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In Cleveland, Income Growth Without Population Growth

Another example of how population growth is outdated as an important economic metric.
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The west bank of the Flats and the Cuyahoga River in downtown Cleveland, Ohio. (Photo: Public Domain)

The west bank of the Flats and the Cuyahoga River in downtown Cleveland, Ohio. (Photo: Public Domain)

Cleveland is dying. In a recent ranking of the best cities for jobs (2014), the region was four slots away from being dead last among the largest metros. That was an improvement over last year. Faced with such a dire assessment and unabated population decline, fellow researcher Richey Piiparinen and I had a mystery on our hands (graphic from The Plain Dealer):


Not only has the per-capita income gone up in Cleveland as the population has declined, it is growing at a faster rate than in Columbus where the population is on the upswing. You can read our full investigation into this matter here. For those who think the Cuyahoga River fire was put out last year (instead of in 1969), you might reasonably argue that the drop in population is juicing Cleveland's per-capita income. To some extent, you'd be right. But one could also consider total income, the other part of the per-capita income ratio. From 2003-12, the metro's total personal income increased by about $20 million. That's not bad for a dying city.

Demographic decline cannot explain all of Cleveland's per-capita income growth. Something else is juicing the regional economy, like an unexpected brain gain boost:

For example, the region's rate of educational attainment appears less-than-competitive in a knowledge economy. About 28 percent of adults in the Cleveland metropolitan area hold a college degree, compared to 35 percent in metro Columbus.

But an older industrial city without a major university is naturally going to have a larger older population, the authors argue. It makes more sense, they say, to examine the education level of the region's actual workforce and its newcomers.

Suddenly, Greater Cleveland shines brighter. About 35 percent of the region's 25 to 44 year olds hold a college degree, a rate well above the national norm, thanks to an infusion of new talent. ...

... Younger newcomers are fueling the brain gain. The number of college-educated 25 to 34 year olds in Greater Cleveland grew by 23 percent from 2006 to 2012.

The skill level of Cleveland's young adult workforce is world class. It ranks 7th nationally, ahead of San Francisco, Chicago, Seattle and Austin, for professional and graduate degrees.

Superficially, Cleveland doesn't look like a brain magnet. A little data sleuthing reveals some impressive numbers in the concentration of talent, particularly among the young and restless with college degrees. One mystery solved, another mystery emerges. If Cleveland is dying (i.e. losing population), then why are smart people who could live anywhere choosing the Mistake on the Lake?

Cleveland isn't dying. However, the same couldn't be said about population change as an important economic metric. Author Zachary Karabell discussing another outdated statistic, GDP:

GDP is extremely good at measuring how much stuff we make, and how much stuff we consume, full stop. It’s an extremely good number to measure output, and in that sense, it’s a good number for 1950s economies, when you had more closed systems, high trade barriers, local manufacturing, particularly for the United States, where most of the stuff the U.S. consumed in 1950 was made in America.

I'd say the same thing about population. It's a good number for 1950s economies, a fine measure of manufacturing's dominance. Manufacturing isn't dominant anymore. Neither is population growth. Today, fewer people are needed to produce more goods. The old numbers are out of touch with the economic transformation.