The Decline of Chicago: The City that Doesn't Work


Recently, Crain’s Chicago Business reported on Chicago winning an award from Fast Company magazine. “Chicago stood out in our reporting for its creativity and vitality,” Editor and Managing Director Bob Safian said at a press conference here. “Chicago offers something distinctive.”

Fast Company Magazine is representative of much of the media: not much on hard facts about Chicago. The Windy City has distinctions but not positive ones. Chicago’s retail sales tax is the highest in the nation at 10.25 percent. Unions, high taxes, and political corruption have made Chicago one of the leaders in big city decline.

One of the great modern myths of big city America is that Chicago is some sort of successful town and a role model for others. By any traditional performance standards Chicago has failed. Like many old, big industrial cities, Chicago peaked in the 1950 Census with a population of 3,620,962. In the 1950s over two percent of the entire U.S. population lived within Chicago city limits. Over a half century later, while America’s population doubled, Chicago’s population declined. The 1960, 1970, 1980, and 1990 Census numbers showed Chicago losing population.

Mayor Daley and Chicago residents were quite excited about the 2000 Census showing Chicago gaining over 112,000 people (a growth rate at half the national average for the 1990s). It appears the 1990s were an anomaly for Chicago. Since the year 2000, according to Census estimates, Chicago again continued its population decline with a loss of 63,000 from 2000 to 2006 leaving a total of 2,833,321.

Recently, the Web site Real Clear Politics listed two Chicago area Congressional districts among the country’s ten fastest-shrinking districts, in terms of percentage of population lost between 2000 and 2005. Jan Schakowsky’s district lost 7.9 percent of its population. Congressman Rahm Emanuel’s district lost 5.1 percent.

Though 2000 was a somewhat positive year, that year’s Census numbers mask some rather disturbing trends. The white flight out of Chicago continued with 150,000 non- Hispanic white people leaving Chicago from 1990 to 2,000. African-Americans, for the first time, began leaving Chicago with a net loss of 5,000. The population gain in Chicago during the 1990s was due to Hispanics.

One of the great fables urban lovers of Chicago like to talk about is some comeback of the city. The comeback, according to this urban legend, involves white families staying in Chicago to raise their children. With Chicago’s 150,000 white population decline from 1990 to 2000: Chicago was only 31.3 percent non-Hispanic white.

What is even more pronounced is the lack of white children in the public school system. The entire Chicago Public School System is only 9 percent white. Not a single public high school has a population that is majority white. Not one.

Recently, the stubborn facts of Chicago’s population decline made news. As CBS TV Chicago reported in January of 2008:

Half-empty schools are ‘unacceptable’ because they don't serve their students or the communities they're supposed to anchor, Mayor Richard M. Daley said Thursday, setting the stage for the biggest wave of school closings in decades.

Officials contend 147 of 417 neighborhood elementary schools are from half to more than two-thirds empty because enrollment has declined by 41,000 students in the last seven years. A tentative CPS plan calls for up to 50 under-used schools to close, consolidate with other schools or phase out over the next five years.

Most of the underused schools are on the South and West Sides, often where the student population is largely African-American, and in lakefront neighborhoods that include Lincoln Park, Lake View, Uptown and North Center.”

The situation isn’t any better in Chicago’s Catholic School System. The Chicago Tribune reported on February 27, 2007:

Nicholas Wolsonovich, superintendent of schools for the archdiocese, called the exodus from Chicago's Catholic schools ‘mind-boggling.’ In 1964, he said, some 500 schools were spread across the diocese, with about 366,000 students. Now, the system has 257 schools and fewer than 100,000 students. Over the last decade statewide, the number of Catholic schools has dropped from 592 in 1997 to 510 this year, according to figures released at the conference.

Chicago’s political elite love to give speeches about the importance of public education, but not for their children. Mayor Daley sent his children to private schools. Deborah Lynch, the former head of the Chicago Teacher’s Union, sent her kids to private schools. America’s newest political superstar, Barack Obama, sends his kids to private schools. With the exodus of the rich from Chicago’s public schools, 69 percent of the children in the Chicago Public School system are poor.

The horrible public schools, high taxes, and crime have driven families out of Chicago. The city’s job base cannot compete with anti-union places like Houston and Phoenix.

Chicago used to be the number one convention town in America but Las Vegas and Orlando now lead the pack. Chicago has lost its top spot as busiest airport to Atlanta. Chicago's high priced unions and restrictive work rules have driven business elsewhere. For decades, Chicago was a major banking center with two major banking headquarters located on LaSalle Street. Continental Bank and First National Bank of Chicago were always among the top ten largest banks for much of the twentieth century.

No longer. Continental was purchased by Bank of America while First National Bank of Chicago was purchased by JP Morgan. Not a single bank in the top 25 largest banks in America is headquartered in Chicago. While Chicago’s financial district declines Charlotte, North Carolina has emerged as a bigger banking town. Charlotte has the headquarters of two of the four largest banks in America: Wachovia and Bank of America.

Other elements of Chicago’s financial district also show major weaknesses. Chicago doesn’t have one major mutual fund company headquarters. Chicago’s mutual fund job base is smaller than Denver, Indianapolis, or Baltimore. Chicago has a few major hedge funds but nothing like New York City or London. Chicago is the futures capital of America with the merger of the Chicago Mercantile Exchange and the Chicago Board of Trade but even here the news isn’t all positive. Computers have shed tens of thousands of jobs in the futures industry. Futures trading floors are headed for extinction within the next three to seven years, eliminating even more jobs.

