America's Growth Corridors

t epo r R ivi c C No. 75 February 2013 75 February No.

America’s Growth Corridors: The Key to National Revival

Joel Kotkin Adjunct Fellow, Manhattan Institute

C S L L CENTER FOR STATE AND LOCAL LEADERSHIP AT THE MANHATTAN INSTITUTE Published by Manhattan Institute

Executive Summary

Much of the discussion about American economic recovery and growth in 2012 focused on the usual suspects: regions on the Pacific and Atlantic coasts and on the shores of the Great Lakes. But the best recent economic record, as well as the best prospects for future prosperity, are to be found elsewhere in the United States.

We have identified four regions of the country that we call “growth corridors.” What they lack in media attention they make up for in past performance and likely future success. Over the past decade—and, in some cases, far longer—these regions have created more jobs and gained more population than their counterparts along the ocean coasts or along the Great Lakes.

The four growth corridors are:

1. The Great Plains region, made up of Montana, Wyoming, Colorado, New Mexico, Texas, Oklahoma, Kansas, Nebraska, and the Dakotas 2. The “Third Coast” stretch of counties whose shores abut the Gulf of Mexico and which range through Texas, Louisiana, Mississippi, and Florida 3. The “Intermountain West,” consisting of counties in the north of New Mexico and Arizona, parts of eastern California and western regions of Montana, Wyoming, and Colorado, as well as the non-coastal eastern regions of Oregon and Washington and all of Idaho, Utah, and Nevada 4. The “Southeast Manufacturing Belt” of counties in eastern Arkansas, all of Tennessee, and large swaths of Kentucky, the Carolinas, Georgia, Alabama, Mississippi, and southwestern Virginia

These regions have different histories and different trajectories into the future, but they share certain key drivers of economic growth: lower costs (particularly for housing); better business climates; and population growth. Some have benefited from the strong global market for commodities, particularly food, natural gas, and oil. Others are expanding because of a resurgence in manufacturing in the United States.

In this report, we describe the growth corridors in some detail and explore what their success means for the country as a whole. Part 1 describes what the corridors are, in terms of geography, population, and history. Part 2 explains why they are succeeding while America’s traditional economic powerhouses are growing at relatively anemic rates. Part 3 explains how the growth corridors are advancing, noting the key industries in each. Part 4 considers the contrast between the growth corridors and the rest of the nation and explains why the growth-corridor mix of culture and policies is crucial to the future success of the United States.

To be sure, New York, Los Angeles, the San Francisco Bay Area, and Chicago will remain the country’s leading metropolitan agglomerations for the foreseeable future. But an important urban story of the coming decades will be the emergence of interior metropolitan areas such as Houston, Dallas–Fort Worth, Tampa, Oklahoma City, and Omaha. On a smaller scale, fast-growing Lafayette (Louisiana), Baton Rouge, Midland (Texas), Sioux Falls (South Dakota), Fargo, and a host of other smaller cities will continue to expand. We may also witness the resurgence of New Orleans as a leading cultural and business center for the south and the Gulf Coast.

This ascendancy of the growth corridors follows one of the great principles of American history. The “most important effect of the frontier,” as Frederick Jackson Turner noted, was how it promoted democracy by spreading opportunity.1 The expanding frontier—then rural, now metropolitan—reinforces the fundamental individualism at the core of American culture.

Equally important, the corridors reveal the most immediate way to propel a broad growth trajectory for the entire United States. By restoring a strong growth path, as well as the optimism that accompanies it, the corridors could help bring about a resurgence whose benefits will extend far beyond their boundaries to touch the entire nation.

America’s Growth Corridors: The Key to National Revival Civic Report 75 February 2013 Andy SywakandGaryGirod. The authorgratefullyacknowledgestheassistanceofMarkSchillPraxisStrategyGroup andofresearchers A Yorker, since1971. hehaslivedinCalifornia guest lecturer atSingapore’s Berkeley. CivilServiceCollege.KotkinattendedtheUniversityofCalifornia, AnativeNew Library).In2010 hewontheGeneBurdHouse/Modern Award forbesturbanreporting. Heiscurrently serving asa books includeTheNextHundredMillion:Americain2050(ThePenguinPress)(Random andTheCity:AGlobalHistory National ChamberFoundation.Healsoservesasexecutiveeditorofthewebsitewww.newgeography.com. Kotkin’s aseniorvisitingfellowattheCivilServiceCollegeinSingapore,University inOrange,California, andafellowatthe “New Geographer”columnforForbes.com.Heisalsoadistinguishedpresidential fellowinurbanfutures atChapman Joel KotkinisaManhattanInstituteadjunctfellowandCityJournalcontributingeditor. Hecurrently writes theweekly A bout cknowledgment

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CONTENTS

1 Part 1: Where the Growth Is 5 Part 2: Why the Growth Is Where It Is Business Climate The Resurgence of the “Real” Economy Progress on Education Migration Patterns Immigrants Head to the Corridors Cost and Quality: A New Perspective 16 Part 3: How Growth Is Happening The Energy Boom The Manufacturing Boom A New Industrial Heartland Booming Aerospace and High-Tech The Rise of Latin America 25 Part 4: America’s Future and the Growth Corridors 27 Endnotes

America’s Growth Corridors: The Key to National Revival Civic Report 75 February 2013 America’s Growth Corridors: The Key to National Revival Joel Kotkin Part 1: Where the Growth Is

uture American economic growth will not be centered in the denser regions of the East and West Coasts of the United States that are often lionized in the national press. Instead, growth in the near future (and likely beyond) will be found Fin four broad regions that are already doing well, despite a devastat- ing recession and weak recovery. Even as many Americans lower their expectations of future prosperity for themselves and their children, these regions look forward to robust expansion in the years ahead.

We have defined these regions as the nation’s “growth corridors:” (1) the Great Plains region, comprising Montana, Wyoming, Colorado, New Mexico, Texas, Oklahoma, Kansas, Nebraska, and the Dakotas; (2) the “Third Coast” stretch of counties whose shores abut the Gulf of Mexico and which range through Texas, Louisiana, Mississippi, and Florida; (3) the “Intermountain West,” comprising counties in the north of New Mexico and Arizona, parts of eastern California and western regions of Montana, Wyoming, and Colorado, as well as the non-coastal eastern regions of Oregon and Washington and all of Idaho, Utah, and Nevada; and (4) the “Southeast Manufactur-

America’s Growth Corridors: The Key to National Revival 1 2 Civic Report 75 February 2013 long-term contributortothenation’s economicfuture. than ever before; and it will be poised to become a major it willbemore urban,ethnicallydiverse,andsophisticated more diversepopulation,thePlainsregion willalsochange: their twentiestomid-forties,thekeyfamily-raisingyears. Modarres, are notreturningboomersbutyoungpeoplein grants comingtotheregion, according todemographerAli Iowa, andNebraska. cording to TheStreet.com, were located in the Dakotas, Five ofthesixbestcitiesfor“startingoverin2012,”ac- transformed from “forsaken” into a region of opportunity. 2 1 the region as“notfarfrom forsaken.” off theregion. growth, manyinthemainstream mediahadallbutwritten After itshalf-centuryofslow—evennegative—population the region thatmighthavebeenleastexpectedtodowell. and theleastpopulatedofgrowth corridors.Thisis country, theGreat Plainsregion represents boththelargest 30millionpeople,coveringroughly 20percentWith ofthe the pastdecade. greater jobgrowth in Darker huesrepresent

the region would“becomealmosttotallydepopulated.” nities to a “buffalo commons.” The Poppers predicted that ultimate nationalpark,”returningthelandanditscommu- posed thatWashington theentire turn region into“the demics DeborahE.PopperandFrankJ.evenpro- DeborahEpsteinPopperandFrankJ. Popper, Egan,“AsOthersAbandonPlains, theIndianand Timothy December 1987. “The Great Plains:From DusttoDust,”PlanningMagazine, April 9,2006. Richard Rubin,“NotFarfrom Forsaken,”TheNewYork Times, Bison ComeBack,”TheNewYork Times, May27,2001;and Growth Corridor1:GreatPlainsRegion With theinfluxofayounger,With better-educated, and Yet overthepastdecade,Plainsregion hasbeen As recently as2006,TheNewYork Times described 3 Remarkably, thevastmajorityofmi- The Four Growth CorridorsinDetail 1 NewJerseyaca- 2

delphia’s (theseventh-largest) insizeby2014. Los Angeles,withplanstoexpandsothatitwillrivalPhila- ness districtintermsofsquare feet,aheadofdowntown that Houstonnowranksasthecountry’s 12th-largestbusi- tion ofmedical facilities in theworld. This is amajor reason massive Texas Medical Center is now the largest concentra- Coast lies in medical services. In Houston, for example, the greater, too. greater thanthenationalaverage;jobgrowth hasbeen in thecountry. Notonlyhaspopulationgrowth beenfar million people.Itisoneofthemostrapidlygrowing regions Brownsville, Texas, toTampa, Florida,andishometo16 The Third Coast region surrounds the Gulf of Mexico from top third. climates in the nation, Marketwatch now places it in the Orleans was long plagued with one of the worst business as the“cooleststart-upcityinAmerica.”ThoughNew ment, andsoftware. Inc.MagazinedescribedNewOrleans energy, and also in such fields as digital effects, entertain- There hasbeenasteadygrowth ofindustries,including movement ofyounger, educatedpeopleintothearea. not onlythereturnofevacueesfrom Katrinabutalsothe percent between2000and2011. in employmentofanymajormetropolitan area—up 15 past decade,Houstonhashadoneofthelargestincreases has emergedasoneofthecountry’s megacities.Overthe cally vital,shores oftheMexicanGulf. along thesomewhatlessscenic,but increasingly economi- lantic andPacificeconomies open aneweraanchored process, itwillchallengethelong-timesupremacy oftheAt- Third Coast appears likely to continue to grow rapidly. In the ing tonarrow andothereconomicengineshumming,the Growth Corridor2:ThirdoastRegion One criticalgrowth industryforthefuture oftheGulf Meanwhile, NewOrleans’demographicrevival reflects Houston, theclearcenterofThird Coasteconomy, With theregion’sWith traditionaleducationgapcontinu- 5

