Since the 2016 U.S. presidential election, there’s been an outsized focus on the “American Heartland.” Even in the tech industry, whose center of power is mostly contained to the West Coast, companies and executives are having conversations about how to shift more resources to parts of the country they’ve typically overlooked.
Now, a new report out today from the Brookings Institution and the Walton Family Foundation aims to quantify just how the Heartland is doing.
Entitled “the state of the Heartland,” the report compares how the states in the middle of the country fare on 25 different counts, ranging from standard measures of economic prosperity like employment rate and average wages, to health metrics like adult obesity and opioid prescription rate per 100 residents. Overall, the report found that while the Heartland is growing and adding more jobs, many of the states that encompass the Heartland are growing at a slower rate than the rest of the country. And nowhere is this more evident than on measures of human capital.
Brookings and the Walton Family Foundation here defined “the Heartland” as 19 states across the Midwest and southern United States, stretching from Oklahoma up to North Dakota, across to Ohio and Michigan, and down to Louisiana.
Heartland states saw their share of adults between the ages of 18 and 34 grow at a rate of about 0.4 percent annually since 2010. The rest of the country has seen their share of young adults grow by 1.2 percent annually during that same time period.
The report also found that about 28.1 percent of young adults in the Heartland have a bachelor’s degree, compared to 32.6 percent in the rest of the country.
“Above all, the starkness of the region’s human capital and innovation challenges underscores that strategies to increase the region’s education levels and expand its innovation activities should be top-of-mind when Heartland leaders gather to talk about the Heartland’s future,” the report’s authors write.
The Heartland’s ability to capture more young talent has been hampered by the fact that it’s more rural than the rest of the country. Since the recession, the urbanization of the U.S. has only increased. As more jobs go to big cities, it leaves young adults in the Heartland with fewer urban cores to choose from.
On a state-by-state basis, some states appear to be doing OK, but even that lens is too wide to really understand what it’s like for companies — and tech companies in particular — who are reliant on young workers. For example, North Dakota leads the nation with the fastest-growing percentage of young adults, with a large share of these being young adults who are born out of state and are moving to North Dakota for jobs. However, a large number of these young adults are moving to North Dakota aren’t considering working for startups, but rather are coming to take advantage of the oil boom.
Brandon Medenwald, the cofounder of Fargo startup Simply Made Apps says that the startup scene in Fargo has grown since he first his company in 2011 — many of the tech startups are growing from “1, 2, 3 person shops to 10,12,15 person shops.” Programmers are still in short supply, and Fargo tech startups typically find them in one of two places: nearby North Dakota State University and other regional universities, or from a competing business.
“It feels terrible to strip away one of [my competitor’s] better programmers because I need that person to come work for me, but that’s kind of what it turned into. It’s almost a zero-sum game,” Medenwald told VentureBeat.
On the other end of the spectrum, Illinois was only one of two Heartland states whose share of young adults shrank from 2010 to 2016. However, Illinois has one of the highest shares of young adults with a bachelor degree or higher. Other reports have found that Illinois is the second largest producer of computer science graduates in the country. That gives Illinois a bigger base of eligible young talent to keep in state — if they aren’t drawn by the siren of Silicon Valley.
Trisha Degg, VP of talent operations at the Illinois Technology Association, says that anecdotally many of the tech companies she works with say that young talent at Illinois universities still want to go out to the West Coast immediately after college and work for tech companies out there.
One way the ITA has attempted to combat this flee of talent to the West Coast is by hosting a programming and coding skills challenge every year for senior college students across the country. The top 50 students who score the highest on the initial challenge are flown out to meet with Chicago companies, field interview requests, and compete in another challenge to win $5,000.
Still, a free weekend trip to Chicago isn’t enough to change some students’ minds. Degg said one Chicago company that participated in last year’s challenge and offered 8 job requests to 8 students — all of whom turned down their offers because they had accepted job offers on the West Coast.
Ross DeVol, a fellow at the Walton Family Foundation says that one initiative Heartland states should consider — that leverages its advantages in having a lower cost of living and higher purchasing power than the rest of the United States — is investing in recruiting campaigns that seek to draw college graduates from the Heartland back to their home states. Though that may not be what Heartland tech companies eager to recruit talent straight out of college wants to hear.
“For those about to start families or already have, housing costs are substantially lower than many West or East Coast tech hubs. This could be an attractive opportunity. Many could afford a house in the Heartland as opposed to renting a 1,000 square foot apartment for $4,000 per month in many coastal tech hubs,” DeVol told VentureBeat in an email.
In fact, Degg said that one of the biggest benefits of the ITA’s tech challenge is building relationships with students so that when they do decide they want to move back to the Midwest, start a family, and work for a Chicago tech company, they know who to email.
“If they actually want to move home and back to the Midwest, they tend to look at the companies they had interacted while they were in school, particularly sponsors of programs such as that,” Degg told VentureBeat.
In other measures of tech prosperity, the Heartland again lags behind the rest of the country. The share of national venture capital captured by the Heartland has shrunk from 11 percent to 5.2 percent since 1995. Oklahoma’s startup scene in particular has struggled to gain momentum, having seen its amount of venture capital raised fall from $6.1 million in 1995 to just $600,000 in 2017.
The Heartland is home to only 25 of the top 100 universities in the nation for commercializing technology and of those 25, almost all of them are located in the northern part of the Heartland.
“R&D spending and university tech transfer [combined] are not sufficient [enough] to have a high-tech presence and to create a world class innovation ecosystem — but they are prerequisites,” report coauthor Mark Muro told VentureBeat.
One bright spot for the region is advanced manufacturing — manufacturing subsectors that require a lot of STEM workers. Advanced manufacturing industries generated 9.8 percent of the Heartland’s economic output in 2016 compared to 6.3 percent in the rest of the country.
This is an area where again, worker training and retention programs will be critical to helping the Heartland capitalize on its momentum. In Indiana, where the state recently announced Micosoft-backed workforce development Skillful was launching a program in the state, advanced manufacturing was cited as one of the industries where the state anticipates having a qualified worker shortage.
“Community colleges and other two-year colleges that offer career technology education should work more closely with local [advanced manufacturing] employers to design their curriculum to better match their needs,” DelVol told VentureBeat. “Additionally, it is important to constantly be evaluating the programs and seek feedback from the employers in order to adjust the programs on a real-time basis.”
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