The New Geography of Jobs

by Enrico Moretti Narrated by Sean Pratt

Overview

We're used to thinking of the US in opposing terms: red versus blue, haves versus have-nots. But today, there are three Americas. At one extreme are the brain hubs amp;mdash; cities like San Francisco, Boston, and Durham amp;mdash; with workers who are among the most productive, creative, and best-paid on the planet. At the other extreme are former manufacturing capitals that are rapidly losing jobs and residents. The rest of America could go either way.

For the past 30 years, the three Americas have been growing apart at an accelerating rate. This divergence is one the most important developments in the history of the US and is reshaping the very fabric of our society, affecting all aspects of our lives, from health and education to family stability and political engagement. But the winners and losers aren't necessarily who you'd expect.

Enrico Moretti's groundbreaking research shows that you don't have to be a scientist or an engineer to thrive in one of the brain hubs. Carpenters, taxi-drivers, teachers, nurses, and other local service jobs are created at a ratio of five-to-one in the brain hubs, raising salaries and standard of living for all. Dealing with this split amp;mdash; supporting growth in the hubs while arresting the decline elsewhere amp;mdash; is the challenge of the century, and The New Geography of Jobs lights the way.

Editorial Reviews

From the Publisher

"Moretti has written the most important book of the year, I can't recommend it enough. The Cal-Berkeley economic professor's book is extremely necessary for politicians and commentators alike, book that artfully slays myriad myths that cloud the economic debate. Brilliant."
—Forbes

　

"Enrico Moretti is a first-rate empirical researcher who has taught us much about the geographic impact of human capital and a variety of public investments. His book, The New Geography of Jobs, is well-written and filled with important facts and wise policy advice. It is an excellent addition to the literature on the economics of place. […] Both local policymakers and national leaders interested in policies with a geographical edge would do well to read the book."
—Edward Glaeser, author of The Triumph of the City

　

"Decade after decade, smart and educated people flock away from Merced, Calif., Yuma, Ariz., Flint, Mich., and Vineland, N.J. In those places, less than 15 percent of the residents have college degrees. They flock to Washington, Boston, San Jose, Raleigh-Durham and San Francisco. In those places, nearly 50 percent of the residents have college degrees. As Enrico Moretti writes in　The New Geography of Jobs, the magnet places have positive ecologies that multiply innovation, creativity and wealth. The abandoned places have negative ecologies and fall further behind. This sorting is self-reinforcing, and it seems to grow more unforgiving every year."
—David Brooks,　The New York Times

"The New Geography of Jobs, examines how and why hiring is stronger in some U.S. cities than in others."
—PBS NewsHour

　

"[A] persuasive look at why some U.S. cities have prospered in recent decades while others have declined."
—Businessweek

　

"In a new book,　The New Geography of Jobs, University of California at Berkeley economics professor Enrico Moretti argues that for each job in the software, technology and life-sciences industries, five new jobs are indirectly created in the local economy. The jobs range from yoga instructors to restaurant owners. Mr. Moretti calculated such a multiplier effect by examining U.S. Census Bureau data from eight million workers in 320 areas during the past 30 years. Mr. Moretti says the data support the argument that technology innovators are one of the most important engines of job creation in the U.S.—with three of those five jobs going to people without college degrees."
—The Wall Street Journal

　

"Moretti has written a clear and insightful account of the economic forces that are shaping America and its regions, and he rightly celebrates human capital and innovation as the fundamental sources of economic development."
—The New Republic

　

"Compelling"
—Slate

　

"Whatever this month unemployment report turns out to be, it's probably not going to be great news for the Rust Belt. Best guesses are manufacturing jobs are still scarce. Meanwhile, new economy places like Silicon Valley continue to thrive. The difference? Location, location, location. So says economist Enrico Moretti in his latest book,　The New Geography of Jobs."
—NPR MarketPlace

　

"A bold vision."
—MIT Sloan Management Review

　

"It is a great and disturbing book about the sweeping changes that are going on in American communities."
—Reuters

　

"Moretti’s book suggests that for each additional job in the average high-tech firm, five additional jobs are created outside that firm in the local community."
—NPR All Things Considered

　

"Economist Enrico Moretti finds that earnings of a high school graduate increase 7% for every 10% increase in the percent of people in a city that are college graduates. While having more high-skilled workers around tends to raise everyone's salaries, Moretti's research shows that low-skilled workers benefit four to five times more than college graduates. Even as liberals work to find a way to counteract the problem of the 1 percent, they should view high skilled immigrants as a step toward turning America back into a true middle-class society."
—The Atlantic

　

"Professor Moretti is a visionary scholar and one of the most important new voices in economics."
—The Costa Report

　

"The book is an inviting read. It is dense with ideas, but spiced liberally with local detail"
—The Journal of Economic Geography

　