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Growth Corridor 3: Intermountain West Region Growth Corridor 4: Southeast Manufacturing Belt Region

Perhaps none of our corridors has better prospects than In contrast to the other corridors, some states that consti- the Intermountain West region. It has the advantages of tute the Southeast Manufacturing Belt region—Alabama, a well-educated and growing population, as well as enor- Mississippi, Georgia, Tennessee, Kentucky and the Caro- mous natural resources. A vast region covering 655,000 linas—have recovered slowly since the Great Recession. square miles between the Rocky Mountain foothills and Yet we believe in the continued emergence of this region, the Sierra and Cascade mountain ranges, it is home to 12.8 largely because of the continuing shift of population to this million people. region, which is home to some 40 million people and ex- Over the past ten years, the Intermountain West has tends over 222,000 square miles.6 had the highest growth in jobs of any area—some 14.7 The key to the Southeast Manufacturing Belt region’s percent, more than three times the national average. At the future lies in its ability to bring skilled labor and investment same time, the region’s population grew 20 percent, the into the area, particularly for higher value-added indus- highest of any corridor, and almost three times as quickly tries. “Southerners don’t have any rich relatives. God was as the rest of the country. It has consistently showed the a Northerner,” the head of the pro-development Southern greatest growth of any region in terms of high-tech jobs. Regional Council told the journalist Joel Garreau three de- Given the area’s natural attractiveness and a contin- cades ago. “Without a heritage of anything except denial, ued good business climate, the Intermountain West should Southerners, given a chance to improve their standard of enjoy strong growth over the coming decades. living, are doing so.”7 This effort once focused on U.S.-based low-tech firms, but increasingly the region targets are higher-wage industries. As measured by “location quotient”—the 3 Jerold Leslie, “6 Best Cities for Starting Over in 2012,” concentration of a particular sector in a state—Alabama, TheStreet.com, December 19, 2011. Mississippi, the Carolinas, and Tennessee rank within the 4 Robert W. Gilmer, Robert F. Hodgin, and Mary Schiflett, top 15 of states most reliant upon manufacturing for the “Economic Impact of the Texas Medical Center on Southeast Texas,” Houston Business, October 2001; and “Texas Medical health of their economies. Center: Collaboration Beyond Boundaries,” 2011. This emphasis on manufacturing could help spark fu- 5 Douglas McCollam, “The Big Easy’s Business Leap Forward,” ture growth. European, Japanese, and Korean firms appear The Wall Street Journal, March 17, 2012; and Russ Britt, likely to continue shifting operations into the Southeast. “New Orleans Business: Most Improved in 2011,” All these countries suffer from the effect of aging popu- The Wall Street Journal, December 13, 2011. lations (a looming shortage of working-age people), and 6 U.S. Census estimated2010 the economies of Europe and Japan will remain weak for 7 Joel Garreau, Nine Nations of North America (Boston: the foreseeable future. China, once the obvious destina- Houghton Mifflin, 1981), p. 143. tion for manufacturers, is plagued by political problems, 8 Jeff Bennett, “Europe Car Makers Confront Gloom,” rising costs, and an unreliable legal system. This leaves the The Wall Street Journal, September 28, 2012; Jack Ewing, “European Automakers Face a Stunted Future,” The New Southeast Manufacturing Belt a likely recipient of new, 8 York Times, September 28, 2012; and Christopher Rauwald large-scale industrial global investment. and Gilles Castonguay, “Fiat Will Shrink Spending in Europe,” The Wall Street Journal, June 16, 2012.

America’s Growth Corridors: The Key to National Revival 3 4 Civic Report 75 February 2013 30 percent ofitspopulation. developments, noteconomicfundamentals). The D.C., whoseeconomicexpansionisduetopolitical (the onlyexception tothispatternis Washington, Atlantic andPacific coastsandtheGreat Lakes more alongthe populationthantheircounterparts growth corridorshave created more jobsandgained the pastdecade—and,insomecases,farlonger—the Our analysisexplores theserealities. It findsthat over out attheregional, state,andlocallevels. reflect economic and geographiclogic working itself account for45percent ofthenation’s landmass ferent trajectoriesofgrowth. Overall, thecorridors But theyhave distincthistoriesandare now ondif- the political will to exploit their natural resources). tics (forexample,allare friendlytobusinessandhave All fourgrowth characteris- corridorspossesscertain or thetraditionallyrecognized regions ofthecountry. isnotentirely ataleofdifferencesstory amongstates As reflected inthefigure above, the growth-corridor western Virginia. Carolinas, Georgia, Alabama,Mississippi, andsouth- all of Tennessee, andlargeswathsof Kentucky, the ing Belt,” comprisingcountiesineasternArkansas, Source: QCEWEmployees,Non-QCEWEmployees&Self-Employed -EMSI2012.3ClassofWorker Great Plains 7.9% 3 Their brightprospects Employment Growth, 2001–12 Third Coas 7.6% tI 2 and ntermountain West 9.6% than thenationalaverage. Income growth hasalsobeenstronger intheseregions growth, thevast majorityliewithinthecorridors. cade. In fact,ofareas now experiencingstrong GDP growth inthepastde- thantherest ofthecountry higher income and higher overall state product thecorridorshave enjoyedmost part, considerably An analysisofwageratesbeliesthisclaim.For the job donecheap.” where Europeans, inparticular, now go“to getthe believes thatforeign firmscometo “slum” America, taking ofaglobal“race tothebottom” inwages.He Harold Meyerson holdsthattheseregions are par- has beendriven by low wages.For example,columnist Some criticshave claimedthatmuchofthisgrowth recession have beeninoneofthefourgrowth corridors. counties thathave recovered alljobsthatwere lostinthe Since the financial meltdown of2009,the majority of industrial Midwest. the ally outperformed West and East Coasts and the job andwealth creation, thesefourareas have gener- higher growth inwagesandGDP. On measures of growth seen corridorshave also,forthemost part, Southeast 0.6% 4 Rest ofNation 0.8% Growth in Average Weekly Wage, 2000–11

Color threshold is national rate, blue counties trail nation, orange counties lead nation.

Part 2: Why the Growth Is Where It Is fossil-fuel resources but chooses, in the name of environmental protection, to govern itself as if land Business Climate and energy supplies were severely constrained.6 As a result, North Dakota recently passed California as the erhaps the biggest advantage that the corridors nation’s third-largest energy producer, a development have today is their business climate. Often his- that would have been inconceivable a decade ago.7 Ptorically poor, many of these areas have stayed hungry: they continue to seek out ways to expand Attitudes toward growth in the United States range incomes and opportunities for their residents. In from suspicion and constraint to an enthusiastic many ways, they resemble the hungry barbarians willingness to expand. The contrast between the two who, as the great fourteenth-century Arab historian approaches is the starkest difference between the eager- Ibn Khaldun noted, usurp the more established re- to-grow corridors and the rest of the nation. A review gimes that develop in the comfort of luxurious cities. of state business climates by Chief Executive magazine Over time, these regimes suffer “the chronic diseases shows that 11 of the top 15 states ranked for the best of senility”—lack of ambition, vigor, discipline, and business climate were located in the corridors. The list willingness to sacrifice for the next generation—that was led by Texas, which straddles the Great Plains and the poorer peoples often avoid.5 the Third Coast growth corridors, and also included two Third Coast states, Florida and Louisiana, as well This contrast can be seen in comparisons of growth- as southeastern states North Carolina, Tennessee, corridor government policies with those of other South Carolina, and Georgia, plus Utah and Colorado regions, on such matters as housing and the devel- from the Intermountain West and North Dakota in opment of manufacturing and natural resources. the Great Plains. In contrast, California, New York, California, for example, is a vast state with enormous Illinois, and Massachusetts sat at the bottom.8

