The New Geography of Jobs

 

Enrico Moretti, “The New Geography of Jobs,” Mariner Books (Paper Back), 2012, 249 pp.

After reading this book, it becomes obvious that you should strongly consider moving to a town or area with great internet service, a good library system, and educated inhabitants.  Another book written at the same time as this book, “Coming Apart” by Charles Murray described the distinctly different cultures between the enclaves of the educated and others. To Murray this is not a good development.  This current book by Moretti goes further and implies this change, whether good or bad, is inevitable because of the economy that has resulted from globalization and technology will necessarily create these innovation enclaves.

 Although both these books were written about 10 years ago they are still very relevant.

We're used to thinking of the United States as red versus blue, black versus white, haves versus have-nots. But today there are three Americas. At one extreme are the brain hubs--cities like San Francisco, Boston, Austin, and Durham--with a well-educated labor force and a strong innovation sector. Their workers are among the most productive, creative, and best paid on the planet. At the other extreme are cities once dominated by traditional manufacturing, which are declining rapidly, losing jobs and residents. In the middle are a number of cities that could go either way.

For the past thirty years, these three Americas have been growing apart at an accelerating rate. Their divergence is one of the most important recent developments in the United States and is causing growing geographic disparities in all other aspects of our lives, from health and longevity to family stability, and political engagement. But the winners and losers aren't necessarily who you'd expect.  Moretti shows that you don't have to be a scientist or an engineer to thrive in one of these brain hubs. Among the beneficiaries are the workers who support the "idea-creators"--the carpenters, hair stylists, personal trainers, lawyers, doctors, teachers, and the like. In fact, Moretti has shown that for every new innovation job in a city, five additional non-innovation jobs are created, and those workers earn higher salaries than their counterparts in other cities. 

It wasn't supposed to be this way. As the global economy shifted from manufacturing to innovation, geography was supposed to matter less. But the pundits were wrong. A new map is being drawn from the inevitable deep-seated but rarely discussed economic forces. These trends are reshaping the very fabric of our society. Dealing with this split--supporting growth in the hubs while arresting the decline elsewhere--will be the challenge of the century, and The New Geography of Jobs lights the way

Addenda (my thoughts on the influence of jobs on geography):

In colonial times agriculture dominated the economy along with limited transportation and small towns; hence, most households were essentially self-sufficient and the populace periodically went to a General Store for essentials such as sugar and salt.

The industrial revolution brought an economy dominated by manufacturing while retaining agriculture in the countryside along with increased mechanical help.  Society then developed better transportation systems and roads to accommodate vehicles.  Towns now provided more goods and farmers came to town at least once a week, towns grew. 

Globalism and technology have expanded world manufacturing but decimated the American manufacturing economy and the towns these manufacturing facilities employment supported.  These towns are being abandoned, no longer able to support the roads, sewers, and stores.  Replaced with the information society in America and loss of small towns and the creation of rust-belt cities.  Manufacturing still exists but is mostly now automated.

My Notes:

Pg. 4:  At the same time that American communities are desegregating racially, they are becoming more segregated in terms of schooling and earnings.

Pg. 6:  The geography of jobs is undergoing a momentous shift.  While some sectors and occupations are dying, others are growing stronger and promise to alter the landscape dramatically.  The effects of globalization, technological progress, and immigration on American workers are not uniform. 

Pg. 10:  Over the past half-century, the US has shifted from an economy centered on producing physical goods to one centered on innovation and knowledge.  Globalization and technological progress have turned many physical goods into cheap commodities but have raised the economic return on human capital and innovation.

Pg. 12:  In total, two-thirds of American jobs are now in the local service sector, and that number has been growing for the past fifty years.  Although jobs in local services constitute the vast majority of jobs, they are the effect, not the cause, of economic growth.  Fifty years ago, manufacturing was the driver of this growth in service, today the innovation sector is the driver.

Pg. 25:  The manufacturing sector’s reversal of fortune (since 1978) is one of the most important facts in America’s economic history of the past six decades.  While the standard of living for the average family more than doubled from 1946 to 1978, it has been largely stagnant ever since.  Take, for example, the average American worker, a forty-year-old male with a high school diploma and about twenty years of work experience.  Between 1946 and 1978 this guy’s hourly wage measured in today’s dollars went up from $8 to $16.  Since 1978 his wage has actually gone down by $2.

Pg. 27:  In the decades after WWII, textiles were a major piece of the US labor market.  As recently as the mid-1980s, more than a million American workers were still employed making clothing and garments.  That number has dropped today by more than 90 percent. Just like iPhones, design, marketing and sales remain in this country but not manufacturing.

Pg. 36f:  US manufacturing production has continued to grow, just not employment.  Today the average factory worker in the US makes $180,000 worth of goods each year, more than three times what he produced in 1978. This is the same phenomenon the American economy went through when it moved from being mainly agricultural to being industrialized.  Today only one percent of workers are in agriculture.