"[There is] a growing divide among American cities. The winners are metro areas like Raleigh, N.C.,　San Francisco, and Stamford C.T. where more than 40 percent of the adult residents have college degrees. […] Metro areas like Bakersfield, Calif., Lakeland, Fla., and Youngstown, Ohio, where less than a fifth of the adult residents have college degrees, are being left behind. The divide shows signs of widening as college graduates gravitate to places with many other college graduates and the atmosphere that creates. "This is one of the most important developments in the recent economic history of this country," said Enrico Moretti, an economist at the University of California, Berkeley, who recently published a book on the topic,　The New Geography of Jobs"
—The New York Times

　

"The choice of where you live is the most important choice an American worker can make today."
—The Dylan Ratigan Show, MSNBC

　

"A fresh, provocative analysis of the debate on education and employment. . . A welcome contribution from a newcomer who provides both a different view and balance in addressing one of the country's more profound problems."
—Kirkus Reviews

　

"If there's one current book I'd recommend to leaders in American cities today, it's Enrico Moretti's The New Geography of Jobs."
—The Urbanophile

　

"Enrico Moretti’s,　The New Geography of Jobs　has been exceptionally well received by many of the economic development literati. Some commentators have described　New Geography　as the best economic development book of 2013. And if you don’t read　New Geography, you would also miss reading the best, most readable explanation and defense of innovation, knowledge-based economics and their effects on the location of jobs in the United States. There is a lot going on in　New Geography."
—Journal of Applied Research in Economic Development

 

"An important new book."
—The American

"Prof. Moretti's findings are both significant and provocative."
—Institute for Research on Labor and Employment 　

　

"The New Geography of Jobs is arguably the most important book about urban economics published this year. Author Enrico Moretti, an Italian-born economics professor at Berkeley, analyzes the great divergence occurring between metropolitan regions in the United States. While much of his narrative about the innovation sector as the key driver in regional growth will be familiar to readers of Richard Florida, Moretti provides a valuable counter-balance to Florida’s theories about the creative class."
—Bacon's Rebellion

　

"The book is excellent, I strongly recommend it."
—Forbes (Adam Ozimek)　

　

"Enrico Moretti's superb book highlights why the study of economic geography is vital for understanding fundamental issues such as the root causes of rising income inequality, innovation, and job growth. For those who are curious about how the United States will continue to thrive in the global 21st century economy, I can think of no better book to read than　The New Geography of Jobs."
—Matthew E. Kahn, author of　Climatopolis

　

"Moretti's book is well-written, well-argued, and important. The New Geography of Jobs is the sort of economics that should be widely read, digested, and discussed."
—The Digital Quad

　

"The message of his very well written and prize winning book is important. And Enrico is right that we should pay attention to the geography of where smart people are choosing to work, play, and live their lives. Ultimately, it has consequences for all of us."
—The Creativity Post

　

"If you’re thinking of a career change or new employment, or if job creation is your Number One priority this year, this is a book you’ll want first. You’ll need solid, hard-core information to do it. And for that, The New Geography of Jobs is hard to resist."
—Independent News

"Enrico Moretti has written an important book that every student of local economic development should read. His perspective is dynamic, placing the present situation in the context of the evolution of industrial production and labor markets over the past 50 year."
—Berkeley Planning Journal

　

"Wow. . . Without referring to Charles Murray, Moretti blows　Coming Apart　totally out of the water, replacing Murray's moralistic sociology with solid economics."
—EconLog

　

"Moretti has done a good deed by sitting down to write. He's clear and concise. He has writer's knack for pulling out the illustrative detail while never losing the broad sweep of events. It is truly a skill to be equally at home in the abstract realm of statistics and the very emotion-laden world of human decision-making. Most economists forget that the conclusions they draw from their sample populations also contain the drama of people's actual lives within them. Moretti remembers this while avoiding another trap of economists. He doesn't leave his story in the realm of the theoretical, but constantly brings his tale back to real-world existence in a way that amplifies the argument by making it coincide with everyday experience. Most importantly, he knows his subject well and he's talking about something that is shaping our future more than we realize."
—Sam Seidel

　

"We are habituated to thinking about U.S. inequality across people: By education, race, and ethnicity. Moretti convincingly demonstrates that the inequalities that matter most in early 21st century America are the differences across places. An individual standard of living is increasingly determined by where she lives, not just what she does. Wages are higher, and unemployment lower, for workers living in an "innovation cluster" than for comparably educated workers outside of these privileged places."
—Inside Higher Ed

　

"In　The New Geography of Jobs, Moretti explains how innovative industries bring 'good jobs' and high salaries to the communities where they cluster, and their impact on the local economy is much deeper than their direct effect."
—Buffalo Rising

“Moretti has written the most important book of the year, I can't recommend it enough. The Cal-Berkeley economic professor's book is extremely necessary for politicians and commentators alike, book that artfully slays myriad myths that cloud the economic debate. Brilliant.”
—Forbes

“Enrico Moretti's superb book highlights why the study of economic geography is vital for understanding fundamental issues such as the root causes of rising income inequality, innovation, and job growth. For those who are curious about how the United States will continue to thrive in the global 21st century economy, I can think of no better book to read than The New Geography of Jobs.”
—Matthew E. Kahn, author of Climatopolis

