High-tech jobs concentrated in just 5 U.S. cities

The overwhelming majority of new high-tech jobs are being created in just five cities in the United States, a new study has shown.

Howard Schneider reported the news for Reuters:

A new analysis of where “innovation” jobs are being created in the United States paints a stark portrait of a divided economy where the industries seen as key to future growth cluster in a narrowing set of places.

Divergence in job growth, incomes and future prospects between strong-performing cities and the rest of the country is an emerging focus of political debate and economic research. It is seen as a source of social stress, particularly since President Donald Trump tapped the resentment of left-behind areas in his 2016 presidential campaign.

Research from the Brookings Institution released on Monday shows the problem cuts deeper than many thought. Even cities that have performed well in terms of overall employment growth, such as Dallas, are trailing in attracting workers in 13 industries with the most productive private sector jobs.

The New York Times’ Eduardo Porter wrote:

Boston, Seattle, San Diego, San Francisco and Silicon Valley captured nine out of 10 jobs created in these industries from 2005 to 2017, according to a report released on Monday. By 2017, these five metropolitan regions had accumulated almost a quarter of these jobs, up from under 18 percent a dozen years earlier. On the other end, about half of America’s 382 metro areas — including big cities like Los Angeles, Chicago and Philadelphia — lost such jobs.

And the concentration of prosperity does not appear to be slowing down.

America’s deepening inequality has become a cause for alarm. The picture of a country cloven between a small set of prosperous urban “haves” and a large collection of “have-nots” has come sharply into focus as an opioid epidemic has overtaken vast swaths of the country. It gained the attention of the political class in 2016, when voters across the industrial heartland embraced Donald J. Trump’s populist message.

The search for ideas that could improve the economic conditions of deprived areas, long derided by economists as a fool’s errand — why spend money on improving the lot of places rather than people, many experts argued — is now at the top of policymakers’ lists.

Rani Molla from Vox noted:

The result: Wealth and productivity are becoming even more concentrated in fewer, primarily coastal cities. One-third of the nation’s innovation jobs resides in just 16 counties; half are concentrated in 41 counties. These jobs are high-paying and contribute to overall faster wage growth in the areas they’re located, than in areas with fewer innovation jobs. They also result in a lot of secondary work — jobs created to help serve those workers.

These locations draw educated people and investment money from other places. Some 40 percent of adults have Bachelor’s degrees in the top 5 percent of metro areas with innovation job concentration, compared with 26 percent in the bottom three quartiles.

As the report stated: “These places enjoy the benefits of what economists call cumulative causation, through which their earlier knowledge and firm advantages now attract even more talented workers, startups, and investment, creating a gravitational pull toward the nation’s critical innovation sectors while simultaneously draining key talent and business activity from other places.”

Being an innovation city does have costs: These include worsening traffic, ballooning housing prices, and wage growth so high that smaller firms can’t compete. In theory, these spiraling costs should send jobs to cheaper areas, but the report notes that the inflection point is very high, and that when a company does move, its jobs don’t necessarily stay within the US.

The disparities between so-called innovation cities and those with declines in innovation employment aren’t because small and midsize inland cities like Kansas City and Des Moines don’t have tech aspirations and aren’t trying to grow and innovate. Rather, the very nature of tech leads to the divide. Tech companies need a lot of tech workers, and they need a lot of other tech companies to help support their operations. Over time, these places develop the necessary infrastructure — broadband, public transit, high quality of living — for continued innovation.