Center for Research on the Wisconsin Economy (CROWE), UW-Madison
Since the 2016 presidential election a popular narrative has been that poorer areas in the industrial Midwest have been left behind economically, falling further behind faster growing urban and coastal regions. Whatever merit this narrative may have nationally, it fails as a description of economic dynamics at the county level. This is particularly true of the counties in Wisconsin, which has been a focus of attention after voting for Republican in the 2016 presidential election, the first time since 1984. Rather than falling behind, over the last decade the initially poorer, rural counties in the state have seen greater improvements in living standards than richer, urban ones.
In December 2007, right before the Great Recession, the unemployment rate in Menominee County, the smallest and poorest county in Wisconsin, stood at 9.6%. This rate was the highest of all 72 counties in the state and more than five percentage points above the statewide average. The recession which followed was especially severe in Menominee County, with unemployment climbing to 15.3% by December 2010, more than six points above the state average.
From the depths of the recession, unemployment has fallen consistently statewide during the economic recovery of the last seven plus years. It fell especially rapidly in Menominee, where by December 2017 unemployment was 4.3%, only 1.6 points above the statewide level. During the recovery Menominee had more than made up the ground it lost during the recession, and had substantially narrowed the pre-recession gap to the rest of the state.
In a recent report, I showed that the experience of Menominee County was extreme but not atypical, as there has been a substantial narrowing of the gaps across counties in many measures of living standards. Like Menominee, counties with higher unemployment rates in 2007 experienced larger average declines in unemployment the following ten years. In addition, over the last decade the poverty rate has declined the most in the poorest counties. While Menominee remains the poorest county in the state, from 2007-2016 its poverty rate fell by nearly seven percentage points, by far the largest reduction statewide. Moreover, counties with a lower incomes in 2007, whether measured by median household income or per capita personal income, experienced faster income growth on average over the following ten years.
Each of these measures includes the period of recession and recovery, so looks at changes from one period of expansion to another. I also find evidence of “snapback growth,” as those counties which suffered the most during the recession have had the largest improvements during the subsequent recovery. But beyond this decline and snapback, the net gains over the recession and recovery have been positive. The counties which were initially worst off have more than made up for their losses during the recession and have closed the gap to those areas which were initially better off.
Although residents in poorer rural counties have seen larger average gains in living standards, the overall scale of economic activity in these counties have not kept pace with larger, richer counties. In particular, counties with a higher level of employment, larger labor force, or bigger population in 2007 experienced faster growth in those measures on average in the following decade. Out of the smallest 13 counties in the state only one, Menominee County again, experienced an increase in population from 2007-2017. All of the others experienced declines, by an average of 4%, with some losing of more than 7% of their population. By contrast the 16 largest counties in the state all had population increases, by an average of 4%, with the state’s second largest county (Dane) growing by 12.6%. Thus the last decade has seen a significant reallocation of the population within the state, with growth in the more concentrated and urban areas and loss in the less populous rural areas.
This evidence is consistent with the trend of increased geographic concentration that has been ongoing nationwide. The general pattern of convergence in living standards and divergence in population was similar in Wisconsin and the rest of the country, but the effects were stronger and more uniform across the regions within Wisconsin. Wisconsin had a larger reduction in unemployment, a smaller growth in population, and a more significant narrowing of income gaps than the rest of the country.
This relative population reallocation also may have contributed to the convergence in living standards as the poorer residents from the less concentrated areas moved to the cities. Further, the difficulties associated with the slow growth of the labor force which have gained increasing attention statewide, such as the difficulties employers face in filling open jobs, have become particularly acute in smaller counties.
“A rising tide lifts all boats,” is a common description of how economic growth leads to shared prosperity. However the rising tide of the recent expansion has not lifted all regions equally. The largest, most populous areas have grown even larger, while the smallest, poorest counties have been lifted the most.