“A fresh, provocative analysis of the debate on education and employment. . . A welcome contribution from a newcomer who provides both a different view and balance in addressing one of the country's more profound problems.”
—Kirkus Reviews

“Wow. . . Without referring to Charles Murray, Moretti blows Coming Apart totally out of the water, replacing Murray's moralistic sociology with solid economics.”
—Arnold Kling, EconLog

　

“[A] persuasive look at why some U.S. cities have prospered in recent decades while others have declined.”
—James Pressley, Bloomberg - Businessweek

“The New Geography of Jobs explains the major shifts taking place in the United States economy and reveals the surprising winners and losers—specifically, which jobs will drive economic growth and where they’ll be located. Which communities will transform themselves into dynamic innovation hubs in 2012 and beyond? It can be done.Get educated, get a map and get going!”
—Troy Onink, Forbes

“In a new book, The New Geography of Jobs, University of California at Berkeley economics professor Enrico Moretti argues that for each job in the software, technology and life-sciences industries, five new jobs are indirectly created in the local economy. The jobs range from yoga instructors to restaurant owners. Mr. Moretti calculated such a multiplier effect by examining U.S. Census Bureau data from eight million workers in 320 areas during the past 30 years. By comparison, he found that just 1.6 local jobs were created for every new job in the manufacturing industry during the same period. Mr. Moretti says the data support the argument that technology innovators are one of the most important engines of job creation in the U.S.—with three of those five jobs going to people without college degrees.”
—Jessica E. Vascellaro, Wall Street Journal

“Decade after decade, smart and educated people flock away from Merced, Calif., Yuma, Ariz., Flint, Mich., and Vineland, N.J. In those places, less than 15 percent of the residents have college degrees. They flock to Washington, Boston, San Jose, Raleigh-Durham and San Francisco. In those places, nearly 50 percent of the residents have college degrees. As Enrico Moretti writes in The New Geography of Jobs, the magnet places have positive ecologies that multiply innovation, creativity and wealth. The abandoned places have negative ecologies and fall further behind. This sorting is self-reinforcing, and it seems to grow more unforgiving every year.”
—David Brooks, The New York Times

“As Enrico Moretti documents in compelling detail in a recently released book, The New Geography of Jobs, even if we don’t assemble iPhones or sneakers in America, we supply their designs to those who do. And we do still make things—things like precision scientific instruments and jetliners. But the way we’re producing them has changed as well: Even in sectors that have expanded production over the last decade, there are fewer jobs to be had— the so-called productivity paradox. The reason? Production is increasingly automated, requiring more computers and fewer human beings. All this adds up to an economy that generates just as much income, but with profits flowing into far fewer pockets than they did in the previous century. Moretti suggests that the prognosis for the average American worker need not be so gloomy if, as he predicts, America continues to thrive as a hub of knowledge generation and innovation. While the idea creators—those who design iPhones and develop new drugs—will continue to be the drivers of prosperity, more than a few crumbs may fall to the workers who support them. For example, Moretti estimates that Microsoft alone is responsible for adding 120,000 low-skill jobs to the Seattle area, where the company is based. This is because of the support workers required to style the hair, cut the grass, and yes, build the houses, of all those Microsoft engineers and computer scientists. And they earn more doing it—a barber in San Francisco earns about 40 percent more than his counterpart in Detroit or Riverside, Calif. So one way of boosting incomes of the bottom quintile would be to provide incentives for them to pick up and move from the rust belt to innovation hubs like Austin, San Francisco, and Boston.”
— Ray Fisman, Slate

“In The New Geography of Jobs, Moretti explains how innovative industries bring 'good jobs' and high salaries to the communities where they cluster, and their impact on the local economy is much deeper than their direct effect.”
— Joann Steinmetz, Buffalo Rising


“The New Geography of Jobs, examines how and why hiring is stronger in some U.S. cities than in others."
— PBS NewsHour

“Whatever this month unemployment report turns out to be, it's probably not gonna be great news for the Rust Belt. Best guesses are manufacturing jobs are still scarce. Meanwhile, new economy places like Silicon Valley continue to thrive. The difference? Location, location, location. So says economist Enrico Moretti in his latest book, The New Geography of Jobs.”
— NPR MarketPlace

“Professor Moretti is a visionary scholar and one of the most important new voices in economics.”
— The Costa Report

“The choice of where you live is the most important choice an American worker can make today.”
— MSNBC – The Dylan Ratigan Show

“The book is excellent, I strongly recommend it.”
— Forbes (Adam Ozimek)

"What explains the wide range of economic growth and prosperity across U.S. regions, and why is it so hard for struggling metro areas to reverse multi-decade trends? These are the questions that urban economist Enrico Moretti addresses in The New Geography of Jobs. In his vision, innovative workers and companies create prosperity that flows broadly, but these gains are mostly metropolitan in scale, meaning that geography substantially determines economic vitality. [...] Moretti has written a clear and insightful account of the economic forces that are shaping America and its regions, and he rightly celebrates human capital and innovation as the fundamental sources of economic development.”
— Brookings Institution (Jonathan Rothwell)