America’s Growth Corridors: The Key to National Revival 5 6 Civic Report 75 February 2013 California didpoorly. by Utah andSouth Dakota. New York, Illinois, and 13 ofthe15top-rankedstatesincorridors,led National Federation ofIndependent Business found attitudes toward wealth creation andemployment. Different of growth views stemlargelyfrom different have been headinglower. and West Coasts,mostofthecorridorstates’ rates level. ing theexpirationofBush taxcutsatthefederal income-tax ratesofover 50percent in2013,assum- City, and Hawaii—will have top marginal effective analysis, three jurisdictions—California,New York instigated highertaxrates.According toarecent past year, New York, California,andIllinois have ing toward increasing their tax burdens. Over the these high-taxstates.On thecontrary, theyare mov- Current trends suggestthat no relief isin sight for bottom three places. California, New York, andNew Jersey occupiedthe burdensome state,followed by South Dakota, while dens, where Wyoming toppedthelistasleast Similar of statetaxbur- patternsoccur in surveys 11 Even asthistrend rolls ontheEast forward Chief Executive Magazine BestStatesforBusiness,2012 10 9 Overall rankingsfrom the The Newfuture growth. York The columnist Thom- Times increasingly irrelevant—and even detrimental—to dustrial economy, dependenceonrawmaterials is It hasbeenestablishedforsometimethatinapostin- The Resurgence ofthe“Real”Economy recent studyby Site Selection magazine. plants,accordingof thetop12forlocatingnew toa corridors, boastalltopfive businessclimatesandten eracy, whichcomprise counties inthree ofthefour climates. For example, the states of the old Confed- states and Texas—places with above-average business tion sectors,hasgravitatedtothesoutheasternU.S. - in petrochemicals, automobiles,steel,andtransporta great dealofrecent foreign anddomesticinvestment, A business climate also affects investment patterns. A of thecorridors. the lower-tax, more business-friendlyenvironments middle-income peopleandby businesses—oftento the consequencehasbeenout-of-statemigrationby and upwardly mobileprofessionals. In bothstates, increasing taxes placea disincentive on entrepreneurs In statessuchasNew York andCalifornia,ever- 12 13 Our Chief Export Opportunity U.S. Agricultural Trade Balance

$40 $37.5

$35

$30

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$20 Billions $15

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$0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 as Friedman writes of the “curse” of raw-material Recession. Their expansion has been led, particularly wealth and warns about the dangers of using raw- in the Great Plains, by a boom in agriculture exports: material development to spur growth. Others, such in 2011, the U.S. exported a record $135 billion, with as the hyperbolic analyst and author James Howard a net favorable balance of $47 billion, the highest in Kunstler, predict a terrible “final blow-off of late oil- nominal dollars since the 1980s.16 based industrialism” that will prove lethal to living standards in the United States as a whole and to its What accounts for this boom? One driver is growing sprawling Sunbelt regions in particular.14 markets in the developing world—notably, China, which consumes almost 60 percent of the world’s In reality, much of the world’s sustained economic soybean exports and 40 percent of its cotton. The growth since 2000 has occurred not in financial or Great Plains corridor, in particular, produces both information capitals but in regions that produce these crops in abundance, which is one reason for basic commodities such as energy and food. In the its increased share of U.S. exports.17 developed world, the consistently best-performing countries since 2008 have been resource-rich ones The importance of agricultural resources and energy are such as Norway, Australia, and Canada. Much of well recognized by investors. The International Food Brazil’s recent rise has been driven by the growth of Policy Research Institute reports that foreign investors manufactured and food exports, as well as its recent sought or secured 37–49 million acres of farmland in the achievement of energy self-sufficiency.15 developing world between 2006 and mid-2009. Inves- tors, including hedge funds and overseas companies, are This economic pattern is a factor in the success of the also investing heavily in U.S. cropland.18 growth corridors. Over the past decade, the domestic- resource economy has enjoyed unexpected growth, Progress on Education which has helped insulate three of the corridor regions—the Great Plains, the Intermountain West, and Despite recent gains, arguably the greatest challenge the Third Coast—from the worst ravages of the Great facing the corridors lies in education. Most corridor

America’s Growth Corridors: The Key to National Revival 7 8 Civic Report 75 February 2013 lege. national average of 18–24-year-olds enrolled in col- is theonlystateinSoutheast thatexceeds the averages. skills—again, allfigures thatare well below national Carolina, Mississippi, andGeorgia lack basic literacy areas remain below thenationalaverage intermsof Similarly, allthe Third Coast’s majormetropolitan 20 percent ofresidents holdingaB.A. has thethird-lowest rateinthenation, withlessthan 25 andolderwithabachelor’s degree. Mississippi national average ofthepercentage ofresidents aged vantage. Every stateintheSoutheast fallsbelow the constituted theregion’s economic disad- primary overall low level of educational attainment has long Southeast and Third Coastcorridors. The Southeast’s ismostevidentintheThis educationalshortfall in thecorridors. World Report, only18ofthetop100universities are educational institutions. According toU.S.News and education. In some, there remains alackoffirst-class cities lagbehindthenationalaverage inlevels of 21 Over 15 percent ofadultsinAlabama,South 22 USDA EconomicResearch Service 19

Billions 100 30 40 50 60 70 80 90 2000 Value ofU.S.Agriculture Production: 2000–10 2001 2002 2003 20 Alabama 2004 2005 consortium ofareaconsortium leaderslaunchedacomprehensive auto manufacturer Mississippi, tonortheastern a automotive engineering. of theonlyschoolsinnationtoofferaPh.D. in tomotive Research CenterinSouth Carolina isone instance, the Clemson University International Au- improvementscally meaningful toeducation.For southern corridorshasfocusedheavilyoneconomi- addressed, inthe leadershipinbothmajorparties Knowing thattheirlaggingeducationratesmustbe long-plagued New Orleans schools. states huggingtheGulf ofMexico—notably, inthe there have beenseveral strong reform inthe efforts iswidelyrecognizedThis shortcoming intheregion: tion ofHouston and Tallahassee, Florida’s capital. people whohave bachelor’s degrees, withtheexcep - Coast “brainmagnets.” ing far more than any of the traditional East or West metropolitan area between 2007and2009,increas- largest increase ineducatedpopulationofanyU.S. by demographer Wendell Cox, New Orleans hadthe according toarecent analysisofeducatedmigrants migration trends in New Orleans offer hopeful signs: 2006 2007 2008 2009 Re To st ofStates, tal Plains,96 24 25 2010 In order tolure amajor 76 23 Meanwhile, effort through area community colleges to retrain of the largest increases in college-educated persons laid-off furniture-industry workers in classes such as have occurred in areas such as south Texas (Browns- robotics used in auto assembly.26 This type of work- ville, Corpus Christi), which have long struggled with force investment helped land a coveted investment low education levels. Houston, Dallas, Baton Rouge, from Toyota. In 2011, the company opened up a and Tampa have seen stronger rates of growth in the new facility in Blue Springs, Mississippi, devoted to numbers of educated people moving into their areas, manufacturing Corollas; it will soon start making more so than such cities as New York, Los Angeles, the hybrid Prius as well. To an area ravaged by the Chicago, and San Francisco. contraction of the local furniture-assembly sector, this plant added 1,300 jobs at range of wages between In sharp contrast to the Third Coast, the Intermoun- $15–$28 an hour.27 tain West and the Great Plains already benefit from above-average education levels. Most major cities in The Southeast’s education levels are increasing more the Intermountain region—Provo, Salt Lake City, rapidly than those of traditional brain magnets (as Denver, Spokane, and Boise—boast above-average are the education levels of the other three corridors). percentages of adults with bachelor’s degrees or Raleigh, Charlotte, and Nashville experienced excep- higher. In Denver, the percentage of people with tionally high-percentage growth in their numbers of graduate or professional degrees, about 13 percent, residents with bachelor’s degrees, well above the na- is some 30 percent above the national average.29 Over tional average. In gross numbers, Atlanta added more 20 percent of Salt Lake City’s metropolitan-area than 300,000 residents with bachelor’s degrees over adults have a bachelor’s degree, compared with 18 the past decade, more than Philadelphia and Miami percent nationwide.30 and almost 70,000 more than Boston.28 More important, the Intermountain West is increas- The Third Coast has had strong increases in the num- ing its educated workforces far faster than the rest of ber of people with bachelor’s degrees. Critically, some country, including such traditional magnets as the

Bachelor’s Degree or Higher Educational Attainment, 2010

Missoula, MT 40.7% Denver, CO 38.2% Provo-Orem, UT 35.2% Logan, UT-ID 31.7% Flagstaff, AZ 31.3% Bend, OR 30.3% Ogden-Clearfield, UT 30.1% Salt Lake City, UT 29.0% Spokane, WA 28.5% Boise City-Nampa, ID 28.3% United States 28.2% Reno-Sparks, NV 26.0% Kennewick-Pasco-Richland, WA 24.1% Las Vegas-Paradise, NV 21.6% Prescott, AZ 21.6%

U.S. Census American Community Survey

America’s Growth Corridors: The Key to National Revival 9 10 Civic Report 75 February 2013 impact onmigrationpatterns inthecorridors.Over Improving economicprospects have hadaprofound Migration Patterns people grew 60percent over thelast decade. as Sioux Falls, whose population ofcollege-educated Worth andOklahoma City, butofsmallercitiessuch of largermetropolitan regions, suchasDallas–Fort York, Boston,andSan Francisco. notonly This istrue bastions ofeducatedpeoplesuchas Washington, New nation and far more robust than that in the traditional Plains metropolitan areas wasamongthehighest inthe percentage ofgrowth ofbachelor’s degrees intheGreat ally migratedtothecoasts.But inthepastdecade, These are the kinds of educated workers who tradition age. Only Oklahoma, New Mexico, and Texas lag. Kansas, allofwhichgreatly exceed thenationalaver- Plains, ledby North Dakota and spreading southto of25–44arein theagecohorts locatedintheGreat ofcollege-educatedpeople the highestproportions in terms of educated people. Many ofthe states with sections, hasanenormous,ifunderappreciated, edge The Great Plains region, initsnorthern particularly the region’s top twocities,Denver andSalt LakeCity. Northeast andCalifornia. of true This isparticularly Share ofResidentsAge 25-44withaPostsecondary Degree South Dakot North Dakot United States New Mexico Minnesota Oklahoma Wyoming Nebraska Colorado Montan Kansas Texa Iowa a a a s 31 - cities from Boston and Los Angeles than go to those gration from thecoasts(i.e.,more peoplecometothese Most majorcities inthecorridorshave positive netmi- significant gains. ing Denver and Salt Lake City, have also notched people; theIntermountain West majorcities,includ- cities suchasHouston and Tampa continue toattract ies—notably, Charlotte andNashville. Third Coast migration magnets,ashave somesoutheasterncit- Texas Plains citiessuchasDallas have remained and Chicagotothecorridors,hascontinuedapace. set oftherecession, theoverall trend, from thecoasts Even thoughnetmigrationhasslowed sincetheon- Francisco, Chicago,andBostonareas. grants comingfrom theNew York, LosAngeles,San for many of theseregions, with many domestic mi- Over thelastdecade,patternhasbeenreversed cities oftheEastand West Coasts,aswell asChicago. larly theiryoung andbetter-educated,tothegreat - generations, thecorridorslostpopulation,particu the expensive oceancoaststoward theinterior. For byThis shiftisdriven asteadymigrationfrom partly quickly thanthenationalaverage. ulating Great Plains, have grown considerablymore the pastdecade,allfour, includingtheonce-depop- 31. 31.4 32. 2 7 35. 7 39.2 40. 41. 41. 8 1 4 44. 45. 45. 8 2 3 49. 50. 4 3 Population Growth

