"Jobs are going to large metro areas," claimed a recent New York Times article examining the divergent fortunes of retail and e-commerce employment.
According to the Bureau of Labor Statistics, the growth of online stores has slimmed down the American workforce. Selling retail goods on the internet has proven to be a smarter allocation of capital, including labor. That’s great for a millennial college grad who lives in a big coastal city and has a background in web design. But it’s bad news for someone from a smaller city in the Midwest who got a job straight out of high school in the 1980s and never had to worry about being automated out of the workforce.
If the trend of e-commerce jobs migrating to bigger cities continues, eventually fewer jobs will be available in rural areas. At least that would be the surface assumption. However, as venture capital has saturated in Silicon Valley, there’s been a reverse migration of Rust Belt, Appalachian and Midwestern natives who made it big out west and are finally returning home. While San Francisco will probably never be overtaken by Minneapolis in terms of tech jobs, the American heartland has a lot to offer.
Location, Location, Location
It seems like a contradiction that in the age of e-commerce, a business’s location could be such a game changer. But as real estate prices skyrocket in Silicon Valley and other coastal tech hubs, they retain a semblance of affordability in the less-hyped parts of America. According to data from RentCafe, the average rent for a two-bedroom apartment in Seattle is $2,025; in Nashville, it’s $1,263. There’s a similar gap when it comes to renting office space.
For businesses that sell a physical product that needs to be stored somewhere, there’s yet another reason why basing operations in rural areas is a smart move. Removed from the higher densities of cities, land is ample and cheap to buy. Since inventory warehouses tend to occupy the same footprint as several football fields, it’s financially wise to keep fulfillment centers in places where real estate costs are lower. Read more about choosing fulfillment center locations here.
There are also logistics to factor in: A business located in the Midwest or Southeast is a (relatively) short flight away from major financial hubs such as New York. Plus, shipping goods from a warehouse in Tennessee or Utah puts them within a two-day distance from a vast swath of the U.S. population. That all translates to lower business costs, which means more capital to invest back into your company.
Better Internet Connection
Without a fast internet connection, you can’t do business online. With major internet service providers in the U.S. greasing the pockets of the FCC, you would assume that the only places in America with decent internet would be big cities near the coast. But you’d be wrong. According to PCMag’s 2017 ISP reader survey, eight out of the 10 fastest cities are located inland. Longmont, Colorado, a town not far from Boulder, leads the way with 173 Mbps, followed by the Google Fiber twins Austin and Kansas City. Apart from Passaic, NJ and Deltona, FL, every place on this list is either in the Midwest, Southwest or Southeast.
There is still a lot of progress that needs to happen for the U.S. to become as competitive as other developed countries in terms of internet speed and access. Thanks to Google Fiber and municipal-led initiatives such as EPB Fiber Optics in Chattanooga, it might just be easier and more affordable to find faster internet in an inland zip code. If you can get faster internet speeds in North Carolina than in NYC for less cost, why wouldn’t you?
Powerhouse Universities
While the Northeast has the Ivies and California has perhaps the best overall public university network in the world, you can’t say that other parts of the country can’t compete when it comes to research universities or budgets. Top-ranked research universities such as Ohio State University, Georgia Tech and Penn State have massive budgets and powerhouse computer and STEM programs. Many of them even have in-house startup incubators such as OSU’s Technology Commercialization Office or Tennessee's Anderson Center for Entrepreneurship.
Financial Incentives
Lower income and corporate taxes make for a business-friendly environment. Saving an extra few percents on income taxes can make a difference in investing in new software programs, giving your loyal employees a raise or expanding your operations. If you started your business in California, where the top-level income tax is 13.3% and then moved to Missouri, where there’s an essentially flat tax rate of 6%, you might shave off 3-4% in expenses.
It’s worth pointing out that in a state like California or Oregon, the rates are tiered progressively, so you wouldn’t even pay much more until you were making six figures. But as your business expands and you look for savings, basing your operations in a state such as Pennsylvania (3.07%) or Indiana (3.3%) might save you a hefty chunk of change.
Better Quality Of Life?
This is less tangible, but for many people who grow up in the fast-paced Northeast or try to make it big in the Bay Area, moving to a city in the South or Midwest feels like a weight lifted off your chest. People are generally known to be friendlier, more laid back, and in a little less of a hurry to get where they’re going. The office dress code tends to be more Levis and less Hugo Boss.
And of course, there’s life outside of the workplace. For any serious lover of the great outdoors, music or craft beer (to name just three reasons to get up early or stay out late), life beyond the coasts is rich and illuminating. You can always move back to NYC or San Francisco. But if you give the heartland a chance, don't be surprised if you stay forever.
