Rich Cities and Poor Cities
This is Enrico Moretti:
The economic map of America today does not show just one country — it shows three increasingly different countries. At one extreme are America’s brain hubs — cities like Seattle, Raleigh-Durham, Austin, Boston, New York and Washington DC — with a thriving innovation-driven economy and a labor force among the most creative and best paid on the planet. The most striking example is San Francisco, where the labor market for tech workers is the strongest it has been in a decade. At the other extreme are cities once dominated by traditional manufacturing — Detroit, Flint, Cleveland — with shrinking labor force and salaries.
In 1980, the salary of a college educated worker in Austin was lower than in Flint. Today it is 45 percent higher in Austin, and the gap keeps expanding with every passing year. The gap for workers with a high school degree is a staggering 70 percent by some estimates. It is not that workers in Austin have higher IQ than those in Flint, or work harder. The ecosystem that surrounds them is different…
Video conferencing, e-mail, and Skype have not made a dent in the need for innovative people to work side by side. In fact, that is more important than ever. Thousands of well-educated innovative workers are now moving to San Francisco and Silicon Valley, many attracted by jobs in social networking. They will produce software intended to create virtual communities that erase distance and allow us to share ideas and information from any corner of the world. Ironically, in order to do that successfully, all this talent must concentrate into a single location. Research shows that our best ideas still reflect the daily, unpredictable stimuli that we receive from the people we come across and our immediate social environment.
HT: Miles Kimball.
also interesting is to look at the individual cities in California. Many are near bankrupt while places like San Fran and Silicon Valley thrive
This is an interesting rebuttal to recent suggestions about working “smarter,” not “harder.” It’s important to underscore that there is value in a traditional workday (9-5, in-office, etc.) not just for workers themselves but for their respective cities.
Social media is not the only source of commuication among Americans, some time traditional ways communications are better for the work place rather than twitter, facebook, and myspace.
I agree that technology has had a major effect of employment, and the success of a city. However, I would also point to the high percentage of union membership in Detroit, Flint and Cleveland.
Unions drive good paying companies away to places like Austin, Houston and San Antonio.
“Sixty years ago, the best predictor of a community’s economic success was physical capital…Today, the best predictor of a community’s economic success is human capital”
It is a result of the shift away from manufacturing to a knowledge economy
Back when I worked in the Information Technology field years ago, I knew a Technology Firm executive who told me how wonderful his teams’ arrangement of virtual offices was. A couple years later his team all but abandoning their respective (virtual) home offices in favor of a central office. I asked him what was wrong with the concept of a virtual office for IT workers. He said the synergy of having the whole team together under one roof couldn’t be duplicated with a virtual office.
Buster, that’s unsurprising. The temptation to flex hours when telecommuting is huge. It’s difficult to make sure everyone is available at the same time. Physical location is great because, frankly, it forces the issue.
Even though in many cases innovations in technology and social networking facilitate the communication of two parties no matter how distant they are from one another, you can’t always rely on them. There’s always that chance of error or misfortune, that being your location, time-zone, the availability of these technological resources wherever you are, etc, that could come in between you and whoever you are trying to contact or work with in distance. I agree it’s more convenient and reliable to work with people side by side, making the communication process smoother.
We are an increasingly intelligence-based economy producing intellectual property and goods.
…and Moretti seems to forget Dallas, home of ExxonMobil (#1 on Fortune 500), EDS, ACS, Texas Instruments, Southwest Airlines, Radio Shack, and the NCPA!
Some companies like google have specific time periods set aside during the work week for people to develop their own ideas.
If you look at rich cities and compare them to poor (rust belt) cities, one thing stands out. Cities that were once rich had something poorer cities didn’t have. Rich cities in the Rust Belt (before it began to rust) had large amounts of capital in the form of an industrial / manufacturing base. That was their competitive advantage.
Now, the rusting manufacturing facilities in the Upper Midweast are not competitive because of high labor costs and regulation compared to places where labor earns a fraction of the U.S. wage. Thus, the old facilities are rusting from neglect. The new competitive advantage is brain power and the integration of these highly educated individuals in cities where technology workers congregate.
What is scary is that science and engineering education is growing in places like India and China. In addition, the Internet makes it easier to collaborate. What would prevent Silicon Valley from migrating to Mumbai or Shanghai? Silicon Valley engineers who demand $100 per hour (working in offices renting for $60 per square foot annually) are rather costly compared to Indian engineers earning, say, $20 per hour (with office rents of only 1/10th the Silicon Valley average).
If wages and trends have changed that much in the last 30 years or so it will be intersting to see where we are in the next 30.
This is why talking about bringing manufacturing jobs back to the U.S. is a foolish idea. Our economy has moved away from it.