Source: EMSI Complete Employment 2011.4, using U.S. Census Data places from the corridor cities). A review of migration New Orleans is the only Third Coast metropolitan patterns over the past decade shows Houston—the area that has experienced significant outflows over largest metropolitan region in the corridors—gaining the past decade. Once the most important Gulf me- residents from most other parts of the country, par- tropolis, it suffered strong out-migration even before ticularly from the Northeast and California. Hurricane Katrina in 2005; over the past decade,

Net Domestic Migration Rate, 2010–11

Austin 17.5 Tampa 9.7 San Antonio 9.0 New Orleans 8.6 Charlotte 7.7 Denver 7.6 Oklahoma City 6.9 Dallas 6.0 Nashville 5.8 Washington, DC 3.8 Houston 3.6 Albuquerque 2.4 Atlanta 2.3 San Francisco 1.3 Salt Lake City 0.8 Kansas City -1.4 Birmingham -2.2 Memphis -2.2 Baton Rouge -2.8 Las Vegas -3.2 Los Angeles -3.9 New York -5.2 Chicago -5.7 Mobile -6.0

Rate per 1,000 residents. U.S. Census Population Estimates

America’s Growth Corridors: The Key to National Revival 11 12 Civic Report 75 February 2013 ropolitan areas. Over thepastdecade,Dallas–Fort The biggestchangeshave occurred inthelargermet- following years ofstagnation. a populationof10,000–50,000,grew by 5percent, 12 percent. The region’s “micropolitan” placeswith smaller metropolitan areas didwell, growing by over gion’s metropolitan areas. Over thepastdecade,even The vast majority of this growth took place in the re- better thanthenationalaverage of9percent. overall region grew 14percent inthepastdecade—far the Great Plains, aselsewhere, have lostpopulation,the communitiesin from thecoasts.Althoughsomerural tious natives, itscitieshave increasingly drawnmigrants Plains. Once famousasaplacetobefled by young, ambi- Equally strikinghave beenthechangesinGreat migrants. for new sector, theNew Orleans region hasbecomeamagnet paced by anexpandingenergyandentertainment around dramatically. With arecovering economy, Yet years, inthepastfew thissituationhasturned of allmajor Third Coastcommunities. since thestorm,itsuffered themostout-migration Ne U.S. Census2000&2010 w York-Northern NewJersey-LongIsland,NY-NJ-PA Plains Metropolitan Population Growth, 2000-2010 San Francisco-Oakland-Fremont,CA Boston-Cambridge-Quincy, MA-N Chicago-Joliet-Naperville, IL-IN-WI Da llas-Fort Worth-Arlington,TX Omaha-Council Bluffs,NE-I Kansas City,MO-K Oklahoma City,OK Ma Fargo, ND-M Sioux Falls,SD United States Bismarck, ND Lubbock, TX nha Lincoln, NE Joplin, MO ttan, KS H A N S have had strong in-migration from the rest ofthe Virtually allmajorurbanregions oftheSoutheast intheNortheasttheir counterparts orCalifornia. largest metropolitan areas, which grew far faster than a whole). oftheregion’s true This wasparticularly percent (compared with9percent forthenationas had some ofthe strongest population growth—13 east. Over thelastdecade,Southeast corridor from theNorthhad steadyin-migration,particularly - dors as well. The Southeast has, over the past decade, patternholdsinthetwoothercorri- This migratory the Golden State forOklahoma. California, for example; but more people now leave favor corridorcommunities.“Okies” onceflockedto and the largertory migration patterns that now There maywell bealinkbetween thisgrowth his- and hasbeenwidelyignored by thenationalpress. coastal metropolitan areas waslargelyunanticipated growth in the Great Plains cities relative tothe great York, Boston, San Francisco, and Chicago. This much-heralded comebackmegacitiessuchasNew Fargo allgrew twotothree timesmore quicklythan Worth, Oklahoma City, Omaha, Sioux Falls, and 3.1% 3.7% 4.0% 5.1% 9.7% 10.9 11.6 % 12.8 13.3 % 14.1 14.4 % 14.8 % % % 16.6 % % 19.7 % 22.0 32 23.4 % % country. Much of this growth has come at the expense geoning industries such as finance and technology, of other states, especially in the Northeast. This is both of which have established a major presence in notable in slower-growing cities such as Atlanta, as Salt Lake City.33 well as in more economically buoyant places such as Charlotte, Raleigh-Durham, and Nashville. Even as they become net importers of talented people, the growth corridors are the areas with the fastest- In the Intermountain West, the Denver area has growing population of children, a consequence of a continued—even in tough times—to draw migrants migration of young families from the coasts and of from around the country—most notably, from a younger population (which means a larger surplus Southern California and the Bay Area. This brain of births over deaths than the national average). The drain out of California has been at the core of the leading areas for young families in terms of growth Denver region’s emergence as a key tech area and have been in Utah and in the great Texas cities; in potential rival of Silicon Valley. contrast, the population under 17 has declined in New York, Los Angeles, Chicago, and the Bay Area. The same kind of shift has taken place in the Salt Lake City region. For generations, educated people Immigrants Head to the Corridors from the area—many of them Mormons—migrated to the Atlantic and Pacific coasts for opportunities. Migration from abroad has followed the same general But increasingly, the net migration flows have favored pattern as migration within the U.S.: the growth Salt Lake City. Workers who might have moved to corridors are attracting more new arrivals than ever. California have instead stayed, while people elsewhere Although the largest numbers of foreign immigrants have moved to the area, attracted by its natural beauty continue to move into the traditional gateway cities and proximity to the mountains. Others from the (such as New York, Los Angeles, San Francisco, and East and West Coasts have moved for jobs in bur- Miami), the greatest rate of growth in this popula- Growth in Children Age 5-17, 2000–10 Fastest and Slowest Growing Regions

Raleigh 49.4% Las Vegas 40.7% Austin 37.2% Charlotte 35.2% Phoenix 28.4% Atlanta 25.0% Dallas-Fort Worth 23.3% Orlando 22.3% Houston 20.4% San Antonio 18.3%

St. Louis -6.7% Virginia Beach -7.0% Los Angeles -7.3% Providence -8.4% Detroit 9.8%- Cleveland 10.7%- Rochester 11.3%- Pittsburgh 13.0%- Buffalo 13.6%- New Orleans -25.1%

U.S. Census

America’s Growth Corridors: The Key to National Revival 13 14 Civic Report 75 February 2013 in thenation.Houston’s Asianmigrationisgrow- now hometotheeighth-largest Asianpopulation expanded by 160,000,or70percent, andthecityis Over thepastdecade,Houston’s Asianpopulationhas newcomers are increasingly arrivingfrom Asiaaswell. has comelargelyfrom Mexico andLatinAmerica,but migration inthenation. Traditionally, thismigration Houston have someofthehighestratesforeign im- Today, Third Brownsville, Coastports Tampa, and and ethnicallydiverse area. now surpassedNew York asthecountry’s mostracially A recent RiceUniversity studyfoundthatHouston magnets asChicago, Washington, andPhiladelphia. international immigrationthansuchtraditional Houston and Dallas already have a higher rate of by lessthan3percent. tion expandedonlyby 12percent andLosAngeles’s more. In contrast,New York’s foreign-born popula- panded theirimmigrantpopulationby 50percent or including Tampa, Oklahoma City, andAtlanta, ex- and Charlottedoubled.Many othercorridorcities, and 2011,theforeign-born populationofNashville tion is found inside the corridors. Between 2000 EMSI CompleteEmployment,2011.4, USCensusData 56 58 60 62 64 66 68 70 72 74 % % % % % % % % % % 2001 Share ofTotal Population asNon-HispanicWhite 34 2002 2003 2004 2005 2006 Los Angeles,andSeattle. established AsianhubsasNew York, San Francisco, ing 50percent fasterthanmigrationflows tosuch urban centers. work intraditional,more expensive,service large is farmore attractive thanthegenerallylower-paid at food-processing plantsorintheenergyindustry ery. For manyimmigrants,theprospect ofregular pay prime contributor to the region’s demographic recov- slow forgenerations,hasbecomeamajorforce anda Foreign immigrationtotheGreat Plains, whichwas of thecountry. Plains region now is as ethnically diverse as the rest largely becauseofHispanic migration. The Great Americans—is becominglessandhomogeneous, ter—once seenaslily-white,withpocketsofNative tion totheSoutheast andtheGreat Plains. The lat- Similar patternscanbeseenininternationalmigra- shift inmigrationpatterns.Anotherkeydriver isthe isonlyonecomponentofthis Economic opportunity Cost andQuality:ANewPerspective 2007 2008 2009 Re 2010 st ofNaon, 2011 Plains, 63.7 35 63.4 % % Housing Affordability 1950–2011 MAJOR U.S. METROPOLITAN AREAS: MEDIAN MULTIPLE

