The New Geography of Jobs

Sorry, cannot blame Trump
Some parts of America are doing very well; others are okay, and some are in serious decline. This is a long-term trend, not something we can blame on the policies of any president. And it is an international trend, not something we can blame America, and – something I need to add at this controversy plagued juncture, this book was written in 2012, so we cannot blame Trump.
Three Americas, only one prospering
Moretti talks about the three Americas. We have become much more integrated racially and ethnically. There are few completely black neighborhoods left in America and probably no completely white ones. Most neighborhoods have their share of immigrants. But we have become much more segregated in terms of economics of opportunity. This goes beyond average incomes, although income is a big factor. It is more the difference between communities that are going somewhere and those that are going nowhere.
First a stipulation. Nearly everybody has become more prosperous in strictly material terms because of general enrichment over recent decades. Some communities, however, have gotten a lot more of the gains than others have. The three Americas are those who are racing into a bright future, those that are just standing still and those that are declining in relatively in terms of material prosperity and in absolute terms in relation to human capital, as well as intangibles such as hope and spiritual strength. These communities are breaking down and not providing the sense of community the people need.
Skilled jobs and skilled workers
Moretti mentions economic reasons why this has happened, the usual changes in the means for production, international competition and automation. American manufacturing produces more than ever before, but it does so with many fewer workers. As automation has replaced workers, those workers who remain need to have higher level skills. There are fewer and fewer jobs available for unskilled workers. Gone are the days when a man could graduate high school, or not even that, and then walk into a decent job. This is good. This is the basis of productivity. It encourages people to improve their skills and work at jobs are more interesting and fulfilling, and ones more likely to pay better. The problem is that not enough of these jobs have become available and not enough workers are qualified to get them.
Highly skilled labor force and highly skilled jobs are a chicken-and-egg problem. Moretti talks about the places that are very attractive and prosperous. These places have both a lot of well-paying skilled jobs, many involving innovation, and they have a lot of skilled and innovative workers to take those jobs, what they call a thick labor market. Once a region has achieved this happy situation, it usually is self-catalyzing, as better jobs attract skilled workers and skilled workers attract or grow firms that employ skilled workers. Such places also benefit less skilled workers. Job prospects even for unskilled workers are better and they are paid more. There is a spillover, positive externalities. Skilled and educated workers produce conditions that improve the general environment.
Can we create these environments?
How to achieve this wonderful balance, however, is not known, although there are lots of theories. Good communities always have an infrastructure of prosperity – theaters, restaurants, brewpubs, nice shops, parks etc. Some think that communities need to provide lots of amenities loved by the “creative class.” This idea is based on two related suppositions. One is that if you have the creative people, creative jobs will follow and the other is that it is the pleasant things that attract them. Unfortunately, this does not always work. Moretti gives the example of Berlin, which is very pleasant for the creative class, with lots of parks, orchestras, restaurants etc. Berlin has relatively low rates and has indeed attracted lots of educated and creative young people, but it has done this w/o creating or attracting creative jobs. Instead, Berlin lives off tourism and government. There are lots of “creatives” living in a type of genteel poverty. (This made me think of Madison, Wisconsin, when I went to college there. We used to joke that you needed a PhD in philosophy to tend bar in Madison, and a taxi license required at least a PhD in history.)
A better-known strategy is for local governments to try to attract firms that will bring with them jobs. State and local governments spend or concede vast resources to get firms to move in. Research shows that this does not work in the long-term. It makes the firms richer, but the money spent could have produced more jobs if they just opened some brew pubs (my addition).
Researchers and leaders study successful innovation clusters and try to copy what they did or have. The problem is that it is easy to see AFTER but maybe what we see was not the cause. For example, ALL successful innovation clusters are near universities. This is not helpful as a predictor, however, since ALL major American communities are near universities.
One thing that seems to work is to have some active and competent individuals. There is no golden rule except persistence. Moretti talks about the growth of biotech clusters. The ones that developed were no better situated than hundreds of others. What they did have at one or more local universities were superstars, people who attracted others. Smart people like to be around other smart people and they attract each other.
You start to be like those you hang out with
Parents often worry that their kids will be negatively influenced by the people they hang out with. This can be good too, if the crowd is good. Clusters tend to have people who pull up others.
Perhaps the best local leaders can do is to run their jurisdictions competently and in ways that create good quality of life for as many as possible. Good education generally is important, but aiming at any particular firm is not practical, since there is so much change. By the time your educated workforce is ready, the situation is very different.
This is a good & interesting book. I think that after (or before) reading the “New Geography of Jobs” it might be useful to read “The Smartest Places on Earth” that talks about renaissances in some of the former rust belt places. I don’t think the one contradicts the other, but they complement and fill in weak spots.