How Colleges Can Help Reverse Regional Inequality

(Source: Washington Monthly)

The University of Wisconsin-Madison shows how one school can revitalize a local economy.

Most of us know by now that the richest Americans are getting even richer. What’s less well known is that America’s richest places are getting richer too.

From 2005 to 2017, just five metro area—Boston, San Francisco, San Jose, Seattle, and San Diego—accounted for more than 90 percent of the nation’s growth in the high-tech industries driving our economy, according to a new report by the Brookings Institution and the Information Technology and Innovation Foundation (ITIF). These superstar tech and innovation hubs now hold more than one in five of the country’s innovation jobs, in well-paid sectors such as tech and telecom, pharmaceutical research and advanced manufacturing. Meanwhile, much of the rest of the nation has lost its share of the economy’s best jobs.

The Brookings/ITIF findings are the latest in a spate of recent research highlighting what’s now clearly the nation’s most urgent long-term economic challenge: extreme and growing inequality between rural and urban areas. Recent research by the Economic Innovation Group (EIG) also finds increasing divergence between upwardly mobile cities and increasingly distressed rural parts of the country. This growing gulf between the geographical haves and have nots, as I’ve noted before, coincides all too well with the rise of populist discontent and increasing political polarization.

So, the million-dollar question is, how to reverse these trends?

Some policymakers—both liberal and conservative—believe the answer is to encourage mobility from declining areas to prospering ones, such as through “relocation vouchers” to subsidize people who move from one place to another. The American Worker Mobility Act proposes stipends of up to $10,000 to finance these moves. But this approach is impractical. Most Americans are deeply attached to the communities they call home. They don’t want to uproot themselves. There are also other negative effects that come with mass migration to a small number of urban centers—including spiking home prices.

A much more promising approach would be to expand the constellation of “superstar cities” so that more parts of the country share the wealth. The Brookings/ITIF report’s authors Rob Atkinson, Mark Muro, and Jacob Whiton propose allocating $100 billion in federal spending to accelerate 10 “growth centers” in disparate regions of the country. At the center of this plan is a dramatic new investment in public universities. That’s what makes the proposal bold. It’s not so much the scale of the investment, but the reimagined role for public universities as engines of economic development. But if this new vision is to work, universities must be the first to embrace it.

There’s perhaps no greater illustration of what a university can do to boost a region’s economy than the story of Madison, Wisconsin.

Until fairly recently, Madison’s reputation was that of a typical college town, better known for its livability, cheap bars, and music scene than as a hub for technology. Songkick named Madison one of the nation’s top 10 cities for live rock music, while USA Today ranked it fourth in its 2014 list of best bicycling towns for its 200 miles of trails. The number of bikes in the city in fact outnumber cars, which is one reason NerdWallet once crowned Madison the “greenest city in America.”

Now, Madison is in the running to be the next Silicon Valley, topping the list of potential candidates for the “growth centers” proposed by Brookings/ITIF.  Among its marquee employers is the medical records software giant Epic Systems, whose billionaire founder, Judy Faulkner, is number four on the Forbes’ 2019 list of America’s richest self-made women (ahead of Oprah, who is number ten). Madison is also home to Exact Sciences Corporation, maker of the Cologuard cancer screening test, as well as a burgeoning video game development industry with 70 independent studios.

From 2007 to 2016, the number of jobs in Dane County, where Madison is located, has grown by nearly 9 percent, while the population of both the city and the county has grown by roughly 11 percent since 2010. In 2018, Madison’s median household income in 2018 was $67,631, above the national median of $63,179.

The secret to Madison’s success, said Paul Jadin, president of the Madison Region Economic Partnership (MadREP), was a deliberate decision in 2012 to harness the full research and educational capacity of the University of Wisconsin-Madison. “We recognized that the university’s role was not simply to graduate intelligent people and send them off into the world but to assist in the state and regional economy,” he told me. “We recognized that we’ve got to use the university as part of our economic development effort.” One thing local leaders wanted to  fix was to ensure that innovations being pioneered at the university were translating into dollars flowing into the state and community, something that wasn’t happening as well as it should, according to a 2011 “strategic assessment” of the region.