1950–1970: From Census Bureau 1980–2009: From Harvard University 2010: From Demographia Annual Data Begins at 1980

 Median Multiple: Median House Price divided by Median Household Income

Housing prices in markets with highly restrictive “smart growth” policies compared with “liberal” (i.e., less restrictive) policies typical of all four growth corridors cost of living, particularly housing. Cost differentials also in the coastal metropolitan areas of California among regions in terms of housing prices have always and the Northeast, Cox argues, that “smart growth” existed, but those differences have expanded over the policies have driven housing costs up even higher.36 past two decades. Research by Wendell Cox, based on the 2010 census, shows that lower-cost regions Even setting housing aside, corridors tend to have have been attracting larger numbers of domestic lower prices for the basket of costs that make up a fam- migrants than those with higher housing costs. It is ily budget. Therefore, corridor regions offer not only

Average Annual Wage Adjusted for Cost of Living, 2012

Houston-Sugar Land-Baytown, TX $75,256 Dallas-Fort Worth-Arlington, TX $62,867 Austin-Round Rock-San Marcos, TX $62,679 Memphis, TN-MS-AR $61,780 Charlotte-Gastonia-Rock Hill, NC-SC $61,636 Atlanta-Sandy Springs-Marietta, GA $60,844 Nashville-Davidson-Murfreesboro-Franklin, TN $59,787 Birmingham-Hoover, AL $59,563 Denver-Aurora-Broomfield, CO $59,068 Washington-Arlington-Alexandria, DC-VA-MD-WV $58,672 Chicago-Joliet-Naperville, IL-IN-WI $58,477 New Orleans-Metairie-Kenner, LA $57,151 Salt Lake City, UT $56,978 Tulsa, OK $56,037 Omaha-Council Bluffs, NE-IA $55,434 Oklahoma City, OK $55,345 Tampa-St. Petersburg-Clearwater, FL $54,969 Kansas City, MO-KS $54,706 Wichita, KS $54,471 San Francisco-Oakland-Fremont, CA $52,988 New York-Northern New Jersey-Long Island, NY-NJ-PA $50,169 Los Angeles-Long Beach-Santa Ana, CA $46,411

EMSI Wage data, adjusted with C2ER Cost of Living Index

America’s Growth Corridors: The Key to National Revival 15 16 Civic Report 75 February 2013 the fast-growing corridormega-regions in Texas, the numbers of B.A. and B.S. degrees—can be seen across crease in educated people—measured by increases in major growth-corridor cities.Indeed, the fastestin- educated peoplehasnow becomemuchhigherin over thepastdecade. Yet thepercentage growth of overall increase inpopulation with bachelor’s degrees les, andSan Francisco have longenjoyed thelargest Coastal mega-regions suchasNew York, LosAnge- of Derek Thompson the Brains are moving toward coastalcities,”states Feetpeople: “The are moving southandwest while are made up with “quality” migration of educated what thesetraditionalcitiesloseby thenumbers boosters ofAmerica’s densecoastalcitiessuggestthat Faced withtheseindicatorsthatfavor thecorridors, than residents ofNew York orLosAngeles. Austin, as well as most corridor cities, earn much more for costofliving,wageearnersinHouston, Dallas, and most largecoastalmetropolitan areas. When adjusted higher incomesbutalsomore bang forthebuckthan U.S. DecennialCensusandAmerican CommunitySurvey Growth inResidentswithaBachelor’s Degree orHigher, 2000–10 Oklahoma City San Francisc Salt LakeCity United States Albuquerque Baton Roug New Orlean San Antoni Washingto Birmingham Los Angele Kansas City New York Las Vegas Charlott Memphi The Atlantic. Nashvill Housto Chicag Atlant Denver Mobile Tampa Austin Dalla n n o o o e a e e s s s s 37 10.1% 19.2% 21.2% 24.4% 25.5% 26.3% 27.4% 27.7% 29.5% 30.5% 30.5% 31.0% 31.1% one inacorridor, theywillgainconsiderablewealth. housefor by simplytradingtheiroldnortheastern could makemanyofthosepeople“equity refugees”: to selltheirhouses. The regional pricedifferentials ther andhomeowners intheNortheast are againable pronounced whenthehousingmarket recovers fur- migration, too. This trend couldbecomeeven more terns driven by housingcostswillshapeeducated Over time,we expectthatoverall migrationpat- Omaha, Sioux Falls, andFargo. ing “micropolitan” areas intheGreat Plains, suchas Salt Lakearea, andDenver, aswell assmaller, thriv- Par their economiesare succeeding. sectors are growing—in otherwords, precisely how economic landscapeoftheregions to mapwhich W 33.5% 35.2% 36.1% 36.9% t 3:HowGr 39.5% 39.6% 39.8% 42.4% 48.1% thriving. We now turntotheparticular ridors are andwhytheseregions are e have describedwhere thegrowth cor- 51.7% 52.3% owth IsHappening 78.4% 38 The Energy Boom oil and gas sector over the past decade; Oklahoma has gained some 45,000. These jobs have been an As we’ve mentioned, the tangible economy of com- outstanding driver of high-wage employment, with modities is an important driver of growth in three cor- an average salary of over $75,000 a year.40 Reckoned ridors: the Great Plains, Third Coast, and Intermoun- as a percentage of new jobs, energy development had tain West. Five of the eight largest energy-producing the greatest impact in North Dakota, which has seen companies in the U.S. are located in these corridors. a fourfold increase in such positions since 2000.

Over the past decade, the national share of domestic This exceptional growth is concentrated, at least oil and gas production that takes place in the corri- in part, in the corridors because other regions have dors has steadily increased, just as the nation has had chosen not to exploit their resources. Neither Cali- a resurgence in domestic oil and gas production. In fornia, with its vast oil and gas resources, nor New 2011, the U.S. became a net exporter of petroleum York, with its sizable shale reserves, has moved to products for the first time in 62 years. American develop these assets—despite the fact that in New imports of raw petroleum have fallen from a high of York State, Manhattan Institute studies show that 60 percent of total to less than 46 percent.39 such development would bring in $1.7 billion for the state economy by 2015.41 With the exception of growth in the Pennsylvania- Ohio region, the American energy boom of the past In contrast, the energy boom has created an enor- decade has been a corridor phenomenon. Of the top mous surge in high-wage jobs across the three affected five states with gains in energy-related employment, corridors, which has helped them stave off the worst four are in the corridors, including leader Texas and effects of the recession.42 second-ranked Oklahoma. This energy boom has had perhaps its most dispro- In the growth corridors, Texas, Oklahoma, and Colo- portionate impact in the economies of the Great rado have created the most new energy-related jobs. Plains. Over the past decade, that region has added Texas alone has added more than 200,000 jobs in its nearly 150,000 energy jobs, which pay well above

Employment Growth in Energy Industries, 2001–12

52.3% 46.5%

22.4%

2.7%

-1.9% Great PlainsThird CoastIntermountain Southeast Rest of Nation West Manufacturing Belt

Source: QCEW Employees, Non-QCEW Employees & Self-Employed - EMSI 2012.3 Class of Worker

America’s Growth Corridors: The Key to National Revival 17 18 Civic Report 75 February 2013 than 10,000. Oklahoma City, 16,000;andMidland, Texas, more decade. Dallas–Fort Worth gained more than 17,000; in theGreat Plains gainedenergy jobsover thepast the nationalaverage. Most majormetropolitan areas the energywave. The area produces roughly halfthe Like theGreat Plains, the Third Coasthasridden of therecession. 43 Source: U.S.EnergyInformationAdministration This growth continued through much 56 48 49 50 51 52 53 54 55 30 32 34 36 38 40 42 44 % % % % % % % % % Share ofTotal U.S.OilProduction From GulfCoastRegion % % % % % % % % 20 00 Plains States’Share ofU.S.Field Production ofCrude 2001 20 01 2002 20 02 2003 20 2004 03 20 2005 04 20 2006 05 the Third CoastandtheGreat Plains, stemslargely The Intermountain West’s ascendancy, likethatof Houston, hometomore than230,000energyworkers. has benefitedmore from thesurgeinenergyjobsthan coming decades.AmongAmerica’s majorcities,none dislocation—now seems settoincrease itsoutputinthe Horizon blowout in 2010, which caused considerable country’s oil and—after the setback of the Deepwater 20 2007 06 2008 20 07 2009 20 08 2010 20 09 2011 20 10 44 Energy Employment in the Intermountain West

