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Why Some Cities Get All the Good Jobs

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Over the past few decades, the U.S. job market has been pulling apart. Lots of new high- and low-wage jobs have been created, while middle-wage ones have become scarcer. Much of this divergence has been along geographical lines. I’ll let economist Enrico Moretti, of the University of California at Berkeley, explain:

A handful of cities with the “right” industries and a solid base of human capital keep attracting good employers and offering high wages, while those at the other extreme, cities with the “wrong” industries and a limited human capital base, are stuck with dead-end jobs and low average wages. This divide — I will call it the Great Divergence — has its origins in the 1980s, when American cities started to be increasingly defined by their residents’ levels of education. Cities with many college-educated workers started attracting even more, and cities with a less educated workforce started losing ground.

That’s from Moretti’s 2012 book, “The New Geography of Jobs,” which I’ve been reading this week. The book explains a lot about our current economic situation, and perhaps something about today’s politics as well. Wonder why voters are so resentful of elites and the establishment? Maybe it’s because that elite establishment has become increasingly concentrated in a few prospering metropolitan areas while much of the rest of the country struggles.

In Moretti’s telling, this divergence is “deepening and accelerating.” The most vibrant, important sector of the economy is what he calls the “innovation sector,” and its workers thrive in the presence of lots of others like them. So clusters of innovation such as the San Francisco Bay Area, New York, Boston and Austin, Texas, will keep creating good jobs, and most other places won’t.

If that’s true, then one of the most important public-policy challenges of our time is figuring out how to enable more people to move to where the good jobs are. Lack of affordable housing in already crowded boomtowns is an issue I’ve written about before. Moretti co-authored a paper last year contending that reducing regulatory constraints on housing construction in San Jose, San Francisco and New York could increase U.S. gross domestic product by 9.5 percent. Another problem is that less-educated Americans are the least likely to move out of state to pursue job opportunities.

Moretti proposes“relocation vouchers” as a way to address this.

I find these arguments pretty convincing, but also a little depressing. The U.S. is full of towns and cities that aren’t exactly innovation-sector hotbeds, but are pretty nice places to live. Real estate is relatively cheap there, too. Does everybody really have to leave them and move to San Francisco to benefit from one another’s company?

It so happens that the Atlantic’s James Fallows has been exploring these kinds of places for the past three years, flying around the country with his wife in their single-engine plane. They’ve been giving progress reports along the way, but now Fallows has attempted to sum everything up in one big article. The piece is a wonderful, hopeful reminder that this country can be a wonderful, hopeful place. It also offers something of a challenge to Moretti’s thesis.

Fallows writes that he found evidence of a flow “of people with first-rate talents and ambitions who decided that someplace other than the biggest cities offered the best overall opportunities.”

He tells of a cluster of design-and-manufacturing startups in Duluth, Minnesota, a high-tech steel mini-mill in small-town Mississippi, a school system on the rebound in Holland, Michigan, a group of young civic-improvement activists in San Bernardino, California. It’s purely anecdotal, and not entirely convincing, but a nice reminder that a few people can make a big difference in turning a place around.

Moretti’s book contains perhaps the most dramatic example of this. Seattle in the late 1970s was a city in decline, with manufacturing jobs disappearing and crime on the rise. Earlier that decade, the Economist had called it the “city of despair.” Then two young entrepreneurs who had been raised in Seattle, Paul Allen and Bill Gates, decided to move their software startup there from Albuquerque, New Mexico. The arrival of Microsoft changed everything for the city, which became one of the nation’s leading innovation hubs.

Meanwhile, Albuquerque’s salaries and educational levels, which were close to Seattle’s in 1979, have fallen way behind.

So perhaps it isn’t fated which cities will thrive in the coming decades. But the economic forces Moretti describes make it seem like it’s still likely that only a few will win big, while most muddle along or lose ground.

Which he defines as including any activity that “generates new ideas and new products,” from tech to entertainment to finance.

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