ERROR
Main Error Mesage Here
More detailed message would go here to provide context for the user and how to proceed
ERROR
Main Error Mesage Here
More detailed message would go here to provide context for the user and how to proceed
search
Close Nav

The Semi-Elite City

back to top
eye on the news

The Semi-Elite City

Chicago’s core problem is that it struggles to lure top talent away from coastal superstar cities. August 9, 2022
Cities
Economy, finance, and budgets

Hell hath no fury like a Chicagoan who thinks his city has been scorned. Blow-ups over insufficiently laudatory media coverage of the Windy City are a semi-regular occurrence. The most recent round occurred late last month, when Matthew Yglesias posted an article expressing his worries for Chicago’s future. Predicting decline for the nation’s third-largest city, he said remote work was “a dire threat to places like Chicago that were affordable but slow-growing before the pandemic.” He continued: “The problem facing Chicago and other midwestern cities is that low demand is not an affordability strategy—it’s a recipe for failure.”

I managed to divert some anti-Yglesias blowback to myself when I noted, in a Twitter thread defending the city’s prospects, that its core problem was that it attracts “B” grade talent in comparison with the “A” talent drawn to the coasts. This resulted in millions of Twitter impressions’ worth of scorn directed my way.

In truth, headlines about murders, carjackings, and businesses leaving town overshadow lots of objective data attesting to Chicago’s strength. A group of local researchers recently detailed some of these stats in Crain’s Chicago Business. Despite losing population, the city actually gained households over the past decade and is close to an all-time record in that regard. The city has seen 68,000 new homes built in the last decade, while downtown jobs grew by 153,000 (pre-pandemic), and the number of college grads in the city grew by 203,000 (third-highest in the nation).

Chicago also has huge assets, including a large corporate HQ base, the world’s most important financial exchange (the CME Group), elite universities (Northwestern and the University of Chicago), a major hub airport (O’Hare), and more. The city has a magnificent lakefront setting and a big expanse of true urbanism in a nation where high-quality urban neighborhoods are in short supply. As someone who lived there for many years, I can attest that it is a fantastic city.

Yet we shouldn’t ignore Yglesias’s critique. Chicago’s real estate prices have lagged for years and barely edge out Detroit and Cleveland in the Case-Shiller Home Price Index. Though prices rebounded in the post-pandemic boom, they grew more slowly than in other cities and trailed the overall inflation rate.

Many have long seen Chicago’s affordability, relative to coastal cities, as an asset. It’s the only genuinely big city where you can enjoy a humane quality of life without being wealthy. An average professional couple can afford a spacious condo there—parking space included.

But recently, Chicago’s housing affordability has become eyebrow-raising in some respects. For example, new construction or fully rehabbed urban real estate in desirable neighborhoods of my current city, Indianapolis, is often not much less expensive than in Chicago—and what you get for that price is markedly inferior in terms of city urbanism. Indianapolis is mostly urbanism-lite, with much less economic opportunity than Chicago. Properties in Nashville, meantime, can even be more expensive than Chicago. One unit I looked at there recently—on a street with no curbs or sidewalks—was worth more than my old Chicago condo, situated in a prime location in the Lakeview neighborhood.

Chicago’s quality-adjusted real-estate prices might possibly be the lowest in the country today. Why is this? Undoubtedly, Chicago benefits from a more permissive building environment than the coasts. But Yglesias is right to suggest that low demand is also a likely culprit. And that’s not a good sign.

Urban planner Pete Saunders has become famous for observing that Chicago is “1/3 San Francisco, 2/3 Detroit.” Chicagoans like to point out that a large sub-city is in fact thriving. The authors of the Crain’s piece note that the “core” of Chicago is prospering and has a population of 1.37 million people, which would make it one of America’s largest cities on its own. But concentrated thriving areas are what one would expect to find in a declining market. As regions or states or nations go into decline, people and businesses pool into islands of success, as with Tokyo in Japan or Columbus in Ohio. Large parts of the city of Chicago, as well as increasing numbers of suburbs, are experiencing moderate to severe decline. Thus, we see concentrated success.

Can a city, metro area, or state be carried by one sub-district? Chicagoans bristle at Detroit comparisons, but remember that, even as the city of Detroit collapsed, Oakland County, at 1.26 million people (about the same size as core Chicago), prospered as one of America’s premier upscale business-oriented suburban counties. The success of Oakland County did not stop value destruction on a large scale in other parts of the region, nor did it mean that the Detroit region was somehow not in major decline. Chicago is by no means Detroit, but the same principle applies: the success of a sub-district can’t be used as evidence for the health of the whole.

Which brings us back to talent. One reason that demand, and thus prices, are lower in Chicago is that the city does not attract the same caliber of talent as the coastal superstar cities and thus generates lower-value economic activity. Peter Thiel caused a stir when he said, in Chicago no less, “If you are a very talented person, you have a choice: You either go to New York or you go to Silicon Valley.” This is hyperbole, to some extent, but it is true that the highest-value industries and highest-talent people have tended to cluster in a few cities. Chicago gets some of this but not nearly enough to compete with the coasts. As Charles Murray wrote in Coming Apart:

It is difficult to hold a nationally influential job in politics, public policy, finance, business, academia, information technology, or the media and not live in the areas surrounding New York, Washington, Los Angeles, or San Francisco. In a few cases, it can be done by living in Boston, Chicago, Atlanta, Seattle, Dallas, or Houston—and Bentonville, Arkansas—but not many other places.

In detailing the geography of talent, Murray also showed where graduates of Harvard, Princeton, and Yale (HPY) reside:

As mature adults, fully a quarter of the HPY graduates were living in New York City or its surrounding suburbs. Another quarter lived in just three additional metropolitan areas: Boston (10 percent), Washington (8 percent), and San Francisco (7 percent). Relative to the size of their populations, the Los Angeles and Chicago areas got few HPY graduates–just 5 percent and 3 percent, respectively. Except for the Philadelphia and Seattle areas, no other metropolitan area got more than 1 percent.

Again, Chicago is on the list, but clearly at a level below the top cities.

Attracting “college graduates” is good, and it’s an easy statistic to track, but not all graduates are created equal. Chicago draws heavily from Big Ten-type schools—good, but not the best. Even there, the cream of those schools is often skimmed off and sent to the coasts, such as the engineering talent from the University of Illinois that built some of Silicon Valley’s most famous companies like Netscape, YouTube, Yelp, Siebel Systems, and AMD.

While there is genuine world-class talent in Chicago, the city overall is semi-elite. It lacks the gravitational draw of the coastal superstars, as well as the high-value sectors that spin off the oceans of cash keeping those cities afloat even in the face of terrible governance. The demand to live in Chicago is qualitatively different. This is not a popular statement in the Windy City, but it’s the truth.

It is possible to be a very successful semi-elite city. There are many reasons to believe Chicago will pull it off, despite the bad headlines. But Yglesias’s decline scenario is one that local leaders and citizens dismiss at their peril.

Photo By Raymond Boyd/Getty Images

Up Next
books and culture

Struggling Communities and Their Prospects

A new academic collection focuses much-needed attention on the challenges facing America’s small cities and towns.
Aaron M. Renn April 8, 2022
Economy, finance, and budgets
Cities
Saved!
Close