120

110

100

Thousand s 70

40 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

QCEW, Non-QCEW, & Self-employed - EMSI Class of Worker 2012.3 from commodity development, particularly energy. will result in lower energy costs.46 Investment in large Over the last decade, the area has added more than manufacturing plants is now conducted carefully, 14,000 energy-related jobs, contributing to the weighing a host of factors such as incentives, taxes, growth of ancillary services in cities such as Denver real-estate conditions, and workforce. Strong pro- and Salt Lake City. business regimes place the corridors in an excellent position for future growth. Unless it is stopped by regulatory constraints, this energy boom could be just in its infancy. New finds Other drivers will spur increased manufacturing pro- in the Wattenberg Field north of Denver alone could duction in all four growth corridors, particularly the contain more than a billion barrels of recoverable oil Southeast. According to a recent Boston Consulting and natural gas, placing it on the same level as the Group report, rising wage rates in China, the advan- huge Eagle Ford find in south Texas and the Bakken tage of nearness to the huge North American market, Field in western North Dakota. Another find, the and technological advances are all making domestic Green River formation in Wyoming, could contain manufacturing increasingly attractive. This “realloca- an astounding 1.4 trillion barrels of oil shale.45 tion of global manufacturing,” the report maintains, “is in its very early phases.” This, it concludes, will The Manufacturing Boom make some U.S. states—such as South Carolina, Alabama, and Tennessee—“among the least expensive There are a number of reasons to expect widespread production sites in the industrialized world.”47 industrial expansion in the growth corridors. One is the energy boom that we’ve mentioned. Energy-sector Given the huge productivity gains associated with expansion will boost manufacturing along the Gulf modern manufacturing, the overall job impacts of Coast, with its burgeoning petrochemical complex. this trend will not be huge. But industrial growth The boom could also create, according to a recent tends to spark expansion in service sectors48 and PricewaterhouseCoopers study, more than a million attracts considerable investment into communities industrial jobs nationwide to supply the industry and where new plants open.

America’s Growth Corridors: The Key to National Revival 19 20 Civic Report 75 February 2013 gains intheregion’s smallercities.Since 2007,the rate across the Great Plains region, withthe greatest trial employment has expandedattwicethenational layoffs than the rest of the country. Since 2010, indus Plains theGreat region survived Recession withfewer able businessconditions,manufacturers intheGreat nation toallthecorridors.Partly becauseoffavor- Industrial growth ofthe hasshiftedfrom otherparts Source: Foreign Trade Division,U.S.CensusBureau. 22% 18% 19% 20% 21% Plains StatesShare ofU.S.Manufactured Exports 2007 Heavy IndustryJobGrowth, 2010–12 2008 - 2009 decade, manystatesalongthe Third Coasthave been larly criticalfortangibleindustries.Over thepast The corridors’ strong pro-business culture- isparticu A NewIndustrialHeartland from 19 percent to21 percent ofthe nation’s total. region’s share of manufactured has grown exports 2010 21.0% 2011 49 Opened and Announced Industrial Investments, 2010–11

primary beneficiaries of new petrochemical plants, belong to a union falls well below the national 2011 establishments rarely sought after in the Northeast average of 11.8 percent.52 In the Carolinas, as well as or California. This is particularly notable in Hous- Georgia and Tennessee, the rate is below 5 percent.53 ton, which has had one of the strongest increases in Even Alabama, with the highest union percentage manufacturing over the past decade of any major city. in the region, stands at 10 percent, still below the national average.54 The Southeast corridor’s increasing focus on heavier industry—notably, automobiles and related suppli- In traditional heavy industries in the Southeast, much ers—provides generally better-paying employment of the decade’s growth has come from overseas firms, than its traditional manufacturing, which was con- which generally lack legacy relationships with estab- centrated in lower-wage industries such as textiles lished unions. Ever since Toyota opened up a plant and furniture. Several factors have contributed to the in Georgetown, Kentucky, in 1985, attracting foreign Southeast’s ascendancy in heavy manufacturing. Land automakers has figured greatly in regional economic is cheap and plentiful, and the area is serviced by a good development. The Southeast witnessed a flurry of transportation system, including access to ports.50 In new automotive assembly efforts in 2011—perhaps fact, South Carolina exports more automobiles than most notably, Toyota’s Blue Springs plant. And any other state through its port of Charleston—many Mercedes-Benz announced that it will invest $350 produced by the mammoth BMW facility in Spartan- million to add capacity to its plant outside Tuscaloosa, burg. In 2011, the state boasted a 21 percent increase joining Navistar, the nation’s top manufacturer of in exports, largely from manufactured goods.51 school buses and medium-duty trucks, which also announced plans to expand in Alabama. The low rate of union membership in the region could also be a factor attracting industry. The per- The vast majority of new U.S. investments made centage of workers in every southeastern state who by auto companies have come into this corridor,

America’s Growth Corridors: The Key to National Revival 21 22 Civic Report 75 February 2013 relate totheautomotive sector. a third ofallmanufacturingjobsin Tennessee now state’s economicdevelopment office recently saidthat to theautomotive sector. ments madeinAlabamaduring2011were related since summer 2011. projects totaling$300 million have been announced In neighboring Tennessee, 11automotive-related trucks. tion’s andfifth-largestproducers ofcarsand fourth- catapulting Alabama and Kentucky into the na to manufacture theChevrolet Equinox. shuttered assemblyplantinSpring Hill, Tennessee, an initialinvestment of$61millioninitspreviously announced inSeptember 2011thatitwouldmake ments are tied to foreign auto manufacturers, GM at thatplantto3,700. popular Passat model, boosting total employment at itsChattanoogaplanttomeetdemandfor recently announcedplanstohire 800more workers percent between 2001and2011. facturing sectorinAlabamagrew anastonishing466 55 Almost a quarter of all project Almost a quarter announce- Source: EMSICompleteEmployment,2011.4 Concentration ofMotorVehicle Manufacturing andSuppliers,2011 58 Although most new develop Although most new - 60 Acommissionerfrom the 56 The automobile-manu- The 61 57 59 Volkswagen - growth inaerospace, in Charleston.Mississippi, too,hasseenmarked Dreamlinerhas announcedplans to assembleitsnew opened a$600millionplantinMobile, andBoeing space andotherhigh-techindustries.Airbusrecently The Southeast hasalsomoved aggressively intoaero- Booming Aerospace andHigh-Tech in Europe, Asia,andLatinAmerica. tor notonlyoftheindustrialMidwest butoffirms The Southeast israpidlybecomingaprimecompeti- largely totheindustrial Third ofMobile. Coastport have establishedcomplexsupplierchains,linked Companies such as Mercedes, Honda, andHyundai to thetraditionalGreat Lakes–basedindustrialbelt. the Southeast is rapidlyemergingas a seriousrival As aresult ofallthisautomobile-related expansion, aerospace jobscreated globally. and theSeattle-Tacoma region inthenumberof Louisiana trailsonlyCalifornia, Toulouse (France), The Third Coastcorridorstretching from Florida to aerospace industry isrankedsixthin aerospace industry 62 whileGeorgia’s burgeoning 64 the nation. 63

Employment Growth in Professional, Technical, and Scientific Services, 2001–12

28.1%

22.2% 20.6%

17.1%

11.9%

Great Plains Third CoastIntermountain Southeast Rest of Nation West Manufacturing Belt Source: QCEW, Non-QCEW, & Self-employed - EMSI Class of Worker 2012.3

Technology-based growth has become more com- and the Salt Lake–Provo metropolis, has had the monplace throughout the four corridors. All the highest growth in professional, technical, and scien- corridors have greatly outperformed the rest of the tific services—an astounding 30 percent, more than country in creating new science, technical, and pro- twice the national average and the highest of any of fessional jobs. the corridors.

The shift to high tech has been most dramatic in the Nowhere is the shift toward the Intermountain West Intermountain West. The area, particularly Denver clearer than in Utah. There is now a plethora of high- Employment Growth in Software, Computer, Data, and R&D Industries, 2001–12

30.9%

14.5% 13.9% 13.2% 10.7%

Great Plains Third CoastIntermountain Southeast Rest of Nation West Manufacturing Belt Source: QCEW, Non-QCEW, & Self-employed - EMSI Class of Worker 2012.3

America’s Growth Corridors: The Key to National Revival 23 24 Civic Report 75 February 2013 from Salt LakeCitytoProvo. with largeoperationsalongUtah’s Wasatch Front tech firms,including Intel, Adobe, Twitter, andeBay, California. in Utah andColoradois60percent lower thanin margin. The cost of real estate for manufacturing California, andColorado’s costsare lower by asimilar costs inUtah are almost50percent below thosein This development isnothard tounderstand.Energy the nationinper-capitapatents. based in Denver. Colorado already ranks tenth in to openitsfirstbranchinoneofthecorridors, recently ledtheU.S.patentandtrademark office area. Its already buoyant level of tech-based activity trained workers andentrepreneurs flocktothe rivalwell ofSilicon becomeatrue Valley, asmore At somepoint,theIntermountain West could to itseconomicfuture. continues topursueahigh-cost,high-taxapproach West are asCalifornia likelytocontinue,particularly high-tech shiftsfrom CaliforniatotheIntermountain favorable businessclimateandlower housing prices, Statistics, basedondatafrom theAmericanAssociationofPort Authorities Source: U.S.DepartmentofTransportation, Research andInnovativeTechnology Administration,Bureau ofTransportation TEUs =twenty-footequivalentunits. One20-footcontainerequalsoneTEU,and40-foot twoTEUs. 66 Given thecorridor’s generallymore U.S.Waterborne Foreign ContainerizedExportandImportTEU

