).2
While all these cities share the common
characteristic of having lost manufacturing jobs since 1960, some have maintained their economic well-being better
than others, as measured by changes in
population, total employment, and median family income relative to changes
in the percentage of people employed
in manufacturing. We interviewed
community leaders to gain further insights into economic, demographic,
and social trends in these ten cities.
What do the data and studies tell us?

William Testa, vice president and director of regional programs at the Federal
Reserve Bank of Chicago, kicked off the
symposium by presenting economic
trends for an assortment of Midwest
cities, along with overviews of their manufacturing histories. Testa explained that
manufacturing jobs in the Great Lakes
region have declined by 50% since 1969.
The rest of the country has exhibited a
similar trend. However, the Midwest
historically had a higher concentration
in manufacturing than the rest of the
nation; accordingly job losses—and their
impact—have been more acute in this
region (as shown in figure 2). Testa
also explained how an educated work
force, which has been shown to foster
innovation and entrepreneurship as

well as attract amenities, has a positive
impact on both income and employment.
However, many midwestern manufacturing cities remain challenged to overcome their manufacturing legacies
and leverage the benefits of a skilled
work force.

employment with relatively small
declines in measures of well-being.
Racine, WI, and Waterloo, IA, are
fading cities.

4.	 Overwhelmed cities—cities that have
relatively large declines in manufacturing employment
and relatively large de1. Case study cities and major cities in the Seventh District
creases in measures of
well-being. Gary, IN,
and Pontiac, MI, are
in this category.
Green Bay
Wisconsin
Waterloo

Iowa

Cedar
Rapids
Des Moines

Michigan

Milwaukee
Racine
Chicago
Aurora
Joliet

Grand
Rapids

Pontiac
Detroit

Gary
Fort Wayne

Illinois

Indiana

Ohio

Indianapolis

Missouri

Case study cities
Major cities
Source: U.S. Department of Commerce, Bureau of the Census.

ICI overview and findings

Jeremiah Boyle, managing director of
economic development at the Federal
Reserve Bank of Chicago, discussed the
development and progress of the ICI
and certain findings to date based on
both quantitative and qualitative data.
Based on a preliminary analysis of data
and interviews, the ten cities were
grouped into four categories, as follows:
1.	Resurgent3 industrial cities—cities
that have relatively small declines
in manufacturing employment with
relatively large increases in measures
of well-being. In our sample, Cedar
Rapids, IA, Fort Wayne, IN, Grand
Rapids, MI, and Green Bay, WI, are
resurgent cities.
2.	 Transforming cities—cities that, despite relatively large declines in manufacturing employment, have seen
relative improvements in measures
of well-being. Aurora, IL, and Joliet,
IL, are in this category.
3.	 Fading cities—cities that have relatively small declines in manufacturing

While each city has a
unique story, certain
themes emerged consistently during our
interviews. These
themes shed some
light on why these
cities trended one
way or another.

Work force development/skills mismatch:
There is a mismatch
between the skills
sought by employers
and those demonstrated by the work force. Even cities
that understand the problem fully have
not succeeded in improving the educational attainment of young people entering the work force. Vocational programs
in public schools have largely been lost
to budget cuts over time. Resurgent and
transforming cities tended to fare better
than fading and overwhelmed cities by
employing cooperative strategies that
engaged multiple partners, including
employers, community and technical
colleges, and public sources of support.
Regionalism versus parochialism:
Creating a regional and global mindset
can be difficult for a city. However, both
resurgent and transforming cities adopted
at least a regional, if not a global, mindset, whereas fading and overwhelmed
cities did not leverage their geographic
location or sustainable assets. Geographic
location and sustainable assets help cities
focus on the issues of job creation, retention, and work force development.
Economic development finance: For the
industrial cities, economic development finance includes public–private

partnerships; leveraging limited public
funds with private investment; and a
higher degree of philanthropic support.
The resurgent and transforming cities
benefited from deeper networks than
fading and overwhelmed cities. This, in
turn, provided resurgent and transforming
cities with a stronger economic development finance base. Additionally, the
recent financial crisis caused consolidation in the financial services industry
and many cities lost their community
banks, the types of financial institutions that build lasting relationships
with local businesses, homeowners, and
community organizations.
Leadership: The role of leadership varied across the cities, but resurgent and
transforming cities tended to have a
group of leaders, both young and old,
who worked together with a shared vision
for the community’s well-being. Engaged
and visionary leadership helps communities respond to economic challenges,
as well as natural disasters. The fading
and overwhelmed cities could not reach
consensus and often appeared unsure
how to proceed when facing challenges.
Related studies and initiatives