“An important new book.”
— The American

“A bold vision.”
— MIT Sloan Management Review

“Enrico Moretti’s, The New Geography of Jobs has been exceptionally well received by many of the economic development literati. Some commentators have described New Geography as the best economic development book of 2012. And if you don’t read New Geography, you would also miss reading the best, most readable explanation and defense of innovation, knowledge-based economics and their effects on the location of jobs in the United States. There is a lot going on in New Geography.”
— Journal of Applied Research in Economic Development

“Economist Enrico Moretti finds that earnings of a high school graduate increase 7% for every 10% increase in the percent of people in a city that are college graduates. While having more high-skilled workers around tends to raise everyone's salaries, Moretti's research shows that low-skilled workers benefit four to five times more than college graduates. Even as liberals work to find a way to counteract the problem of the 1 percent, they should view HSI as a step toward turning America back into a true middle-class society.”
— The Atlantic

“Prof. Moretti's findings are both significant and provocative.”
— Institute for Research on Labor and Employment 　

“[There is] a growing divide among American cities. The winnter are metro areas like Raleigh, N.C.,  San Francisco, and Stamford C.T. where more than 40 percent of the adult residents have college degrees. The Raleigh area has a booming technology sector and several major research universities; San Francisco has been a magnet for college graduates for decades; and metropolitan Stamford draws highly educated workers from white-collar professions in New York like finance.

Metro areas like Bakersfield, Calif., Lakeland, Fla., and Youngstown, Ohio, where less than a fifth of the adult residents have college degrees, are being left behind. The divide shows signs of widening as college graduates gravitate to places with many other college graduates and the atmosphere that creates. "This is one of the most important developments in the recent economic history of this country," said Enrico Moretti, an economist at the University of California, Berkeley, who recently published a book on the topic, The New Geography of Jobs.”
— The New York Times (Sabrina Tavernise)

“The New Geography of Jobs, by Enrico Moretti of U.C. Berkeley, provides an excellent big-picture analysis of the increasingly divergent outlook for our nation’s cities and delves into the reasons why this disparity is likely to widen. […] Highly recommended, a compelling read!”
— Talking about Finance (Eric Von Berg)

“This book convincingly argues that an unprecedented redistribution of jobs, population and wealth is underway in this country.”
— CNBC

“Remember author Thomas Friedman’s argument that the world was flat, and where you lived didn’t matter, because with e-mail, cell phones, and the Internet, you could do business all over the world? Berkeley economist Enrico Moretti pretty much says "that is so 10 years ago!" In fact, Moretti says the opposite has happened. There’s a sea change going on, a redistribution of population and wealth fueled by innovative companies that need to be in ecosystems to thrive.”
— NPR Here and Now

“Amid growing concern about its outsourcing practices, Apple has posted a study showing that it has created or supported more than 514,000 jobs in the United States. U.C. Berkeley economist Enrico Moretti has written a book about this kind of indirect job creation. He says Apple's total jobs creation estimate is too high — the real total is somewhere between 300,000 and 400,000. 'My research suggests that for each additional job in the average high-tech firm, five additional jobs are created outside that firm in the local community,' Moretti says. And when well-paid tech employees spend a lot of money, that also creates jobs. According to Moretti, 'That would suggest that at the local level, Apple generates about 300,000 jobs all together in the U.S.'”
— All Things Considered

“The dueling speeches on the economy by Obama and Romney simply offered national solutions. Yet so many cities and states are on a strong comeback. Each place has unique reasons for doing well, such as natural resources or creative universities. New York City thrives on finance, arts, tourism. Washington, D.C., prospers on tax and visitor dollars. Many places have largely defied the sluggishness in the national economy. These growth centers could become America’s pathway back to prosperity. They not only hold lessons for what other places can do, but they can serve as magnets for the unemployed.

More than ever, local communities are the secret of economic success" in a global economy, finds Enrico Moretti, an economics professor at the University of California Berkeley , and author of a new book, The New Geography of Jobs. Like many scholars now studying microeconomies, Dr. Moretti sees the mobility of workers to low-employment cities as an easy solution to improve the national economy. ‘Your salary depends more on where you live than your résumé,’ he writes.”

