Much of their manufacturing has disappeared, but many old industrial towns in the Midwest still have two things going for them. These are colleges and hospitals, or eds and meds, as they’re called. Most of these towns are counting on these industries to support them in the way that factories once did.
This always sounded a little desperate, even when both education and medicine were fast-growing parts of the economy. That’s stopping now, and towns that have staked their future on teaching young people and treating old people may be in for a disappointment.
Basically, both eds and meds depend heavily on government financing. In an era of tight government budgets at all levels, that financing just isn’t going to be there.
From Washington University in St. Louis to Case Western in Cleveland, Midwestern cities have long boasted first-rate universities. Many of these universities had their own hospitals and medical centers. Often, both the universities and the hospitals were philanthropic creations by the families and companies that owned the local factories.
The factories are gone now. The schools and hospitals remain. Since they’re all there is, the cities are basing their futures on them.
Muncie, Indiana, for instance, was home to Ball Glass, Borg-Warner and many other major manufacturing companies. The biggest employers now are Ball State University (a benefaction of the Ball family, also mostly gone), a big hospital, the community schools and, in fourth place, an IBM call center.
Dayton, Ohio, had Delphi auto parts and National Cash Register, among other titans. Now its four top employers are Wright-Patterson Air Base, two hospitals and the county government, plus Wright State U. – all government, no private industry.
In Cleveland, four of the top five employers are eds or meds, led by the mighty Cleveland Clinic. In St. Louis, Boeing ranks second in employment and Wal-Mart fifth: otherwise, it’s Washington U., two health care systems, Scott Air Force Base, and the local Roman Catholic archdiocese.
South Bend, long past its Studebaker days, relies on Notre Dame, two hospitals, two other universities, the public schools and the diocese for most of its jobs.
In Detroit, the Big Three auto companies lead the list of employers, although only one is still inside the city limits and all have been shedding jobs for years. Of the next 13 biggest employers, all are universities, health care systems, schools, the city government and the U.S. post office.
Even Peoria, where Caterpillar reigns supreme, depends on government-funded schools and hospitals for seven out of its top ten job-spinners.
Smaller factory towns are in the same boat. Anderson, Indiana, a one-time GM town, relies heavily on hospitals, a local college, a prison and a casino for the majority of its jobs.
In some of these cities, such as Peoria and Anderson, hospitals boomed because the big employers, such as Caterpillar and GM, offered first-rate health plans to their employees. Most employers are cutting back these plans now. Anderson’s hospitals will continue to thrive so long as the aging former GM workers and their widows stay alive. But then what?
All these towns where I’ve visited are positioning themselves to be big regional health care centers. Some of these cities – Cleveland certainly, Peoria possibly – will achieve this ambition. But how many big regional health care centers does the Midwest need?
Already consolidation is taking place. Local full-service hospitals in many medium-size towns are closing. In-patient services are going to the nearest major hospitals, leaving behind out-patient care facilities at best.
Towns and cities, like the nation itself, need a healthy private sector backed by government spending to achieve balanced economic vitality with good jobs. In too many Midwestern towns, government-financed institutions – universities, public schools, town governments, hospitals, military bases – are now a safety net for local economies that have all but lost their private sectors.
Many hospitals, of course, are privately owned. But more than any sector, health care relies on government spending. For years, this spending has been galloping ahead, faster than the economy itself. That’s ending now.
For the past three years, health care spending grew more slowly than the economy. This is good news for most Americans appalled by our run-away medical spending. But it’s bad news for towns and cities who counted on ever-rising spending to stay alive.
Part of this, no doubt, is a general backlash against the profligate spending of the past. Part of it reflects the use of technology to keep costs down, through efficiencies. Part of it stems from consolidation, as behemoths such as the Mayo and Cleveland Clinics expand their empires. A good chunk of it is likely to be a result of Obamacare: even before the Affordable Care Act takes full effect, hospitals and doctors are installing preemptive efficiencies.
Education faces the same pressures. College tuition, like health care costs, may have hit the backlash point. State spending on state universities is declining everything, either in absolute figures or as a percentage of costs. The political attack on public service unions in states such as Wisconsin and Michigan will almost certainly result in lower pay and reduced pensions for teachers and, consequently, in their purchasing power.
Already, law schools are cutting enrollments in the fact of fewer job openings for young law grads. In the rest of the economy, new graduates are facing tighter job markets and lower pay: this, coupled with the burden of college debts, will lead some students to skip college altogether or seek cheaper alternatives, such as community colleges. Parents are balking at the costs of a top-drawer education and voters everywhere oppose the higher taxes that will fund state schools.
Once, Midwestern schools pumped educated students into the big industrial economy that supported the region’s middle class until its pensions kicked in and the health care sector took over. The schools and the hospitals are still there, for the young and old, but the industrial link between them, like that middle class itself, has gone away.