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ECONOMIC ANALYSIS: Good transportation paves the way for strong economy

May 22, 2006

"Like it or not," noted author Richard Florida opined as he looked out over a crowd that recently gathered in Indianapolis to discuss economic development issues in central Indiana, "you are all part of the greater Chicago region."

That might come as news to you who pay taxes, follow sports, or subscribe to a newspaper. But the point is well made. In the larger scheme of things-the so-called Shanghai perspective one would take in looking at our economy from the other side of the world-we're all part of the upper Midwest, and the center of gravity in our part of the universe is on the shores of Lake Michigan in northeastern Illinois.

That might be obvious from an economic point of view, but politically it is a completely different matter. And since it is the public sector that builds the roads, airports and other transportation infrastructure that connects us to one another, political boundaries have had a significant impact on economic development.

Nowhere is that more apparent than within the confines of the tri-state Chicago metropolitan area itself. If one adds the La Porte and St. Joseph counties served by the South Shore light rail line to the 14 counties in the officially defined Chicago MSA, you have an economy with 4.4 million workers on payrolls, 9.7 million people, and almost $342 billion of personal income. By the last measure, it's almost twice the size of the entire Indiana economy.

Yet economic development on the east and the west side of the Illinois-Indiana border within greater Chicago is a story of contrasts, particularly as northwest Indiana moves out of the shadow of the giant steelmakers that have so prominently shaped its history.

On the west side of that border, of course, is the third-largest city in the nation, home to dozens of headquarters, financial institutions and specialized services industries of all kinds. Not only is it a world of high-paying jobs-the average job in Cook County, Ill., paid $1.21 in wages for every dollar paid nationally-but it is an environment where relative pay has been increasing. In 1990, the average pay for the region's most populous county was $1.17 per dollar paid the average national worker.

The devastating impact of the decline in steel industry employment in northwest Indiana over the last three decades is wellknown. But even in recent years, much like the remainder of the state, relative pay continues to decline in the northwest counties, from 95 cents per dollar of national wages in 1990 down to just 87 cents today.

Ringing Cook County on the Illinois side of the border are a number of counties whose growth in population, jobs and income rival those of any in the nation. Yet communities in northwest Indiana, which are geographically closer to the Chicago Loop, aren't even on the same page.

It's a complex situation to unwind, but one contributor to this disparity is staring us in the face-transportation access.

"Top-tier transportation states also have top-tier economies," Lt. Gov. Becky Skillman recently said, and a map of the freeway and light-rail system in the Chicago region in comparison to economic performance bears that out.

Suburban Illinois counties connect to Chicago's center in a way that southern Lake and Porter counties, for example, do not. Even with longer physical distances involved.

The fruit of transportation investments-access to higher-paying jobs, a more diversified work force, and even cultural amenities-is high-octane fuel for economic growth. And those benefits live on long after the headline-grabbing dollar amounts spent on the infrastructure itself are forgotten. But the reverse is also true, and cautious, pennypinching communities should beware.



Barkey is an economist and director of economic and policy study at the College of Business, Ball State University. His column appears weekly. He can be reached by e-mail at pbarkey@ibj.com.
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