-100% Growth since 1980 100% 200% 300% 400% 500% 600% 700% 0% 1980 1982 65 1984 by CoastalPort Region:1980–2009 1986 67 1988 1990 1992 1994 1996 its extensive direct linkstoAsia. theLosAngeles–LongBeach area,particularly with connections toEurope, andthenthe West Coast, focus oftradefirstfavored with easy EastCoastports, andintothetwentieth, the late nineteenthcentury to markets inEurope andtheNortheast. But inthe planter economyoftheCaribbeanbasin,aswell as inant city, New Orleans, was tied primarily to the Historically, theregion, its once-dom- particularly This activityismostfevered onthe Third Coast. Plains tothenation’s southernrim. linkages fromby developingtransport theGreat new There are several proposals toacceleratethisprocess but by theexpansionofcorridoreconomies. axis, acceleratednotonlyby LatinAmericangrowth future growth maybemoving alonganorth-south lowing theoldeast-west orientation,thecountry’s a fast-growing andnearby market. Ratherthanfol- U.S. tradehasbeenshiftingtoward LatinAmerica, changes inthenation’s globalfocus.Increasingly, The emergenceofthecorridorscomesamidmajor The RiseofLatinAmerica 1998 2000 2002 We 2004 st/P Ea Gulf 444% 2006 acific Coas st /A Coast, 258% 2008 tlantic 339% t, Coast,

In the twenty-first century, this pattern has begun to Part 4: America’s Future and the change. Since 2003, the Third Coast’s share of U.S. Growth Corridors exports has grown from 10 percent to 16 percent and from $76 billion to $234 billion. The region is he rise of the four growth corridors presents now home to several of the country’s leading ports, a great opportunity for the United States in led by Houston and New Orleans, which also boast Tthe coming decades. Throughout history, as the first- and second-fastest growth in custom district the historian Fernand Braudel notes, core economies traffic among the top five districts, outpacing New “took advantage of the backwardness and inferiority” York, Los Angeles, and Detroit.68 of the periphery.71 In the corridors, though, we see the periphery catching up to—indeed, outpacing—the This reflects a major shift in trade patterns. In the twentieth-century core of the American economy. 1980s, California’s Pacific ports overtook those of This development will do more than keep the U.S. the East Coast to become the top import-export economy growing: it will also spur new relationships sites in the United States. But now, U.S. trade with between old urban centers and emerging ones—re- Mexico, South America, and the Caribbean basin lationships that will be crucial to the new globalized has expanded rapidly. Over the last decade, for economy of the twenty-first century. example, Third Coast trade with South America and Caribbean countries increased by 167 percent, To successfully navigate these changes, the United far outpacing increases in the region’s trade with States will have to return to the kind of expansive Europe and Asia. agenda that characterized the country until recent times. Early in U.S. history, leaders such as Henry Clay The historical emergence of Latin America is critical and John C. Calhoun supported an elaborate infra- to the Third Coast’s development. With 600 million structure to link cities with less developed regions and people, including a middle class of some 400 million, generate greater economic growth. “Let us then bind Latin America represents one of the world’s great the Republic together with a perfect system of roads growth markets. Poverty, although still a reality for and canals. Let us conquer space,” Calhoun suggested. some 200 million residents, has dropped 17 percent since 1990. Latin America’s total GDP is already These “internal improvements,” to use the nine- larger than Russia’s and India’s combined—larger, teenth-century phrase, were long a fundamental in fact, than any region’s besides the U.S., the E.U., American strategy for economic growth. The devel- and China.69 opment of canals, followed by the rail, freeway, and air-transport system, bound this vast country to- In the future, many Third Coast ports will likely gether, creating the greatest economic power in world increase trade with Asia. The scheduled 2014 history. The New Deal and its political successors, opening of an expanded Panama Canal, with including the Eisenhower administration’s emphasis double its current capacity, will likely shift some on water development, power, and transportation, Asian trade from America’s West Coast ports to set the stage for the country’s great postwar boom.72 its Third Coast. Houston will likely benefit most; the city expects a 15 percent jump in Asian trade Policymakers in the corridors as well as outside need after the canal expansion project is complete. In to remember the critical role that our continental contrast to ports in the Northeast and California, expanse has played in our past and could play in our virtually all the Third Coast ports—and many on future. For better or worse, America will never be the southeast littoral as well—are in the process orderly and dense like Japan or Korea, nor will it be of large-scale expansions.70 a capital-city-dominated economy such as the United

America’s Growth Corridors: The Key to National Revival 25 26 Civic Report 75 February 2013 attention inSacramento. State’s job-generatingpoliciesmightmeritgreater pointing outthatsomeaspectsoftheLoneStar with even thestate’s Democratic lieutenantgovernor “Texas model” hasalready becomeapoliticalissue, the Pacific and inthe Northeast. In California,the state, slower-growth alternatives espousedalong tothemore steady- dors willactasacounterweight We expectthat over time, the emerging four corri- American history, anditremains today. true out. inthepreviousThis wastrue twocenturiesof ing thispatternandrecognizing where itisplaying migrants, companies,andinvestors arise from accept- regions, anddecliningregions. for Opportunities constantly changingmosaicofboomregions, mature Kingdom orFrance. Instead, theUnited States isa transition to“green” energy, suchasCalifornia,have on ourpolicymakers.Regions committedtoarapid energy—notably, solarandwind—mayfinallydawn relatively ofalternative weak economicperformance conventional wisdom is in the realm of energy. The The biggestchallengethatcorridorsuccessposesto 73 demand awiderfieldforitsexercise.” on apeople,theAmericanenergywillcontinually dominant fact,and,unlessthistraininghasnoeffect American lifehasnow ceased.Movement hasbeenits “who thattheexpansive characterof shouldassert Turner suggestedaround theturnoflastcentury, “He wouldbearashprophet,” Frederick Jackson nomic geographywillcontinuetodrive itstrajectory. isnotnearitsend,andeco- The Americanstory strengthen thelong-termprospects forthiscountry. their vitalitytowhatalready existscanonlyfurther and manufacture tofinanceandculture. Adding with more established areas from tech in everything regions willcontinuetocompete,oftensuccessfully, New Orleans—will paceourfuture growth. These Dallas–Fort Worth, Nashville, Charlotte, Raleigh, dors andespeciallytheirascendantcities—Houston, economy ofthegreat coastalmetropolises, thecorri- Unless there isanunexpectedshiftinthepolitical “green” jobs. only asmallnumberofnew, largelysubsidized seen energyprices skyrocket andhave experienced 74 75 Endnotes

1 Frederick Jackson Turner, The Significance of the Frontier in American History (New York: Ungar, 1973), p.74

2 Analysis of U.S. Census Land Area data, by Mark Schill, Praxis Strategy Group.

3 Analysis of EMSI Complete Employment, 2012.3, by Mark Schill, Praxis Strategy Group.

4 See http://articles.latimes.com/print/2011/may/15/opinion/la-oe-meyerson-europeans-20110515.

5 Ibn Khaldun, The Muqaddimah, trans. Franz Rosenthal (Princeton, N.J.: Princeton University Press, 1967), p. 135.

6 See http://www.energybulletin.net/stories/2012-07-23/dawn-great-california-energy-crash; and U.S. Energy Information Administration, “U.S. Crude, Natural Gas and Natural Gas Liquids Reserves,” November 30, 2010.

7 See http://sacramento.cbslocal.com/2012/05/15/north-dakota-becomes-nations-second-leading-oil-producer- passing-alaska-and-california.

8 See http://chiefexecutive.net/best-worst-states-for-business-2012.

9 See http://taxfoundation.org/article/2012-state-business-tax-climate-index.

10 See http://www.alec.org/docs/RSPS_5th_Edition.pdf.

11 Gerald T. Prante and Austin John, “Top Marginal Effective Tax Rates by State and by Source of Income, 2012 Tax Law vs. 2013 Scheduled Tax Law,” November 15, 2012, http://ssrn.com/abstract=2176526.

12 “California Ugly,” The Wall Street Journal, May 14, 2012; http://www.manhattan-institute.org/html/cr_71.htm#. UG7mz1Fsh8E; and http://www.empirecenter.org/pb/2011/08/migration1080311.cfm.

13 Susan Aluise, “Foreign Automakers Drive Growth in U.S. Manufacturing Jobs,” Investor Place, June 3, 2011; and http://www.siteselection.com/issues/2011/nov/cover.cfm.

14 Thomas L. Friedman, “Pass the Books, Hold the Oil,” The New York Times, March 11, 2012; Edward B. Barbier, Scarcity and Frontiers (Cambridge: Cambridge University Press, 2011), p. 681; and James Howard Kunstler, The Long Emergency (New York: Grove.Atlantic ], 2005), p. 185.

15 Paul Kennedy, Preparing for the 21st Century (New York: Random House, 1993), p. 335; Norbert Walker, “Germany’s Hidden Weaknesses,” The New York Times, February 9, 2012; David Winning and Min-Jeong Lee, “Asia Bids for Australia’s Rich Resources,” The New York Times, February 15, 2011; and Peter Muello, “New Rig Brings Brazil Oil Self-Sufficiency,” Associated Press, April 21, 2006.

16 Joseph W. Glauber, “Prospects for the U.S. Farm Economy in 2011,” http://www.usda.gov/documents/Glauber_Joe_Speech.pdf [ February 21, 2011.

