The Midwest is in a vicious cycle

As the 2024 elections approach, this edition of Labor Matters will examine the political implications of labor market and higher education trends, and how these trends, in turn, influence politics. Nowhere are these issues more prominently highlighted than in the Midwest.

The Midwest finds itself amid a vicious cycle of economic, demographic and educational decline that is reshaping its societal and political landscape. Historically a manufacturing stronghold, the region has suffered significant job and population losses, and economic stagnation. At the same time, the Midwest is barely benefiting from the rise of tech and consulting, that are boosting growth in other parts of the country.

Amidst these challenges, there has been a notable political shift, with the Midwest increasingly gravitating towards the Republican Party. This political realignment corresponds with a growing skepticism among Republicans about the value of higher education. This skepticism is manifesting tangibly as a stagnation in 4-year college enrollment rates across the Midwest.

The cycle of economic decline and educational disengagement is likely to perpetuate itself, potentially leading to even more significant declines in the coming years.

Economic and population decline

The economic trajectory of the Midwest over the past few decades has been significantly shaped by two major factors: the decline of the manufacturing sector and the minimal impact from the booming tech and consulting industries.

Historically, the Midwest relied heavily on manufacturing. However, this sector has experienced a significant decline in employment due to a combination of offshoring, migration to the Sun Belt, and automation. These changes have led to widespread job losses and reduced economic activity, contributing to a broader economic downturn in the region.

In contrast, the expansion of the U.S. economy over the past decade has been significantly driven by two key sectors: Professional & Technical Services and Information, representing the technology and consulting industries. The accompanying chart illustrates the importance of these sectors to state GDPs, showing that they play a substantial role in the economies of the Pacific region and states near New York City, Boston, and Washington D.C.

However, many states in the South and Midwest see minimal impact from these industries. Consequently, the populations in these regions largely miss out on the rapid growth observed in the tech and consulting sectors.

Recent economic data starkly reflects these trends. Among U.S. regions, the Midwest, particularly the Great Lakes states, has experienced the most significant drop in per capita income relative to the national average over recent decades. As a result, nearly every state in the Midwest now falls below the average state income.

This trend is evident in the distribution of fast-growing metropolitan areas in the U.S., where the Midwest is notably underrepresented. For instance, between 2012 and 2022, only three out of 72 metropolitan areas identified as top performers in personal income and per capita income growth were in the Midwest.

In recent years, this slower growth in Midwestern states has persisted:

In addition to declining per capita income, Midwestern states have also been among the slowest growing in terms of population. Even if an individual's financial situation remains stable, living in an area with a shrinking population can negatively impact their sense of well-being. Reduced social interactions, fewer local services, and economic stagnation contribute to feelings of isolation and insecurity. Moreover, the visible deterioration of the community and a decline in cultural activities can adversely affect mental health and overall quality of life.

?Impact on voting

This economic and population decline has also had significant political ramifications. Our analysis indicates a substantial political shift in the Midwest between the 2012 and 2020 presidential elections, with no other region in the country moving more decisively towards the Republican Party. Over the past decade, the Republican Party's message has increasingly resonated with those who feel economically left behind—a sentiment that has grown strong and relatively new in the Midwest.

The Midwest's shift towards the Republican Party is part of a broader trend where regions with lower levels of education and income increasingly align with Republican candidates. The chart below presents findings from a recent analysis that examines the relationship between the Republican-Democrat vote share gap and key demographic indicators: personal income per capita and the population share with a bachelor’s degree. This analysis utilized data from the 2000 largest counties in the United States, covering presidential election results from 2000 to 2020.

In 2000, the analysis revealed a barely negative correlation between the vote share gap and both personal income per capita and the share of the population with a bachelor’s degree, indicating that voting preferences were not significantly polarized by these demographic factors at the turn of the millennium.

?However, over the next 20 years, these correlations turned markedly negative, particularly in relation to the population share holding a bachelor’s degree or higher. This shift suggests a substantial change in how educational attainment influences voting behavior, with lower education levels increasingly aligning with the Republicans.

?The evolution of these correlations, especially the pronounced negative shift with education levels by 2020, indicates a growing political divide based on socioeconomic status, particularly education. If this trend continues through 2024, areas with lower education attainment and personal income, like the Midwest, are likely to shift further towards Republicans.

And there are also higher education implications. A recent Gallup study ?https://news.gallup.com/poll/646880/confidence-higher-education-closely-divided.aspx) reveals a significant decline in public confidence in higher education, particularly among Republicans. According to the study, 50% of Republicans now express very little or no confidence in higher education institutions, marking a substantial increase from six to nine years ago.

The declining confidence among Republicans is likely leading to reduction in their enrollment in colleges and universities. Our earlier analyses indicate that, all else being equal, colleges in counties that shifted towards the GOP between 2012 and 2020 saw significant declines in student numbers.

And when looking at actual enrollment data, while in other regions, the share of 18-24 y.o enrolling in 4-year colleges has been growing in the past decade, in the Midwest it has been stagnating.

The Midwest contends with simultaneous declines in educational attainment, population and economic development. This region is caught in a self-perpetuating cycle of economic downturn and educational disengagement, which may lead to more pronounced declines in the future. The widening economic divide threatens the Midwest's competitiveness and viability in a rapidly changing national landscape. This trend, if unaddressed, suggests that today's challenges could merely be the beginning of a more severe deterioration.

Without significant intervention, such as a comprehensive development plan akin to the Marshall Plan, the Midwest risks further economic degradation and a deepening distrust in fundamental American institutions and democratic values.