Chicago’s high tax life style has driven businesses and jobs to the suburbs. Chicago is one ofthe only towns in America with an employee head tax on employment. Companies with over 50 employees must pay $4 a month per employee to the city. Most of the major corporate headquarters in the Chicago area are located in Chicago’s suburbs. Motorola, Walgreens, All State, Kraft, Anixter, Illinois Tool Works, McDonald’s, Alberta-Culver, and Abbott Labs all have their corporate headquarters outside city limits.

Recently, Chicago got its first Wal-Mart. In most places in America, politicians allow consumers to decide whether a business should fail or succeed. In Chicago, with the power of the unions, Chicago’s city council has made it difficult for Wal-Mart to open up any more stores. Chicago’s poor are relegated to paying higher retail prices and have less access to entry-level jobs. The adjacent suburb of Niles has the unusual distinction of being the only town in America (with less than 45,000 people) with two Wal-Marts. One of the Niles Wal-Marts is located right across the street from Chicago.

The largest employer in the city of Chicago is the Federal government. Followed by the City of Chicago Public School system. Other major employers are the city of Chicago, the Chicago Transit Authority, the Cook County government, and the Chicago Park District. These thousands of government workers provide the backbone of the coalition for higher taxes, generous pensions and “political stability”.

Chicago’s political system is inefficient and costly. There are no term limits in Chicago. The Democratic Party has controlled the Mayor’s office since 1931(a big city record). There’s no opposition: Democrat’s control 49 out of 50 seats on the city council. Corruption is everywhere. Barely a month can go by without a major scandal. The FBI has the largest public corruption squad in the United States located in Chicago . Chicago voters don’t seem to care. Those who care about high taxes, good public schools, and low crime are a small minority in Chicago.

In conclusion, Chicago’s long decline continues. In the coming years, public pension commitments will test even the high tax tolerant Chicago residents. Look for low regulation, low tax Houston to overtake Chicago in population in the next eight to 15 years.

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For reference

Between 1990 and 2000, Greater Houston gained about 950,000 people, while Chicagoland gained a bit over 1,000,000. You should be mindful of the following:

1) The impact of arbitrary political boundaries, particularly between municipalities, when using urban statistics.

2) The difference between percent change and actual change

3) The difference between a place of incorporation and the location of actual employment.

While your article raises some valuable points in regards to Chicago's rotten political culture (hypocrisy, punitive taxation, personal grudges, the whole gamut), it falls short when trying to support assertions about the supposedly faltering economy. The fact is the region is quite economically healthy and desirable by most measures, despite its political culture. As compared to other global financial trading centers (NYC, London), Chicago is a low cost, low tax haven. And compared to the low-regulation supposed utopias you cite, Chicago blows them out of the water in terms of amenities and quality-of-life with an overall tax burden not much higher (our ultra low property taxes more than make up for the high sales tax, and the flat income tax is somewhere around the middle of most states in terms of burden).

not the best that rises to the top but the worst

Good comment. Note however that arbitrary boundaries apply also to time periods. For example, excerpting Chicagoland's strongest growth decade in a lifetime (or placing it alongside a fast-building urban area's weakest recent growth decade) proves little.

I will agree that the whole urbanized region's economy is fairly well diversified. Its constituent parts, however, are the fatal flaw, since in a culture of cronyism it's more often the worst that rise to the top than the best. United Airlines' bloat and management could yield an apt metaphor for the local public and private cultural way of doing things lately. East and West draw too much justification from merit and advancement, but I wouldn't call Chicago's a healthy alternative, even if you're a young person who can in part keep from being involved. And in terms of fatal flaws and constituent parts, the fact that thick cronyism would so persist is a more trenchant commentary on Chicago life than any figures:

a society puts up with cronyism only at the point when many-to-most inhabitants feel their piece of the pie is under enough danger of shrinking that they're willing to let honchos profit - as long as boss power seems to still be delivering some protection. There will always be Millennium Parks and programs to show for it at the time; the beneficiaries can well afford trophies. Chicagoans' reactionary behavior on the ground continues to belie the headlines.

...and the inertia that the machine enjoys is a self-strangulating one. In the short run, this works well for the bosses, since it perpetuates demand for their help against individual client households' toes getting stepped on as the pool keeps threatening drying up. And a pool as large as Northern Illinois can provide a comfortable living for corrupt skimmers (not to say they're not cutthroat) in business and in office almost indefinitely. But in that long run, it does matter that the best can rise somewhere *else* and development can do more good there. McCormick Place may think that by being #1 it got away with requiring out-of-towners to hire local electricians to come out and plug in the extension cords for convention booths, but the drumbeat of feet to points south and southwest speaks for itself. 1,000 miles closer at hand, maybe Naperville's working well enough not to have entrenched interests that get their cut, yet Chicagoland had better just hope that publicity feeds regional improvement from outside more than the region itself can do now. And if that's what it's going to take, I don't see why I should represent it positively to the rest of the country.
Better for everyone that they make their futures where the place will let them do the most good-

Neil Strickland