The Fresh Economic Development Strategy Emerging in the Midwest

A growing handful of Midwestern cities, like Columbus, Ohio, Traverse City, Michigan, and Carmel, Indiana, are reaching beyond traditional incentives for recruiting business and industry, focusing on how to expand their populations by promoting the region as a good place to live.

“This is probably the fastest-growing innovation in economic development for 50 years,” said economist Michael Hicks, a professor at Ball State University in Muncie, Indiana, where he runs the Center for Business and Economic Research. 

The county in Indiana with the strongest population growth—Hamilton—for instance, is “almost exclusively trying to attract people,” Hicks said. With four mid-sized cities, including Carmel, the county’s 350,000-plus population has a median household income of around $100,000 and officials are projecting consistent job gains over the next five years. The county and its cities consistently make “best places to live” lists because of the quality of public schools, amenities for singles, the health of the population and opportunities for outdoor recreation.

Parts of the Midwest served as longtime anchors for U.S. manufacturing, but saw declines in recent decades as jobs moved overseas or to Southern states where companies see factors like fewer labor unions, lower taxes and cheaper land as upsides. Meanwhile, coastal cities like Boston, San Francisco and Seattle served as magnets for firms and talent in the tech sector. 

The emerging focus on attracting people who can provide the foundation for a solid workforce in the region stands in contrast to other approaches to economic development, which can often prioritize policies like tax breaks for companies to build factories or warehouses.

But as economics professor Amanda Weinstein of the University of Akron’s College of Business, in Ohio, noted, “We are increasingly seeing the jobs move to people rather than the people move to jobs.”

The rise of remote work adds another twist, allowing professionals in some fields to work anywhere and giving communities across the country a chance to lure them in.

Weinstein, like some other economists, advises local governments to invest in and promote quality-of-life amenities, along with health care and education, to help retain residents and attract out-of-staters looking to relocate to affordable, family-friendly communities.

“The Midwest underestimates or discounts its best assets and why people want to be here,” Weinstein said. “Ohio has one of the highest percentages of people who are here who were born here … but we don’t realize why so many people want to stay. … We discount how nice the Midwest is to raise a family. Rather than lean into that, we do other things to help our economy.”

Weinstein added that without population growth, tried-and-true strategies, like tax incentives for businesses that locate in Midwestern communities, aren’t working as well as they once did.

It's an important moment to consider which approaches to strengthen local economies are working best, as the federal government is rolling out a huge new slate of industrial development programs meant to drive greater domestic production of goods like clean energy equipment, electric vehicles and semiconductors. Which communities will benefit most from those federal initiatives remains to be seen.

Slipping Population Growth

The U.S. Census Bureau includes 12 states in its definition of the Midwest: the Dakotas, Nebraska, Kansas, Minnesota, Iowa and Missouri in its West North Central region, and Wisconsin, Illinois, Michigan, Indiana and Ohio in its East North Central region.

As in most of the country, the population in that group—with a smattering of exceptions—grew at its slowest rate over the last decade since the Great Depression, according to Census Bureau figures. The pandemic slowed the pace even more across the country, with population growth ticking up at a rate five times slower in 2021 than it had during the prior decade.

In recent years, the Midwest as a region and its cities have just not proven to be “the destination that the coastal cities are,” said consultant, columnist and podcaster Aaron Renn. 

Some economists have suggested that strategies to reinvigorate struggling Midwest communities will have to look different from the past, when births outnumbered deaths and young people stuck around or returned home after college for jobs in manufacturing or agriculture.

“If you can’t convince Amazon to put [a national headquarters] in your city; if you can’t convince Facebook to open an office, what should we do?” Renn asked. “We should adopt a citizen-[focused] strategy. We do that through quality of place, improving public services, investing in your people where you think you can.”

That can be as simple as paving streets and filling potholes or as difficult as tackling the epidemic of opioid addiction, Renn said. “I’m not claiming it will bring prosperity, but I am saying it will make it better for the people who are there,” he added. And it could lead to more migration of working-age residents into a region contending with a stagnant labor force.

Tim Bartik, a senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Michigan, described the difficulties some Midwest cities face as a “chicken-and-egg problem.”

“If you don’t have many high-tech firms or high-tech workers, you can’t attract high-tech workers because you have no high-tech firms, and you can’t attract high-tech firms because there are no high-tech workers,” he said.

Rise of Remote Work

Directing funds to amenities like schools, health care, parks, roads, recreation, transit and even, in the case of Akron, its robust punk rock community, could boost population and bolster the workforce, which, in turn, could attract businesses with jobs to offer.

Midwestern communities should market those amenities to remote employees, Hicks advised.

“The geographic connection to your job is now severed for about half of college-educated workers and one-in-four for non-college grads with an [associate degree] or high school diploma,” said Hicks, who noted that nearly 50% of college grads are teleworking, including 24% who don’t have to report in person to a workplace at all.

“The pandemic put that on steroids,” Weinstein agreed. “We have increasing freedom to live anywhere we want. Where do we want to live? Places that have a high quality of life.”

Hicks predicted the remote work trend will endure. “We’re at the beginning stages of what I imagine will be a two-decade-or-longer adjustment,” he said. “Young people are going to be looking for remote work in a very great way.”

That makes them prime recruits for Midwest communities, Weinstein added.

Demographer Ken Johnson, a sociology professor with the University of New Hampshire’s Carsey School of Public Policy, said access to quality internet service is a factor that can make the difference to a remote worker deciding where to live, as can a local airport and good hospitals. 

Bartik endorses investment in job training, preschool and K-12 education. “All of those things would increase the quality of your local labor force,” he said, noting that quality education can also lead to lower crime and reduced teen pregnancy rates.

Renn echoed that view. “The No. 1 way to move the needle,” he said, “is through education.”

Still, Bartik said, too little research exists on how well quality-of-life efforts work to attract skilled and remote workers to proclaim the approach a surefire economic development strategy.

But Hicks predicted that Midwestern communities that embrace quality-of-life strategies will see brighter futures than those that don’t.

“My hunch is the Midwest is going to see this play out rather dramatically over the next generation,” Hicks said. “Some places are going to do really well if you’ve got good schools, very little blight, little crime, things to do in your town; we’ll see migration to those places.” 

For places on the opposite end of that spectrum, population growth is likely to sputter, Hicks predicted, adding: “This means that the model of attracting business is going to be less effective than the model of attracting people.”