17 Ibid.

America’s Growth Corridors: The Key to National Revival 27 28 Civic Report 75 February 2013 36 35 34 33 32 31 30 29 28 27 26 25 24 23 22 21 20 19 18

DouglasStanglin,“Study:HoustonArea PassesNYCastheNation’s MostDiverse,”USAToday , March 8,2012. NelsonD.Schwartz,“FinancialGiantsAre MovingJobsOff Wall Street,” TheNewYork Times, July2,2012. Seehttp://usatoday30.usatoday.com/money/economy/2010-10-12-oklahoma12_CV_N.htm. Basedondecennialcensus. UtahBusinessandEconomicProfile, edcUtah[,SaltLakeCity, 2012. U.S.decennialcensus. Seehttp://www.newgeography.com/content/003007-the-us-cities-getting-smarter-the-fastest. Ibid.;and“Toyota toBuildPriusHybridinU.S.,”Agence-FrancePress, July10,2008. Idem,“Toyota: HowMississippiEngineered theBlueSpringsDeal,”NewGeography.com, November17,2011, AndySywak,“TheSouthRisesAgain!(inAutomobileManufacturing,ThatIs),”NewGeography.com, July23, Seehttp://www.newgeography.com/content/002044-americas-biggest-brain-magnets. ontheBayou:ANewModelforAmericanEducation,”Third “Born Way, DavidOsborne, September2012. Ibid.,2003figures, http://www.higheredinfo.org/dbrowser/index.php?submeasure=337&year=2003&level=natio NCHEMSInformationCenterforHigherEducationPolicymakingandAnalysis,2009figures, http://www. “EducationalAttainmentintheUnitedStates:2009,”U.S.CensusBureau, p.11. Seehttp://colleges.usnews.rankingsandreviews.com/best-colleges/rankings/national-universities. Shepard DanielwithAnuradhaMittal,“TheGreat LandGrab:RushforWorld’s FarmlandThreatens FoodSecurity Seehttp://www.demographia.com/db-bubblehaff.pdf; andhttp://www.newgeography.com/content/00512- Seehttp://www.newgeography.com/content/003080-the-changing-geography-asian-america-to-the-south-andhttp://www.newgeography.com/content/002529-toyota-how-mississippi-engineered-blue-springs-deal. 2008, http://www.newgeography.com/content/00107-the-south-rises-again-in-automobile-manufacturing. n&mode=graph&state=0. higheredinfo.org/dbrowser/index.php?submeasure=331&year=2009&level=nation&mode=graph&state=0. The Washington Post,August21,2011. for thePoor,” OaklandInstitute,2009,p.6;andSethLubove,“BettingtheFarm—andWinning,” moving-flyover-country. the-suburbs. 37 See http://www.theatlantic.com/business/archive/2010/12/americas-bipolar-population-shift/68709.

38 Brian Chappatta, “U.S. Population Migrates from Coasts for ‘Gigantic’ Income Boost,” Bloomberg News, December 21, 2011; and Jennifer Medina and Sabrina Tavernise, “Economy Alters How Americans Are Moving,” The New York Times, October 27, 2011.

39 Liam Pleven and Russell Gold, “U.S. Nears Milestone: Net Fuel Exporter,” The Wall Street Journal, November 30, 2011; Daniel Yergin, “America’s New Energy Security,” The Wall Street Journal, December 12, 2011; Vinod Dar, “World’s Largest Producer of Natural Gas? Now It’s the U.S.,” SeekingAlpha.com, January 13, 2010; and Robert Bryce, “America Needs the Shale Revolution,” The Wall Street Journal, June 13, 2011.

40 Based on Praxis Strategy Group estimates using http://www.economicmodeling.com/ data

41 See http://www.manhattan-institute.org/html/eper_09.htm.

42 Brenda Cronin, “Oil Patch Bucks Income Drop,” The Wall Street Journal, February 2, 2011.

43 An analysis of QCEW workers, non-QCEW workers, and self-employed, EMSI class of worker 2012.3, by Mark Schill, Praxis Strategy Group.

44 “The Impact of Decreased and Delayed Drilling Permit Approvals on Gulf of Mexico Businesses,” Greater New Orleans Inc., January 30, 2012; Tom Fowler, “After Spill, Gulf Oil Drilling Rebounds,” The Wall Street Journal, September 21, 2012; and Tom Fowler, “Return to the Gulf,” The Wall Street Journal, December 15, 2011.

45 Russell Gold, “Anadarko Raises Colorado Oil Tally,” The Wall Street Journal, November 15, 2011; and John Merline, “Scarce Oil? U.S. Has Sixty Times More than Obama Claims,” Investor’s Business Daily, March 14, 2012.

46 Ed Morse, “Move Over, OPEC—Here We Come,” The Wall Street Journal, March 19, 2012; Wendy Koch, “Oil Boomlet Sweeps U.S. as Exports and Production Rise,” USA Today, December 19, 2011; http://www.pwc.com/us/en/press-releases/2011/abundance-of-shale-gas.jhtml; and Guy Chazan, “Big Oil Heads Back Home,” The Wall Street Journal, December 5, 2011.

47 See http://www.cookassociates.com/media-center/press-releases/2011-press-releases--/bid/79967/SURVEY-85-of- manufacturing-executives; and Harold L. Sirkin, Michael Zinser, and Douglas Hohner, “Made in America, Again: Why Manufacturing Will Return to the U.S.,” Boston Consulting Group, August 2011.

48 See http://www.esa.doc.gov/Reports/engines-growth-manufacturing-industries-us-economy-0.

49 Foreign Trade Division, U.S. Census.

50 Joshua Wright, “Data Spotlight: Ranking States by Their Dependence on Manufacturing,” NewGeography. com, March 21, 2012, http://www.newgeography.com/content/002737-data-spotlight-ranking-states-their- dependence-manufacturing?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Newge ography+%28Newgeography.com+-+Economic%2C+demographic%2C+and+political+commentary+about+p laces%29.

America’s Growth Corridors: The Key to National Revival 29 30 Civic Report 75 February 2013 69 68 67 66 65 64 63 62 61 60 59 58 57 56 55 54 53 52 51

Seehttp://www.bizjournals.com/denver/print-edition/2012/07/20/patent-office-marks-a-denver-area.html?page=all. Seehttp://www.electricchoice.com/electricity-prices-by-state.php; and“UtahManufacturing Industry,” Economic Seehttp://www.norcalblogs.com/bored/2010/08/utah-lures-adobe-other-california-high-tech-companies.php. Seehttp://blog.al.com/live/2012/09/airbus_growth_forecast_bodes_w.html. Seehttp://www.aviationweek.com/Article.aspx?id=/article-xml/awx_07_11_2012_p0-475640.xml; Seehttp://www.ainonline.com/aviation-news/2012-07-10/americas-south-rises-again-aerospace-wave-mississippi. Accardi, “EconomicDevelopmentLeaders.” JerryHirsch,“Volkswagen toAdd 800JobsatU.S.Factory,” LosAngelesTimes, March 23,2012. NickBunkley, PlanttoReopen,andG.M.Add700Jobs,”TheNewYork “Ex-Saturn Times, November21, Ibid. Wright, “DataSpotlight.” MarianAccardi, “EconomicDevelopmentLeaders,Gov. RobertBentleySpeakatAutomotiveConference in http://www.conexusindiana.com/documents/2011-market-data-na-production.pdf Ibid. Ibid. Bureau ofLaborStatistics,http://www.bls.gov/news.release/union2.nr0.htm. DavidSlade,“ExportsonRisethrough PortofCharleston,”ThePostandCourier,March 21,2012, RaulRivera,“Puncturingthe 4MythsaboutLatinAmerica,”QuarterlyAmericas(spring2011);andDavid Greater HoustonPartnershipcalculationsbasedondata from WISERTrade: Trade International Database. Development CorporationofUtah,2012. news/2012-07-10/americas-south-rises-again-aerospace-wave-mississippi. com/publications/Aerospace-Industry-Report-Feb-2012.pdf; andhttp://www.ainonline.com/aviation- http://online.wsj.com/article/SB10000872396390444914904577615920149581932.html; http://selectgeorgia. 2011, http://www.nytimes.com/2011/11/22/business/saturn-plant-to-reopen-with-700-jobs.html. Huntsville,” TheHuntsvilleTimes, November4,2011. The Wall StreetJournal,July5,2012. http://postandcourier.com/article/20120321/PC05/303219912; andJohnBussey, “AnEngineDownSouth,” Luhnow, “PovertyRatesFallinLatinAmerica,”TheWall StreetJournal,December1,2011 70 Susannah Jacob, “Canal Expansion Raises Expectations and Questions,” The New York Times, February 18, 2012.

71 Fernand Braudel, The Perspective of the World, trans. Sian Reynolds (Berkeley: University of California Press, 1979), p. 91.

72 David E. Nye, America as Second Creation (Cambridge, Mass.: MIT Press, 2003), pp. 147, 246.

73 See http://www.bloomberg.com/news/2011-04-14/california-begs-texas-for-job-recipe-with-growth-trading- places.html.

74 “The Price of Green Virtue,” The Wall Street Journal, July 7, 2012; Sheila McNulty, “Uneven Incentives Hamper Growth,” Financial Times, January 18, 2011; Russell Gold, “Wind, Solar Energy Still Face Big Hurdles,” The Wall Street Journal, March 31, 2011; Robert Samuelson, “Energy Pipedreams,” The Washington Post, June 21, 2010; and Aaron Glantz, “Number of Green Jobs Fails to Live Up to Promises,” The New York Times, August 18, 2011.

75 Frederick Jackson Turner, p. 57.

America’s Growth Corridors: The Key to National Revival 31

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