Tech jobs continue to congregate in particular metropolitan regions

A new analysis looks at where tech jobs located between 2005 and 2017:

Researchers from the Brookings Institution and the Information Technology and Innovation Fund, a tech-industry-backed think tank, arrived at their conclusion by looking at a fairly narrow slice of jobs—13 industries that involve the highest rate of research and development spending and STEM degrees per worker. That includes much of the software industry, as well as jobs in areas like pharmaceuticals and aerospace. The researchers found that, between 2005 and 2017, five metro areas—San Jose, San Francisco, Seattle, San Diego, and Boston— not only added lots of jobs, they were also becoming more dominant in those industries overall.

TechJobsWired2005to2017

In part, that’s due to changes in what businesses need, says Enrico Moretti, an economist at UC Berkeley who wasn’t involved in the study. The enduring dominance of some tech hubs is somewhat counterintuitive. Technology was supposed to be a democratizing force—the internet and iPhone would make it possible to do innovative work from just about anywhere. But instead, high-tech industries became about proximity to your fellow high-tech workers. Businesses clustered around hubs of investment, in places where skilled workers could stick around after school, hop between jobs, and stay in touch with contacts. That plays out on an individual level too, Moretti says. In recent research tracking the patent activity of scientists as they moved in and out of places like the Bay Area, Moretti found that they were far more productive in those innovative hubs…

The researchers’ point is that it’s hard to build hubs of innovation from scratch—in places where the economy is really struggling, and where there’s little existing tech talent. Instead, you want to start with places that are already buzzing, and through a mix of investment—in things like R&D, education fellowships, and financing for small businesses—and tax incentives to encourage new business, nudge them to become innovation hubs. In other words, those places are already fertile ground for high-tech companies, but they need a little more fertilizer to get there. The researchers prefer federal investment to local subsidies that try to attract individual businesses—an often fruitless effort for smaller communities, as incidents like the downsized Foxconn factory in Wisconsin and Amazon’s HQ2 search demonstrate.

How exactly these centers of industry arise, thrive, and consolidate (and then maybe fade away or die?) is a good subject of academic study. Through a series of decisions, conditions, and good circumstances, agglomerations start. Inertia can carry them for a long time. As noted in the last paragraph, it can be difficult to introduce competition from other centers or create new centers once the main locations are well-established. Tech center do not just happen; they are the result of multiple social processes, interactions, and decisions.

Additionally, it is interesting to see that there is still a lot of value of actual physical locations near other businesses or organizations – even in a field that can render spatial and time distances less relevant. Being close to other people, being able to actually stop by or talk to them, still matters. All of this can add up to a location with a collection of similar organizations being more than the sum of its parts.

Yea! The Internet enables American workers to work more

A working paper links the number of hours American white-collar employees put in and the Internet:

In a new working paper, the economists Edward E. Leamer, of UCLA, and J. Rodrigo Fuentes, of Pontificia Universidad Católica de Chile, studied data about working hours from the American Community Survey. They found that hours worked since 1980 increased nearly 10 percent for Americans with bachelor’s and advanced degrees. Leamer told me that he believes this is because computing has shifted much of the economy from manufacturing to neurofacturing, Leamer’s term for intellectually intensive white-collar labor that is often connected to the internet, such as software programming, marketing, advertising, consulting, and publishing.

Neurofacturing jobs lend themselves to long hours for several reasons, Leamer said. They’re less physically arduous, as it’s easier to sit and type than to assemble engine parts. What’s more, the internet makes every hour of the day a potential working hour…

As Leamer and Fuentes write in the paper, “The innovations in personal computing and internet-based communications have allowed individual workers the freedom to choose weekly work hours well in excess of the usual 40.”

The internet has also supercharged global competition and forced international firms to outwork rivals many thousands of miles away. This has created a winner-take-all dynamic that’s trickled down to the workforce. In their 2006 study, “Why High Earners Work Longer Hours,” the economists Peter Kuhn and Fernando Lozano found that the premium paid for longer workweeks has increased since 1980 for educated workers, but not for less educated workers. Their theory is that at the most competitive firms, ambitious workers putting in super-long hours are sending a clear message to the boss: Promote me! And the boss isn’t just getting the message; he’s actively soliciting it. At many firms, insanely long hours are the skeleton key to the C-suite and the partner track. Thus, overwork becomes a kind of arms race among similarly talented workers, exacerbated by the ability to never stop working, even at home. It’s mutually assured exhaustion.

“Mutually assured exhaustion” is the result of zealous workers, managers asking more of employees, or the product of a unique work ethic in the United States?