Pg. 42:  The hollowing out of the labor force and the evaporation of the middle class is not a passing trend, it is common across industrialized economies.  While the number of high and low-wage jobs increases, middle-wage jobs have declined and continue to decline.

Pg. 50ff:  In 2013 when this book was written, there were about 141 million workers in the US.  About 112 million in the private sector, the rest in various forms of government jobs.  If we do not make physical things anymore, what do we do all day?  

Progress in information technology is one of the most important sources of employment, productivity, and investment growth over the past fifty years.  Similarly, the internet sector alone is responsible for about one-fifth of the growth of the American economy between 2004 and 2008.  In the end, it does not matter whether American workers make something physical or something immaterial, like a better search engine.  What really matters is that American workers produce goods or services that are innovative and unique and not easily reproduced.  This is the only way to generate jobs that pay well in the face of stiff global competition.  Approximately 10 percent of all jobs in the US belong to the innovation sector and this is the driver behind the economy.  Remember that even at its peak never more than 30% were employed by the manufacturing sector when it was the driver of the economy.

Pg. 56:  The vast majority of jobs in a modern society are in the non-traded sector, i.e., they cannot be exported outside the region where they are produced: you need to consume them where you produce them.  Most restaurant jobs are in the non-tradable sector, but in tourist destinations, restaurant jobs are often in the traded sector as they mainly serve outsiders. By contrast, most jobs in innovative industries belong to the traded sector, together with jobs in traditional manufacturing, some services—parts of finance, advertising, publishing—and agricultural and extractive industries such as oil, gas, and timber.  These jobs have to be competitive in the national and global marketplace.

Pg. 60f:  The author’s research on an analysis of 11 million American workers in 320 metropolitan areas shows that for each new high-tech job in a metropolitan area, five additional local jobs are created outside of high tech in the long run.  Two of the jobs created by the multiplier effect are professional jobs—doctors and lawyers.  All parts of the traded sector have a multiplier effect, but innovation has the largest. 

Pg. 104:  It is ironic that at the very moment that American neighborhoods were desegregating racially our country was segregating educationally.  This has tremendous economic implications as well as social and political ones.  A country that is made up of regions that educationally differ dramatically from one another will end up culturally and politically balkanized.  Concentration of large numbers of poorly educated individuals will magnify and exacerbate all other socioeconomic differences.

 The divergence in education levels is causing an equally striking divergence in wage levels.  Measured in 2010 dollars, the salaries of college graduates in Boston and San Jose have grown by more than $30,000 since 1980.  At the other end of the spectrum, the salary of college graduates in Flint MI has actually declined in this period by $11,645.

Pg. 106:  Technological change and globalization result in more employment opportunities for a low-skilled worker in a high-tech hub but fewer opportunities for a similar worker in a hollowed-out manufacturing town.  What divides America today is not just socioeconomic status but also geography.

Pg. 112:  The Moving to Opportunity program ran from 1994 to 1998 when the federal government gave thousands of public housing residents in Baltimore Chicago, Boston, New York, and Los Angeles vouchers to leave the projects and move to private housing in the same city but in significantly better neighborhoods.  This was a randomized experiment with 1,7888 families selected to receive the vouchers and 1,898 families randomly assigned to the control group.  The group that moved showed significantly lower incidence of obesity, diabetes, and depression.

Pg. 144:  Economy of Scale has been found to apply to all the companies as a whole in a geographical area.   Larger clusters are more efficient because they have a thicker labor market, a more specialized supply of business services, and more opportunities for knowledge spillover.  A surprising implication is that as a country, the US is more productive—and therefore richer—because its innovation sector is concentrated in a limited number of innovation hubs rather than spread out among all cities. 

Pg. 148:  By its very nature, the innovation sector is the part of a market economy where creative destruction matters the most.  Silicon Valley is the Detroit City of today and appears to be following the same path of creative destruction.  As their innovative products become just commodities, they will have to move on.

Pg. 197:  Universities are most effective at shaping a local economy when they are part of a larger ecosystem of innovative activity, one that includes a thick market for specialized labor and specialized intermediate services.  Once a cluster is established, colleges and universities play an important role in fostering its growth, often becoming a key part of the ecosystem that supports it and makes it successful.

Pg. 234:  America High School graduation rates peaked at around 80 percent in the late 1960s, then began declining.  Today (2012) the US has been surpassed by scores of other nations.  It is clear that unless the US substantially increases the number of skilled workers with a college education, the supply of human capital in the country will not meet demand, and inequality in our society will keep increasing.

Pg. 242ff:  Foreign-born workers account for a third of all US engineers and half of all those with doctorates.  It is in America’s self-interest to radically reform its immigration policy to favor immigrants with college degrees, master’s degrees, and PhDs.  Right now, 60 percent of the students in American engineering schools are foreign-born, but when they graduate they often find it difficult to stay in the US.