Coronavirus probably isn't going to drastically change cities like many say it will
[Note: Originally published on my Substack April 14, 2020]
Every time there's some big economic or social upheaval - coronavirus, the global financial crisis, 9/11 - there's always talk of "everything is going to change... everything is going to be different." There are undoubtedly predictions that New York and San Francisco will hollow out, that people are going to leave the cities and head for the cheaper, golden hills of Texas or Utah or Colorado. And that has absolutely been true - to a degree.
Let me use my adopted hometown of Chicago as an example. It's cold. The taxes are high. The city's/county's/state's finances are a disaster. The unemployment rate tends to run a few percentage points higher than the national average. So it isn't terribly surprising that the population of Cook County fell six of the years between 2010 and 2019. In fact, do you know what year Chicago’s population peaked? 1950! Chicago’s eulogy has been written dozens and dozens of time.
But is Chicago dead? Even merely dying? Not really.
- In 2018, there were ~1.98M households in Cook County, down 33,423 households from 2017. However, there were 629,907 households with incomes over $100,000, or 53,878 households more than 2017.+
- In 2017, the number of households declined by 15,600, but the number if $100K households increase by 15,004.
- In 2016, there were only 9,261 new households, but 27,653 more households hitting the $100K threshold.
Ken Griffin may have his traders at Citadel, the preeminent Chicago hedge fund, camp out in Palm Beach to bypass coronavirus. But is he going to follow the lead of David Tepper, who moved his firm from cold, high-tax New Jersey to Florida. I don't know, maybe.
But so far, all of those stories are more one-offs than reality. There just isn't a consistent outflow of high-earners from many places like Chicago - in fact, Chicago is very much a magnet for high-paying, high-productivity jobs despite all of the downsides.++
This is a long winded say of saying… place matters.+++
If you want a city that attracts big investments from companies like Google and Salesforce, or lures McDonald's from the suburbs back into the city (which led to applications for corporate jobs jumping by 20% since the move!), or becomes a headquarters for several of Uber's business segments, there's more to it than offering tax breaks or a lower cost of living.
Coronavirus is just the latest challenge, but it isn't likely to knock cities off the rails and have the entire population of Chicago flow into Peoria, Des Moines, and beyond
+ According to the American Community Survey's Household Income in the Past 12 Months (B19001).
++ There's also a conversation to be had about inequality of opportunity, because Chicago truly is a tale of two cities and it's the bottom two-thirds income households that are feeling the worst everything. However, that’s not really a story unique to Chicago.
+++ Required reading: Enrico Moretti's The New Geography of Jobs