This could lead to a basic question that I ask myself from time to time: has the Internet made life better? Is humanity thriving more, feeling better, doing more good, and experiencing a better life because of the Internet? The personal comparison is harder in that I was much younger when the Internet was not available but I can still imagine the comparisons. How might my academic work be different? My family life? My leisure time? And so on.

Additionally, the study also seems ripe for a comparison to other countries around the world that also have the Internet. Is the Internet the driver here or a tool that the American economic and social system utilizes to push a particular kind of work and approach to life? The Internet is not all powerful and cultural and social decisions in other societies seem to provide room for pushing against the possibility of working all day that the Internet allows.

Reminder: only 17% of the jobs in the Chicago region are downtown

An article I posted about earlier in the week included this statistic:

Downtown Chicago accounts for 17% of jobs in the six-county region, according to the Illinois Department of Employment Security…

But most of the region’s jobs — almost 3 million — are outside of downtown and may require more complicated commutes. More than 400,000 people commute every day from Chicago to jobs in the suburbs, according to the Regional Transportation Authority

This 17% is still a sizable percentage of jobs within the region. Put those jobs together with other economic resources, cultural opportunities, political resources, and historical inertia and the Loop is still a center of the region.

But, this also suggests 83% of the jobs in the region are outside Chicago’s downtown. Many Chicagoland residents do not need to go near downtown for work. Many commutes are suburb to suburb. As the second paragraph above notes, even hundreds of thousands of Chicago residents travel from the center to the suburbs for work.

At the least, such numbers should help us reconceptualize cities, suburbs, and regions. The varied pieces within a region are interdependent. Problems need to be solved across communities and taxing bodies. Celebrations take place across the region. The problems of either cities or suburbs are not only theirs to address. The communities are competing against other regions more than each other.

Three larger issues underlying mass transit problems in the Chicago suburbs

Suburbs in the Chicago region are looking for ways to help workers make the “last mile” connection between existing transit and their workplaces but there are few easy solutions:

Transit advocates and local officials are looking at ways to fill the “first mile/last mile” gap, which could include shuttle buses, bikes, scooters, better sidewalks, ride-share vehicles and, eventually, autonomous or self-driving vehicles…

Suburbs with manufacturing and warehouse businesses offer examples of the last-mile problem. Bedford Park has just 600 residents, but 400 businesses and about 30,000 jobs at big companies like Cintas, FedEx, Home Chef and CSX. Located near Midway International Airport, the village has for years promoted itself as business-friendly, and has seen jobs grow…

The last-mile problem goes beyond Bedford Park and into other other suburbs with light manufacturing like Addison, where it’s difficult for workers to connect with Metra because of varying shifts, Wennink said. It also affects white-collar work zones, like the office complexes of Naperville and Warrenville, Wennink said.

A longer-term solution to the job/worker disconnect is to have more jobs located in transit-oriented development areas, Wennink said. But in the meantime, businesses, employers and towns are trying a patchwork of fixes.

These commuting issues connect to three broader issues that, if addressed, could help address the last mile problem:

1. As noted, the Chicago region operates on a hub-and-spoke model where train lines and other transit options tend to radiate out of downtown but then there is little connecting the spokes. As one example, efforts to create a rail line that would connect some of the existing rail lines and job centers did not get very far.

2. Individual suburbs will find it difficult to address these issues on their own without more regional or metropolitan-wide support (and resources). These are collective problems but the preference for local governments in the suburbs plus limited organizational capability or power in the Chicago region means the efforts will likely remain just a patchwork.

3. While this might look like a transit problem, it could also be a housing issue. If people do not or cannot easily live near where they work, then transit is needed. The deeper underlying issue, however, might be residential patterns regularly organized by race/ethnicity and class that makes it difficult for many of the workers described in the article to be close to their place of employment. The social science term for this is spatial mismatch.

Living close to work

Presidential candidate Beto O’Rourke tweeted earlier this week about the ability of workers to live near their place of work:

https://twitter.com/BetoORourke/status/1171238016289034240

There is a lot to think about here. A little historical context: most workers lived very close to work up until the Industrial Revolution and the urbanization that came with it. The separation of home and work life is a relatively recent phenomenon for humans.

A little data on commute times. The 2017 American Community Survey showed the average commute time was 26.9 minutes. Commuting time can differ quite a bit across metropolitan regions:

McKenzie says the East Stroudsburg, Pa. metro area has among the longest average one-way travel time, clocking in at about 37.9 minutes. The U.S. Census Bureau contacted NPR with new information to include the New York-Newark-Jersey City metro area, which has a travel time of 37 minutes. Travel times for the two metro areas are not statistically different from one another.

Among the shortest average travel times, usually less than 20 minutes, were in Cheyenne, Wyo. and Grand Forks, N.D.