— Christian Science Monitor

“Politicians from both parties, acutely aware that voters are giving a critical eye to the unemployment rate, continue to tout a rebirth in American manufacturing as the key to job growth. However, not everyone agrees that more manufacturing equals more jobs. In his book The New Geography of Jobs, University of California at Berkeley economics professor Enrico Moretti argues that, contrary to conventional wisdom, the information economy is a driver of job growth. The problem, according to Moretti, is that we often look at places like Palo Alto, Calif., with its office parks, Stanford University campus and ambitious entrepreneurs, and fail to recognize the ripples that tech companies send through the greater economy. Using reams of U.S. Census data, Moretti estimates that for every job created by the likes of Apple or Cisco Systems, another five jobs are added in the local service industry.”
— TERRENCE MURRAY, The Financialist

“Excellent”
—The National Review

“Enrico Moretti's provocative new book on the geography of prosperity grapples with such issues and states that research universities increase both the supply and demand for college graduates, but he criticizes efforts to create universities where there is no pre-existing ecosystem of industrial activity and research. The implication is that if you are mayor of El Paso, Modesto, Las Vegas, or Buffalo, you might as well give up on purposeful efforts. Success, in large part, comes down to luck and history. If you are fortunate enough to be Seattle, two local boys grow up to become Bill Gates and Paul Allen and eventually decide to locate their company, Microsoft, there.”
—The New Republic

“The New Geography of Jobs by Enrico Moretti offers a readable and comprehensive view of the economic forces at work in the nation's metropolitan areas. Moretti, an economist at the University of California Berkeley, offers a comprehensive and non-technical discussion of the shift to a knowledge-based economy, the growing importance of human capital to individual and community economic success, and the critical role played by industry clustering in driving innovation and productivity. For Moretti, this shift to a knowledge economy means the economic prospects of cities are diverging: adaptable places with talent are becoming more prosperous, while those with less talent and locked in to traditional industries struggle.”
—The Huffington Post

“If there's one current book I would recommend to leaders in American cities today, it’s Enrico Moretti’s The New Geography of Jobs.”
—Aaron M. Renn in Urbanophile

“The New Geography of Jobs has affected the way I see the world.”
—Jim Russell

“Some economic texts get lost in the minutia. However, The New Geography of Jobs takes a step back to revel in the Big Picture where the real patterns of commerce can be explored.”
—Carrie B. Reyes

“This important book by a U. Cal Berkeley economics professor contains vital insights and data about the nature of jobs in our new economy.  The thesis he unveils is, at its core, extraordinarily encouraging because American innovators have so much untapped potential.  Moretti gets special points for observing that Friedman’s The World Is Flat thesis is simply wrong.  In Moretti’s opinion the data don’t support this view. And despite all the hype about the “death of distance” and the “flat world”, where you live matters more than ever.”
—Mark Mills, Forbes

“Just finished Cal economist Enrico Moretti’s excellent  The New Geography of Jobs. Moretti has a way of looking at things we all know in new and refreshing ways.”
—Mike Cassidy, Silicon Beat

“Moretti has written a clear and insightful account of the economic forces that are shaping America and its regions, and he rightly celebrates human capital and innovation as the fundamental sources of economic development.”
—The New Republic

“In his book The New Geography of Jobs, Moretti unpacks the forces that are reshaping America. Whereas the 20th century was defined by physical capital producing physical goods, the 21st century is increasingly driven by human capital and its output of innovation and knowledge. Smart people tend to cluster into globally competitive “brain hubs”  that, in Moretti’s eyes, will form the basis for much of America’s future prosperity.”
—Free Enterprise

“I highly recommend to everyone in business or wanting to be in business.”
—Kathleen Quinn Votaw

“It is a great and disturbing book about the sweeping changes that are going on in American communities.”
—Reuters

“The New Geography of Jobs is arguably the most important book about urban economics published this year. Author Enrico Moretti, an Italian-born economics professor at Berkeley, analyzes the great divergence occurring between metropolitan regions in the United States. While much of his narrative about the innovation sector as the key driver in regional growth will be familiar to readers of Richard Florida, Moretti provides a valuable counter-balance to Florida’s theories about the creative class.”
—Bacon's Rebellion

“We are habituated to thinking about U.S. inequality across people: By education, race, and ethnicity. Moretti convincingly demonstrates that the inequalities that matter most in early 21st century America are the differences across places. An individual standard of living is increasingly determined by where she lives, not just what she does. Wages are higher, and unemployment lower, for workers living in an 'innovation cluster' than for comparably educated workers outside of these privileged places.”
—Inside Higher Ed

“If you’re thinking of a career change or new employment, or if job creation is your Number One priority this year, this is a book you’ll want first. You’ll need solid, hard-core information to do it. And for that, The New Geography of Jobs is hard to resist.”
—Independent News

“Moretti has done a good deed by sitting down to write. He's clear and concise. He has tackled these vexing questions from many angles - the decline in American manufacturing; the phenomenon of path dependency that he calls The Great Divergence; the reason why people choose to live where they live. He has writer's knack for pulling out the illustrative detail while never losing the broad sweep of events. It is truly a skill to be equally at home in the abstract realm of statistics and the very emotion-laden world of human decision-making. Most economists forget that the conclusions they draw from their sample populations also contain the drama of people's actual lives within them. Moretti remembers this while avoiding another trap of economists. He doesn't leave his story in the realm of the theoretical, but constantly brings his tale back to real-world existence in a way that amplifies the argument by making it coincide with everyday experience. Most importantly, he knows his subject well and he's talking about something that is shaping our future more than we realize.”
—Sam Seidel

Product Details

BN ID:	2940170544622
Publisher:	Tantor Audio
Publication date:	10/23/2018
Edition description:	Unabridged

