Economic Winners and Losers Among America's Cities - The Cost of Intolerance

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Since the economic crash of 2008, economic winners and losers have been shaking out among America's cities.  Not surprisingly, cities in more liberal states and/or which are liberal islands in their own states are leading the pack among the winners while conservative (perhaps anti-knowledge is a better term) cities with low wages are filling the ranks of the losers as evidenced by the map above.  In Virginia, outside of the Northern Virginia suburbs of Washington, D.C., and Charlottesville - perhaps the most liberal city in Virginia outside the D.C. area - the loser category predominates.  So what is a city to do to prosper?  As a lengthy piece in The Atlantic suggests, welcoming diversity, innovation and knowledge are perhaps the key.  Sadly, outside of less than a dozen or so cities in Republican dominated states, diversity, innovation and modern knowledge are not welcome.  Low taxes are not the panacea that the GOP claims to be the cure for economic backwardness.  Here are highlights from the article authored by Richard Florida:

Back in the spring of 2009, I wrote in these pages that the financial crisis would “permanently and profoundly alter the country’s economic landscape.” Some cities and regions “will eventually spring back stronger than before,” I predicted. “Others may never come back at all.”

It might have sounded apocalyptic, but tectonic shifts of this kind are not unprecedented. They are the geographic counterpart to what the economist Joseph Schumpeter dubbed “creative destruction”—the great gales of change that level some companies and industries, and give rise to others. As powerful as they might seem in the moment, it is only when we look back through the lens of history that the full extent of economic and geographic changes becomes clear.

Five years after the crash, with the national economy just beginning to return to something resembling normalcy, we can begin to trace the outlines of America’s emerging economic map—and take inventory of the places that are thriving, those that are declining, and those that are trying, in novel ways, to come back.

A variety of measures can be used to divine the health and prospects of these different places—population growth, job growth, housing prices, and the unemployment rate are among the more common. Each of these measures has its uses, but some of them can conceal as much as they reveal. Population growth, for instance, tells you nothing about the skills and education of the people arriving; job growth says nothing about whether the new jobs are good or bad.

Throughout this article, I will draw on some of these measures. But I’ll lean most heavily on three measures less commonly seen in the popular press, but perhaps more telling: the composition of job growth (high-wage, mid-wage, or low-wage); productivity growth (which is the basis for improvements in the standard of living); and venture-capital funding (a proxy for the sort of entrepreneurial innovation that can power future growth).

The economic landscape is being reshaped around two kinds of hubs—centers of knowledge and ideas, and clusters of energy production. Overwhelmingly, these are the places driving the economic recovery. Outside them, the economy remains troubled and weak.

New York City was widely expected to be devastated by the financial crisis. Wall Street’s collapse, the conventional wisdom went, would bring the whole city down with it. In 2009, I predicted that New York would in fact prove to be one of the country’s most resilient places. Even so, the speed and strength of its rebound has surprised me—its explosive growth as a start-up center especially so.

New York’s rise as a tech center signals a major shift in the locus of venture-capital-fueled innovation. For a long time, high-tech start-ups have clustered in suburban office parks along freeways, places that are sometimes called “nerdistans.” But since the crisis, start-ups have taken an urban turn. San Francisco, which has fared extremely well since the crash, is a striking case in point. Over the past several years, Twitter has established its headquarters downtown, Pinterest has moved from Silicon Valley to San Francisco, and even Yahoo has created a new facility in the old San Francisco Chronicle building in the South of Market neighborhood.

America’s “knowledge metros,” large and small, make up perhaps the biggest group of winners, overall, since the crash. Data provided by Economic Modeling Specialists International show that a handful of knowledge metros have an overwhelming lead in generating the high-wage jobs (those paying more than $21 an hour) that America needs. Nearly two-thirds of San Jose’s new jobs have been high-wage, as have nearly half of the new jobs in nearby San Francisco. San Jose also leads the nation in productivity growth . . . .  Portland, Oregon, posted the second-highest level of productivity growth among large metros, nearly 7 percent, belying its Portlandia caricature as a place for slackers. Austin’s tech-fueled economy combined the fastest job growth of all large metros (10.5 percent between 2009 and 2013) with well-above-average growth in productivity and in high-wage jobs.

Knowledge, it turns out, is what allows metros to generate good high-wage jobs. Across America’s metro regions, I have found that high-wage jobs are closely related to several key markers of regional knowledge economies: the share of adults who are college grads; the share of the workforce in professional, technical, and creative jobs; the levels of innovation and venture-capital investment.

The Sun Belt features two kinds of regional economies: declining real-estate economies and booming energy economies. Energy stands alongside knowledge as the second pillar of America’s recovery.

Houston’s high-wage-job growth stems from two main sources—the fossil-fuel industry and information technology. The city is home to more than a third of the country’s petroleum engineers and by far the highest concentration of geoscientists. From 2009 to 2012, Houston added 30,000 jobs in a mix of industries related to oil and gas extraction and scientific and technical consulting services. These pay an average salary of $124,000. Houston has also seen rapid growth in software-development jobs (16 percent) and information-technology jobs (12 percent), along with consistent growth in its medicine-and-health-care sector.

Back in 2009, I predicted that the crisis would exact its steepest toll in “the interior of the country—in older, manufacturing regions whose heydays are long past,” and “in newer, shallow-rooted Sun Belt communities whose recent booms have been fueled in part by real-estate speculation, overdevelopment, and fictitious housing wealth.”

Sadly, the data bear me out. Just before the crisis, greater Las Vegas was one of the nation’s leaders in population growth; today it has the highest concentration of fast-food jobs in the nation. Palm Coast, Florida, the metro with the fastest population growth since 2001, has seen the nation’s worst rate of growth in economic output per person since that same year (negative 3.2 percent through 2011).

Population growth alone has never proved a sufficient foundation for future prosperity—not when many of the new arrivals are retirees or modestly educated people looking to get in on a real-estate boom. But since the crash, even that imperfect engine has failed many Sun Belt cities.

The metros where low-wage jobs make up the largest share of job growth since 2009 are in the Rust Belt and the Sun Belt: St. Louis (where 90 percent of new jobs are low-wage); California’s so-called Inland Empire of Riverside–San Bernardino (where nearly three-quarters of new jobs are low-wage) . . .

The main threats to America’s growth model don’t come from other countries, but from domestic contradictions. The more talented people cluster, the greater the economic returns they produce.

The cultural, political, and economic gulfs that separate advantaged and disadvantaged people and places go well beyond the wage gap. Knowledge workers benefit from living in neighborhoods with better schools, better amenities, and lower crime rates, while less advantaged groups are sometimes stuck in place, with limited prospects for climbing even one rung up the economic ladder, and insufficient resources to move out of stagnant areas. Americans have seen a dramatic decline in economic mobility, overall. But a poor person from a knowledge center like San Jose or San Francisco has twice the chance of becoming wealthy as a poor person from some Rust Belt or Sun Belt centers like Cleveland or Atlanta.

On November 5, 2013, here in Virginia voters will select a new Governor, Lt. Governor and Attorney General as well as a new House of Delegates.  Sadly, the Republican ticket is a case study on those who reject knowledge, reject diversity, and reject innovative thinking as they seek to drag Virginia and society backwards in time.  For future economic reasons alone, they need to be defeated.  Meanwhile, localities need to stop trying to do things the way they have always been done and make themselves more welcoming for diverse and innovative individuals.  Hampton Roads has a long, long way to go on this front.