Rick Matoon, senior economist and
economic advisor at the Federal Reserve
Bank of Chicago, moderated a panel
featuring authors of other studies and
initiatives exploring the economic fate
of industrial cities.
Hal Wolman, professor at George
Washington University, presented his
research on distressed cities and regions,
including an overview of four studies
that identified and isolated some of the
elements affecting economic performance
in local and regional contexts. While
the findings varied by study, Wolman
reported that: 1) regional performance
was affected by both education level/
educational facilities and population
size; 2) local economic performance
was affected by wages, crime rate, and
age of population; and 3) leadership is
vital, but hard to quantify.
Yolanda Kodrzycki, vice president and
director of the New England Public Policy
Center at the Federal Reserve Bank of
Boston, discussed her paper, entitled

“Reinvigorating Springfield’s economy:
Lessons from resurgent cities.” Springfield
faces many of the same challenges as
other manufacturing cities, including
high rates of chronic poverty. This paper
is one in a series from the Boston Fed
that is part of a broader initiative to

Falls, IL—old factory towns in an area
known as the Sauk Valley—focus on their
regional strengths to succeed, including
agriculture, parks, historical sites, and
manufacturing. Muncie, IN, declined
for many years after losing two large
manufactures—the Ball Company and
Borg-Warner. Recently, however, the city
2. Manufacturing share of employment
has launched the
percent
Muncie Action Plan
35
to help revive its fortunes. The plan out30
lines five initiatives:
25
1) linking learning,
health, and prosperity;
20
2) fostering collaboration; 3) strengthen15
ing pride and image;
10
4) creating attractive
and desirable places;
5
and 5) managing com0
munity resources.”4
1969
1990
2009
Finally, Youngstown,
OH, suffered severe
Midwest
US
economic contraction
Note: Midwest shares based on data for 83 metropolitan statistical areas.
due to the collapse of
Source: U.S. Department of Commerce, Bureau of Economic Analysis.
the steel industry 30
years ago. Recently,
support renewed economic growth in
new civic leadership has stepped in to
Springfield. The Boston Fed selected a run the city. These new leaders do not
group of similar cities against which to
want to rebuild based on the city’s past
benchmark Springfield’s progress.
glory, but rather envision Youngstown
as a thriving city, leveraging its location,
Randy Eberts, president of the Upjohn
infrastructure, and educational instituInstitute, concluded the panel by distions. These three examples demoncussing the Northeast Ohio Dashboard
strate the importance of regionalism
Indicators project, which provides a
and leadership, key themes of the ICI.
framework for understanding regional
economic processes while also tracking Longworth closed by noting that each
the progress of the regional economy.
city controls its own fate. While many
midwestern cities may ultimately succeed
Caught in the middle
because of their proximity to Chicago,
Longworth underscored the need for
The keynote speaker of the ICI
more work force development throughout
Symposium was Richard Longworth,
author of Caught in the Middle: America’s the Midwest.
Heartland in the Age of Globalism. Longworth
Lessons from manufacturing and
explained that while many of the ICI
topics were not new, the unique contri- automotive communities
bution of the project was compiling these The day ended with a panel moderated
ideas in one place. Longworth explained by Testa discussing lessons from manufacturing and automotive communities.
that each city has its own story to tell;
The panelists were Paul Krutko, president
and some had less of an industrial hurdle
and CEO of Ann Arbor SPARK; Kristin
to overcome than others.
Dziczek, director, Labor and Industry
Longworth also described some of the
Group at the Center for Automotive
other cities that he has observed. For
Research; and Kim Hill, director,
example, Sterling, Dixon, and Rock

Sustainability and Economic
Development Strategies, director,
Automotive Communities Partnership,
and associate director, Research at the
Center for Automotive Research. Krutko
pointed out the importance of U.S. manufacturing as a driver of research and
innovation. Manufacturing is challenged
by a steep decline in employment, despite
rising output, due to both off-shoring
and technological advancements. Some
of Krutko’s recommendations to strengthen the manufacturing sector in the
Midwest were: 1) grow from within; 2)
develop a skilled work force; 3) invest in
innovation; and 4) invest in sustainability.
Echoing some of the other speakers,
Dziczek discussed the need for more
education and work force development. With current-year U.S. vehicle
production projected at over 10 million
units and automotive manufacturing
employment expected to reach over
750,000 by 2015, a skilled labor shortage
is likely. Dziczek concluded that industrial cities need to devote more resources
to helping dislocated workers, new
graduates, and disadvantaged workers
acquire advanced skills to meet future
employment needs.