Related Subjects

• Business
• Current Affairs & Politics
• Economics
• United States Politics & Government
• Economic Conditions
• Labor Economics
• U.S. Politics in the Post Cold-War Era
• Economic Conditions in the United States
• Employment & Unemployment
• Labor Market
• Labor Supply
• U.S. Politics & Government - 21st Century - General & Miscellaneous

Read an Excerpt

INTRODUCTION

Menlo Park is a lively community in the heart of Silicon Valley, just minutes from Stanford University’s manicured campus and many of the Valley’s most dynamic high-tech companies. Surrounded by some of the wealthiest zip codes in California, its streets are lined with an eclectic mix of midcentury ranch houses side by side with newly built mini-mansions and low-rise apartment buildings. In 1969, David Breedlove was a young engineer with a beautiful wife and a house in Menlo Park. They were expecting their first child. Breedlove liked his job and had even turned down an offer from Hewlett-Packard, the iconic high-tech giant in the Valley. Nevertheless, he was considering leaving Menlo Park to move to a medium-sized town called Visalia. About a three-hour drive from Menlo Park, Visalia sits on a flat, dry plain in the heart of the agricultural San Joaquin Valley. Its residential neighborhoods have the typical feel of many Southern California communities, with wide streets lined with one-story houses, lawns with shrubs and palm trees, and the occasional backyard pool. It’s hot in the summer, with a typical maximum temperature in July of ninety-four degrees, and cold in the winter. 

Breedlove liked the idea of moving to a more rural community with less pollution, a shorter commute, and safer schools. Menlo Park, like many urban areas at the time, did not seem to be heading in the right direction. In the end, Breedlove quit his job, sold the Silicon Valley house, packed, and moved the family to Visalia. He was not the only one. Many well-educated professionals at the time were leaving cities and moving to smaller communities because they thought those communities were better places to raise families. But things did not turn out exactly as they expected. 

In 1969, both Menlo Park and Visalia had a mix of residents with a wide range of income levels. Visalia was predominantly a farming community with a large population of laborers but also a sizable number of professional, middle-class families. Menlo Park had a largely middle-class population but also a significant number of working-class and low-income households. The two cities were not identical—the typical resident of Menlo Park was somewhat better educated than the typical resident of Visalia and earned a slightly higher salary—but the differences were relatively small. In the late 1960s, the two cities had schools of comparable quality and similar crime rates, although Menlo Park had a slightly higher incidence of violent crime, especially aggravated assault. The natural surroundings in both places were attractive. While Menlo Park was close to the Pacific Ocean beaches, Visalia was near the Sierra Nevada range and Sequoia and Kings Canyon National Parks. 

Today the two places could not be more different, but not in the way David Breedlove envisioned. The Silicon Valley region has grown into the most important innovation hub in the world. Jobs abound, and the average salary of its residents is the second highest in America. Its crime rate is low, its school districts are among the best in the state, and the air quality is excellent. Fully half of its residents have a college degree, and many have a PhD, making it the fifth best educated urban area in the nation. Menlo Park keeps attracting small and large high-tech employers, including most recently the new Facebook headquarters. 

By contrast, Visalia has the second lowest percentage of college-educated workers in the country, almost no residents with a postgraduate degree, and one of the lowest average salaries in America. It is the only major city in the Central Valley that does not have a four-year college. Its crime rate is high, and its schools, structurally unable to cope with the vast number of non-English-speaking students, are among the worst in California. Visalia also consistently ranks among American cities with the worst pollution, especially in the summer, when the heat, traffic, and fumes from farm machines create the third highest level of ozone in the nation. 

Not only are the two communities different, but they are growing more and more different every year. For the past thirty years, Silicon Valley has been a magnet for good jobs and skilled workers from all over the world. The percentage of college graduates has increased by two-thirds, the second largest gain among American metropolitan areas. By contrast, few high-paying jobs have been created in Visalia, and the percentage of local workers with a college degree has barely changed in thirty years—one of the worst performances in the country. 

For someone like David Breedlove, a highly educated professional with solid career options, choosing Visalia over Menlo Park was a perfectly reasonable decision in 1969. Today it would be almost unthinkable. Although only 200 miles separate these two cities, they might as well be on two different planets. 

The divergence of Menlo Park and Visalia is not an isolated case. It reflects a broader national trend. America’s new economic map shows growing differences, not just between people but between communities. A handful of cities with the “right” industries and a solid base of human capital keep attracting good employers and offering high wages, while those at the other extreme, cities with the “wrong” industries and a limited human capital base, are stuck with dead-end jobs and low average wages. This divide—I will call it the Great Divergence—has its origins in the 1980s, when American cities started to be increasingly defined by their residents’ levels of education. Cities with many college-educated workers started attracting even more, and cities with a less educated workforce started losing ground. While in 1969 Visalia did have a small professional middle class, today its residents, especially those who moved there recently, are overwhelmingly unskilled. Menlo Park had many low-income families in 1969, but today most of its new residents have a college degree or a master’s degree and a middle- to upper-class income. Geographically, American workers are increasingly sorting along educational lines. At the same time that American communities are desegregating racially, they are becoming more segregated in terms of schooling and earnings. 

