The shrinking state of Illinois

I saw this on social media Wednesday:

University of Michigan–Flint Prof. Mark J. Perry shows the other side of that meme, so to speak:

The No. 1 U.S. state for outbound migration in 2017 was Illinois, moving up from No. 2 in the previous year. And Wisconsin is one of the top beneficiaries of this migration pattern.

There were 534,527 moves in 2017 for Illinois — 339,435 outbound moves (63.5% of the total) and 195,092 inbound moves (36.5% of the total), for a -27.0% net outflow. That put the Prairie State far ahead of No. 2 New York at -22.7% net outflow and No. 3 New Jersey at -19.3%. This is based on a recent analysis of the U.S. Census Bureau’s annual “State- to-State Migration Flows” database for 2017 that I did for a report titled “Top 10 Inbound vs. Top 10 Outbound U.S. States in 2017: How Do They Compare on a Variety of Tax Burden, Business Climate, Fiscal Health and Economic Measures?”

When compared on a variety of 10 measures of tax burdens for individuals and businesses, business climate, state fiscal health, labor market robustness and economic growth, the migration patterns of U.S. households (and businesses) followed some predictable patterns.

There is strong empirical evidence that Americans “vote with their feet” and are moving from high-tax states that are fiscally unhealthy, economically stagnant and unfriendly toward businesses to fiscally sound states that are more economically vibrant, dynamic and business-friendly, with lower tax and regulatory burdens and that offer more economic and job opportunities.

No surprise there. And no surprise that Illinois led the coun- try in outbound migration in 2017 given its poor rankings on most of the 10 measures of business friendliness, tax burden and economic dynamism. In addition, the Mercatus Center ranks Illinois No. 50 for state fiscal condition, mostly due to its large ($446 billion) and growing unfunded pension liabilities.

Where are the outbound households and businesses from the Land of Lincoln moving? One increasingly popular destination is across the northern border into Wisconsin.

In 2017, nearly 27,000 people left Illinois for Wisconsin, compared with fewer than 13,000 moving in the opposite direction — for a net inflow to Wisconsin of nearly 15,000 people. That followed a record net inflow of nearly 16,000 in 2016, 11,500 in 2015 and 15,370 in 2014 (Figure 1).

There has been a net outflow from Illinois to Wisconsin of more than 116,000 residents between 2006 and 2017. About half of that net gain has taken place in the past four years at an average net gain for Wisconsin of nearly 40 residents moving from Illinois every day between 2014 and 2017. …

On 14 different measures of labor market dynamism, economic growth, various tax burdens, business climate and fiscal health, Wisconsin comes out ahead of neighboring Illinois on all but one of those measures — state individual income tax rate. Taken together, these results suggest that compared with Illinois, Wisconsin is a relatively more pro-growth and fiscally sound state, a more economically vibrant and business-friendly state, with a lower tax and regulatory burden for businesses and a more robust labor market.

Overall, the Badger State offers citizens, workers and businesses greater economic and job opportunities, with greater future prospects for economic growth than the Prairie State. Reflecting the greater relative degree of economic vibrancy and business friendliness in Wisconsin compared with Illinois, residents and businesses are increasingly leaving the Land of Lincoln for brighter economic opportunities across its northern border.

The state-to-state migration flow patterns that exist at the national level are consistent with what is happening between Wisconsin and Illinois at a local level, summarized as follows: Residents and businesses in Illinois are increasingly “voting with their feet” and escaping across the northern border to Wisconsin — at a net rate of 40 every day — from a relatively stagnant, high-tax, fiscally unhealthy, business-unfriendly state to a fiscally sound state that is more economically vibrant and business-friendly with greater economic prospects for resi- dents, businesses and workers.

One key takeaway from this analysis is that it’s relatively easy to attract a net inflow of residents and businesses from a fiscally insolvent neighboring state with a struggling economy like Illinois, and Wisconsin is certainly doing that and deserves credit for doing so. To maintain that inflow from Illinois and to attract migration from elsewhere, Wisconsin should pursue the proven formula for states to attract those inflows: low tax burdens, less regulation, greater fiscal stability, right-to-work laws, resisting calls for higher minimum wages and creating business-friendly climates. Wisconsin is doing very well on many of those measures, especially compared with its neighbor to the south.

Further improvements in the Badger State’s attractiveness to residents, workers and businesses will pay off in the same way that it’s now working to attract large and increasing inbound migration from Illinois. One improvement would be to reduce the state income tax burden as is currently being proposed and which is the one measure out of the 14 discussed above that gives Illinois a competitive advantage. And Wisconsin should keep its labor costs for low-skilled workers at a competitive level and resist the political pressure to follow Illinois’ lead with a 100% hike in the minimum wage to a job-killing level of $15 per hour.

Of course, this all depends on whether Republicans maintain control of the Legislature after next year’s elections and, before and after that, whether they act like real Republicans and not Democrats Lite.

 

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