Charles L. Evans, President  Daniel G. Sullivan,
;
Executive Vice President and Director of Research;
Spencer Krane, Senior Vice President and Economic
Advisor ; David Marshall, Senior Vice President, financial
markets group  Daniel Aaronson, Vice President,
;
microeconomic policy research; Jonas D. M. Fisher,
Vice President, macroeconomic policy research; Richard
Heckinger,Vice President, markets team; Anna L.
Paulson, Vice President, finance team; William A. Testa,
Vice President, regional programs, and Economics Editor ;
Helen O’D. Koshy and Han Y. Choi, Editors  ;
Rita Molloy and Julia Baker, Production Editors 
;
Sheila A. Mangler, Editorial Assistant.
Chicago Fed Letter is published by the Economic
Research Department of the Federal Reserve Bank
of Chicago. The views expressed are the authors’
and do not necessarily reflect the views of the
Federal Reserve Bank of Chicago or the Federal
Reserve System.
© 2012 Federal Reserve Bank of Chicago
Chicago Fed Letter articles may be reproduced in
whole or in part, provided the articles are not
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Prior written permission must be obtained for
any other reproduction, distribution, republication, or creation of derivative works of Chicago Fed
Letter articles. To request permission, please contact
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ISSN 0895-0164

Hill concluded the symposium by discussing the Automotive Communities
Partnership, in which companies and
municipalities cooperate in places with
an automobile manufacturing legacy.
The partnership is a forum for topical
issues and actions, providing communities with industry information on emerging, current, and obsolescent (or soon
to be) technology, green development,
risks and opportunities for existing or
potential new plants related to supply
chains, energy prices and inventories,
and other important issues. One significant accomplishment of the partnership
has been the repurposing of former
auto plants. Some examples of the new
uses to which former auto plants have
been put are warehousing, education,
1	 The Seventh Federal Reserve District in-

cludes most of Illinois, Indiana, Michigan,
and Wisconsin, and all of Iowa.

2	 Unless otherwise noted, the data used in

this article are from the following sources:
National Historical Geographic Information
System, University of Minnesota, 2004,
pre-release version 0.1. All data from 2000
are from the 2000 Census via American
FactFinder. All data from 2009 are from the
American Community Survey via American
FactFinder. Some of the data (and tabulations) were made available (in part) by the
Interuniversity Consortium for Political

and recreation. The redevelopment of
these plants has helped to restore property values, as well as having some limited positive impact on employment.5
Next steps

Our preliminary findings from the ICI
and our discussions at the symposium
raise several important questions that
the project’s next phase will address.
How can communities adequately enhance the skills of their work force?
How can they best leverage public and
private resources in lean economic
times? What is the role of a city in a regional or global context? What will be
required to develop the next generation of leaders? And, finally, are best
practices transferable across cities and

communities and, if so, how can these
communities be connected?
These 10 cities and many other similar
cities throughout the Midwest face many
complex and interrelated challenges,
including low educational attainment,
new populations, competition for workers and jobs, and strained municipal
budgets. Through the ICI, CDPS will
explore these cities’ responses to challenges, how they define success and
failure, and what separates resurgent
cities from their less successful counterparts. CDPS will also convene meetings
of policymakers and practitioners from
industrial cities to explore areas in
which their communities can benefit
from collaboration across the region.

Social Research (ICPSR). The data for
City and County Data Book (United States)
Consolidated Files, City Data 1944–77 were
originally collected by the U.S. Department
of Commerce, Bureau of the Census. Neither the collector of the original data nor
the ICPSR bears any responsibility for the
analyses or interpretations presented here.

urban economic development policy”
(Yolanda K. Kodrzycki and Ana Patricia
Muñoz, with Lynn Browne, DeAnna Green,
Marques Benton, Prabal Chakrabarti, David
Plasse, Richard Walker, and Bo Zhao, 2009,
“Reinvigorating Springfield’s economy:
Lessons from resurgent cities,” Federal
Reserve Bank of Boston, Community Affairs
Discussion Paper, No. 2009-03, August, p. 1,
available at www.bostonfed.org/commdev/
pcadp/2009/pcadp0903.pdf.).

3	 Resurgent cities are cities that “have made

substantially more progress than other cities
with similar challenges and opportunities
in improving living standards for their residents, and are recognized as vital communities in a broader sense by experts on

4	

http://muncieactionplan.org/?page_id=41.

	 Center for Automotive Research.

5


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