Certainly any country has communities with more or less educated residents. But today the difference among communities in the United States is bigger than it has been in a century. The divergence in educational levels is causing an equally large divergence in labor productivity and therefore salaries. Workers in cities at the top of the list make about two to three times more than identical workers in cities at the bottom, and the gap keeps growing. 

Cities with a high percentage of skilled workers offer high wages not just because they have many college-educated residents and these residents earn high wages. This would be interesting but hardly surprising. But something deeper is going on. A worker’s education has an effect not just on his own salary but on the entire community around him. The presence of many college-educated residents changes the local economy in profound ways, affecting both the kinds of jobs available and the productivity of every worker who lives there, including the less skilled. This results in high wages not just for skilled workers but for most workers. 

I consider the Great Divergence to be one of the most important developments in the United States over the past thirty years. As we will discover, the growing economic divide between American communities is not an accident but the inevitable result of deep-seated economic forces. More than traditional industries, the knowledge economy has an inherent tendency toward geographical agglomeration. In this context, initial advantages matter, and the future depends heavily on the past. The success of a city fosters more success, as communities that can attract skilled workers and good jobs tend to attract even more. Communities that fail to attract skilled workers lose further ground. 

The growing divergence of American communities is important not just in itself but because of what it means for American society. While the divide is first and foremost economic, it is now beginning to affect cultural identity, health, family stability, and even politics. The sorting of highly educated Americans into some communities and less educated American into others tends to magnify and exacerbate all other socioeconomic differences. For example, there are vast differences in life expectancy among inhabitants of American cities, and these differences have been expanding for the past three decades. The divorce rates, crime rates, and political clout of different communities have also been diverging. These trends are reshaping the very fabric of our society.

The United States is not in particularly high spirits these days. Fear of economic decline is widespread, and insecurity about America’s standing in the world and its economic future is growing. Talk of the “death of the American dream” is everywhere, from well-articulated op-ed pieces to crude talk radio shows, from casual barbershop conversations to highbrow academic symposia. In a nation sharply divided along political lines, concern about the economy is shared almost equally by those on the left and on the right. 

On the surface it seems we have good reason to be worried. Middle-class salaries are declining. Good jobs are scarce. Take the typical forty-year-old male worker with a high school education: today his hourly wage is 8 percent lower than his father’s was in 1980, adjusted for inflation. This means that for the first time in recent American history, the average worker has not experienced an improvement in standard of living compared to the previous generation. In fact he is worse off by almost every measure. On top of this, income inequality is widening. Uncertainty about the future is now endemic. 

But the economic picture is more complex, more interesting, and more surprising than the current debate suggests. America’s labor market is undergoing a momentous shift. While some sectors and occupations are dying, others are growing stronger, and still others, just born, promise to alter the landscape dramatically. Most of all, the geography of jobs is changing in profound and irreversible ways. While these trends are national, even global, in scope, their effects are profoundly different in different cities and regions of the country. For example, the effects of globalization, technological progress, and immigration on American workers are not uniform across the United States. They favor the residents of some cities and hurt the residents of others. As old manufacturing capitals disappear, new innovation hubs are rising and are poised to become the new engines of prosperity. An unprecedented redistribution of jobs, population, and wealth is under way in America, and it’s likely to accelerate in the decades to come. 

Some of the changes in the economic map reflect long-run forces that are outside our control. Others can be shaped and managed. But none of them are random, chaotic, or unpredictable. In the end, they all reflect clear and rather basic economic principles. Unfortunately, they tend to be obscured by the flood of data on the fluctuations of the stock market or the latest employment numbers. The focus on short-term events often results in information that is incomplete, irrelevant, or both. What happened today, this week, or even this month is not very illuminating, because the fundamentals of an economy evolve at a much slower pace. 

But if we take a step back and look at the big picture, the forces that have been driving these changes reveal themselves very clearly. They are far more fascinating and much more important than the daily movements of the Dow Jones. This book examines the long-term trends that really matter to our lives—the vast changes that have taken place in the American labor market over the past three decades and the economic forces underlying these changes. But it also looks forward, seeking to provide insight into the trends that will shape our economy over the next three decades. 

Economists like to distinguish cyclical change, the ups and downs of the economy driven by the endless cycle of recessions and expansions, from secular change, the long-run developments that are driven by deep-seated but slower-moving economic dynamics. Most of the current public debate on the economy—in the media, in Congress, in the White House—focuses on the former. The time horizon in this debate is six months or a year at most: How do we end the recession? What should be in this year’s budget? How will unemployment affect the next election? In this book, the focus is almost entirely on the forces that drive long-run trends. Understanding why these changes are taking place, where they are occurring, and how they are affecting individual Americans is crucial. Our jobs, our communities, and our economic destiny are at stake.

