1 The New Geography of Jobs Enrico Moretti University of California at Berkeley
The Labor Market is Improving 2
3 The Improvement is Uneven Unemployment rate in Austin, TX: 3.3% San Francisco, CA: 3.5% Seattle, WA: 3.7% Durham, NC: 3.8% Youngstown, OH: 7.4% Detroit, MI: 7.5% Visalia, CA: 12.2% Yuma, AZ: 18.5%
4 What Causes the Difference? Strong Labor Markets Well educated labor force Large share of employers in the innovation sector Weak Labor Markets Unskilled labor force Employers in traditional industries
Share of Workers with College Degree 5
Patents per Worker 6
Labor Productivity 7
8 The Three Americas At one extreme are America s brain hubs At the other extreme are cities with an unskilled labor force and employers in traditional industries In the middle are cities that could evolve either way The three Americas are growing apart.
9 Cities with High Share of College Graduates Percent with College Degree Salary of College Graduates Salary of High- School Graduates Washington 49% $90,872 $67,140 Boston 47% $95,173 $62,423 San Francisco 47% $127,381 $70,546 Raleigh-Durham 44% $73,745 $50,853 Seattle 42% $95,025 $56,001 Austin 41% $72,289 $48,809 NYC 40% $93,955 $57,187
10 Cities with Low Share of College Graduates Percent with College Degree Salary of College Graduates Salary of High- School Graduates Vineland, NJ 13% $57,668 $35,375 Flint, MI 12% $43,866 $28,797 Visalia, CA 12% $55,848 $29,335 Yuma, AZ 11% $52,800 $28,049 Merced, CA 11% $62,411 $29,451
11 The Great Divergence in Earnings Gains in Earnings of College Graduates Since 1980 40000 Blue: Top 10 cities Red: Bottom 10 cities 35000 30000 25000 20000 15000 10000 5000 0 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
12 Divergence in Health Male life expectancy: Fairfax, VA; Marin, CA: 81 years Baltimore, MD: 66 years
Divergence in Divorce The city with the highest divorce rate is Flint, MI 13
The Decline of Manufacturing 14
15 Reasons for the Decline Manufacturing employment has been decimated by: - Automation - Globalization These trends are unlikely to weaken the decline will continue The myth of the renaissance of US manufacturing
16 Important Exception Employment of highly educated workers has increased in US manufacturing Number of engineers employed in manufacturing has doubled in 1980-2012 Example: Apple
17 The Rise of Innovation The innovation sector is growing IT, software, Internet Life science Clean-tech, new materials, robotics Digital entertainment Parts of finance, marketing What they have in common: Make intensive use of human capital Make products that are unique and can t be reproduced elsewhere
The Rise of Jobs in Innovation 18
19 The Clustering Effect Wage growth in brain hubs is accelerating Tipping-point dynamic Self-reinforcing trend that magnifies the differences between cities
20 What Causes Clustering? 1) Thick labor markets Better match between specialized workers and firms 2) Local ecosystem IP lawyers, venture capitalists, specialized technical services, etc. 3) Human capital spillovers We learn from each other Implication: path dependency and agglomeration
21 Competitive Advantages Brain Hubs are expensive for employers But research shows that workers are more productive innovative They cost more, but produce much more
22 Job Growth in Brain Hubs is Broad Based Job growth in innovation job growth in local services If Google adds 1 software engineer in Mountain View more jobs for waiters, taxi drivers, doctors, architects (but not vice versa)
23 The Multiplier Effect For each innovation job, 5 additional service jobs are created in the same city Example: Google has 12,000 employees in Bay Area Indirect job creation: 60,000 jobs in services Most important impact of Google on local labor market is outside high tech.
24 High Tech vs. Manufacturing The multiplier for traditional manufacturing is only 1.6 Innovation generates 3 times more service jobs The best way for a city to generate broad based employment growth is to attract companies in the innovation sector
25 Conclusion 1 Education and innovation are the most important drivers of growth for US communities Well educated workers + innovative companies good jobs for all workers
26 Conclusion 2 Even in Silicon Valley, high tech jobs are a small minority of total employment. The reason why the Bay Area economy is doing so well is not just that high tech is growing The real reason is that the growth of high tech generates wealth that supports the 70% of workers who are employed in local service sector.
27 Conclusion 3 Today, one of the best ways for a city or a state to generate jobs for less educated workers is to attract high-tech companies that hire highly educated ones