Today, the university is intimately involved in all aspects of the region’s economic development. The school’s chancellor, Rebecca Blank, who also served as acting secretary of commerce in the Obama Administration, sits on MadREP’s board and is actively involved in regional strategy. The university is also working to help local startups commercialize technologies developed by its researchers. In 2012, for instance, the school’s Center for Dairy Research launched an incubator called TURBO, which offers companies opportunities to license UW-Madison research, along with technical support. The school has also invested in a massive expansion of its flagship incubator facility, University Research Park. In 2018, the park broke ground on a five-story building that will become the new corporate headquarters of Exact Sciences. At the same time, the university is making a concerted effort to produce more graduates who match regional employers’ needs. (This is a bonus, too, for recent graduates who will now have a better shot at finding a job.)

“If we didn’t have the University of Wisconsin here and we just had the capital, we would be a fine community with a great quality of life and some good businesses,” said Jadin. “But the university has clearly played a major role in launching Madison into the nation’s most competitive regions.”

But for all its successes, ITIF’s Atkinson and Brookings’ Muro and Whiton argue that Madison can’t break through to innovation superstar status without a federal boost. That’s because the gravitational pull of places like Silicon Valley is so strong that up-and-coming places may never catch up.

But that’s not the only reason to support the continued growth of places like Madison. It will also help keep innovation in America. Atkinson, Muro and Whiton argue that if places like Boston become too pricey, companies could be just as likely to move to Shanghai or Tel Aviv as they would somewhere like Madison, absent some additional incentive.

In addition to Madison, the researchers say their top candidates for cities that should be elevated to “superstar” status are Minneapolis-St. Paul, Minnesota; Albany, New York; Lexington, Kentucky; Rochester, New York; and Tucson, Arizona. An infusion of federal dollars, the authors write, “can help some places break out from the noise of so many places competing against each other and work toward getting to scale.”

Policymakers should embrace this approach. The problem of regional inequality has become so dire that anything short of a bold intervention will fail to reverse America’s slide into extreme economic polarization. Expanding the number of high-growth cities will break the monopoly that a handful of cities have on the nation’s talent and wealth.

What’s more, the scale of the investments Brookings/ITIF propose would help reverse a decades-long decline in federal R&D investment that threatens to undermine our global competitiveness. According to a recent analysis by the American Association for the Advancement of Science (AAAS), the federal government spent nearly three times as much on interest payments on the national debt as it did on research and development in 2018. (In fact, payments on the debt have outstripped federal R&D funding for the last 20 years.) In contrast, China has increased its R&D spending 30-fold from 1991 to 2016 and now accounts for 20 percent of all global R&D spending, according to the Center for Strategic and International Studies.

The key for this idea to work, however, is for colleges and universities to fully buy in. An infusion of federal dollars would certainly help arrest what Jon Marcus documented in Washington Monthly—the slow decline of public research universities as state funding has gone dry. More significantly, it would prompt a rethinking of the role of public universities in their communities, particularly as continued declines in enrollment threaten to worsen many schools’ financial woes.

Many schools might be used to thinking of their principal role as educating individual students and competing for prestige by attracting the “best and brightest” to their campuses. But expanding their mission to include economic development could bring far greater rewards, especially for regional public universities that don’t—and can’t—aim to compete with the likes of Harvard and Stanford.

Other examples show how well this strategy can succeed: the Florida High Tech Corridor, a joint initiative by the University of Central Florida, the University of Florida, and the University of South Florida to boost regional industries such as aerospace and aviation and agribusiness. Agribusiness technology is also a major focus of the Georgia Research Alliance, anchored by eight Georgia Universities, including the University of Georgia, Georgia State University and Emory.

As higher education has come under fire for its failures to tackle inequality at the individual level, the example set by the University of Wisconsin-Madison and other schools shows that public universities still have a vital role to play in combating inequality on a larger scale. Both universities and the federal government should step up to that challenge.

(Article appeared January 1, 2020 in Washington Monthly).