There is an academic term that addresses this issue: spatial mismatch. In this theory, jobs available to lower-income workers are located far from their residences. Imagine a typical well-off suburb: can the workers at the local Target or McDonald’s or gas station or hotel live in that community or nearby? Patterns of residential segregation and exclusionary zoning can mean that cheaper or affordable housing is not available close to certain jobs. This can be a more hidden form of inequality as longer trips to work mean less time for other activities.

This might get trickier for people with more resources and the options of where they want to live. A common American trade-off for the middle-class gets at this: should a homeowner move further out from work to purchase a larger home or live closer to work and job centers (which can include urban downtowns as well as suburban job centers dozens of miles away from urban downtowns)? Is a shorter commute worth having if it comes with paying more money for (possibly smaller) housing?

And perhaps the wealthy can truly live the closest to work if they so choose. Some of them might even locate their business or firm to where they are. Others might have multiple homes, including ones significant distances away where they can get to work by means not available to many such a private jets and helicopters.

So perhaps the issue here is not really living close to work but deeper issues involving mixed-income neighborhoods and moving away from resources (income and wealth) determining where people can life. O’Rourke gets into this a bit more, calling for smarter and denser cities that he says will lead to numerous positive outcomes – which could include shorter commutes.

Celebrating the labor of those who build McMansions?

The construction of single-family homes employs many Americans. When demand for homes drops, such as in the late 2000s with the burst housing bubble, many are out of work until the housing market heats up again.

Critics of McMansions would argue such homes should not be built. Instead, the land could be put to better use or developers and communities should focus on building other kinds of housing units that do not suffer from the same flaws.

But, the construction of McMansions employs people. Developers may build them to make more money than they could by building starter homes and communities may approve them in order to keep property values higher. And these homes provide work. Is this the case where a job is not worth it if the outcome is an undesirable product (in the eyes of McMansion critics)?

On this Labor Day, it would be interesting to consider how those who construct McMansions might be employed constructing other buildings. For many who construct McMansions, it could be hard to turn down the work if other opportunities are not present or the job pays okay. Should part of the fight against McMansions also include efforts to address labor issues?

An incomplete way to frame it: Lake County loses jobs and HQs to Chicago

The shift of headquarters and jobs from Lake County to downtown Chicago leaves a number of suburban buildings vacant:

The far north suburban county is bracing for the loss of about 2,700 office jobs by early next year, from prominent companies Walgreens Boots Alliance, Takeda Pharmaceutical Co. and Mondelez International…

History indicates corporate campuses in Deerfield and nearby suburbs — and the homes and businesses those high-paying office jobs support — can weather the storm. But the challenge has only intensified as more companies move jobs to downtown Chicago, in pursuit of younger workers who want to live in the city…

McDonald’s, Kraft Heinz, Motorola Mobility, Hillshire Brands, Gogo, Wilson Sporting Goods, Motorola Solutions and Beam Suntory are examples of companies that have moved their headquarters downtown in the past few years. Others, such as Walgreens, have established large offices in the city while retaining suburban headquarters…

A 2013 report outlining the county’s economic development strategy said losing any of the larger employers in the biopharma industry — such as Takeda — would be “devastating” to the county.

Such moves have real consequences for suburban areas. Filling and/or reviving large office parks and suburban campuses can be difficult. The loss of jobs and tax revenue can hurt.

At the same time, a story like this can reinforce notions that when Lake County loses jobs to the city of Chicago, this is a bad outcome. When the suburbs lose jobs to the big city or vice versa, someone is winning and someone is losing. Not necessarily: the region is still benefiting as the cities and suburbs depend on each other. From the perspective of the whole region, there is good news here:

-The fact that these companies want to stay in the Chicago region, whether in the suburbs or downtown, hints at the economic vitality and amenities of the whole area. With the bad news of Illinois’ financial issues, big companies are not leaving the state en masse.

-Other parts of the article hint that while the vacancy rate for office space is high in Lake County, there is still some business demand for these headquarters and campuses. Some locations might require more work to find a sizable replacement but they are not necessarily sitting empty for years.

-This presents opportunities – perhaps unwanted – for suburban municipalities to rethink suburban office parks and campuses. Rather than waiting for the big company to use the whole property, these could be future mixed-use sites featuring office, retail, recreational, and residential space. Rather than rely on single employers, suburbs could work to tie these campuses into the larger fabric of their community.

This could become a bigger problem if suburban properties stay vacant for a long time but these changes seem fairly normal for now: businesses move locations within a region to chase what they think are attractive options for workers (particularly young ones) and their bottom line. Perhaps more importantly, the suburb versus city battle over prestigious headquarters does not need to sour relations or perceptions. The region as a whole can continue to thrive even if there are changes to address within the metropolitan area.