The changes taking place in the United States can be seen around the globe. New economic powerhouses are displacing old ones. What used to be tiny, barely visible dots on the map have turned into thriving megalopolises with thousands of new companies and millions of new jobs. Nowhere are these changes more obvious than in the Chinese city of Shenzhen. If you have not heard of it, you will. It is one of the fastest-growing cities in the world. In just three decades it has gone from being a small fishing village to being a huge metropolis with more than 10 million residents. In the United States, a fast-growing city like Las Vegas or Phoenix may triple or quadruple in size over a thirty-year period. Shenzhen’s population has grown by more than 300 times in the same period. In the process, Shenzhen has become one of the manufacturing capitals of the world. 

Shenzhen’s rise is truly remarkable because it parallels almost perfectly the decline of U.S. manufacturing centers. Thirty years ago Shenzhen was an unremarkable small town that no one outside of southern Guangdong Province had even heard of. Its fate—as well as the fate of millions of American manufacturing workers —was sealed in 1979, when the Chinese leadership singled it out to be the first of China’s “Special Economic Zones.” These zones quickly became a magnet for foreign investment. In turn, that flow of investment led to thousands of new factories. These factories are where many American manufacturing jobs have gone. 

As Detroit and Cleveland have declined, Shenzhen has grown. Massive production facilities of all kinds carpet the region. Every year the skyline adds new high-rise offices and apartments, and its workforce swells as more and more farmers leave rural areas to look for better-paying jobs in its cavernous factories. The Chinese call it the city with “one high-rise a day and one boulevard every three days.” As you walk along its wide streets, you feel the city’s energy and optimism. Shenzhen has been China’s top exporter for the past two decades and has built one of the world’s busiest ports, a sprawling facility dotted with huge cranes, enormous trucks, and containers of all colors. Twenty-four hours a day, seven days a week, 365 days a year, these containers are loaded onto enormous cargo ships bound for the West Coast of the United States. Twenty-five million of these containers leave the port each year, almost one per second. In less than two weeks that merchandise will be on a truck headed for a Walmart distribution center, an IKEA warehouse, or an Apple store. 

Shenzhen is where the iPhone is assembled. If there is a poster child of globalization, it is the iPhone. Apple has given as much attention to designing and optimizing its supply chain as to the design of the phone itself. The process by which the iPhone is produced illustrates how the new global economy is reshaping the location of jobs and presenting new challenges for American
workers. 

Apple engineers in Cupertino, California, conceived and designed the iPhone. This is the only phase of the production process that takes place entirely in the United States. It involves product design, software development, product management, marketing, and other high-value functions. At this stage, labor costs are not the main consideration. Rather, the important elements are creativity and ingenuity. The iPhone’s electronic parts—sophisticated, but not as innovative as its design—are made mostly in Singapore and Taiwan. Only a few components are made in the United States. The last phase of production is the most labor-intensive: workers assemble the hardware and prepare it for shipping. This part, where the key factor is labor costs, takes place on the outskirts of Shenzhen. The facility is one of the largest in the world, and its sheer size is extraordinary: with 400,000 workers, dormitories, stores, and even cinemas, it is more like a city within a city than a factory. If you buy an iPhone online, it is shipped directly to you from Shenzhen. Incredibly, when it reaches the American consumer, only one American worker has physically touched the final product: the UPS delivery guy. 

At a superficial level, the story of the iPhone is troubling. Here you have an iconic American product that has captivated consumers everywhere, but American workers are involved only in the initial innovation phase. The rest of the process, including the making of the sophisticated electronic components, has been moved overseas. It is therefore natural to wonder what might be left to American workers in the decades to come. Is America entering a phase of irreversible decline? 

Over the past half century, the United States has shifted from an economy centered on producing physical goods to one centered on innovation and knowledge. Jobs in the innovation sector have been growing disproportionately fast. The key ingredient in these jobs is human capital, which consists of people’s skills and ingenuity. In other words, humans are the essential input—they are coming up with the new ideas. The same two forces that have decimated traditional manufacturing, globalization and technological progress, are now driving the rise of jobs in the innovation sector. The Great Recession has temporarily halted this growth, but the long-term trend points upward. 

Globalization and technological progress have turned many physical goods into cheap commodities but have raised the economic return on human capital and innovation. For the first time in history, the factor that is scarce is not physical capital but creativity. Not surprisingly, innovators capture the largest share of the value of new products. The iPhone is made of 634 components. The value created in Shenzhen is very low, because assembly can be done anywhere in the world. Even sophisticated electronic parts, like flash memories and retina displays, create limited value, because of strong global competition. The majority of the iPhone’s value comes from the original idea, its unique engineering, and its beautiful industrial design. Essentially this is why Apple receives $321 for each iPhone—much more than any part supplier involved in physical production. This matters tremendously, not just for Apple’s profit margin and for our sense of national pride, but because it means good jobs. 

The innovation sector includes advanced manufacturing (such as designing iPhones or iPads), information technology, life sciences, medical devices, robotics, new materials, and nanotechnology. But innovation is not limited to high technology. Any job that generates new ideas and new products qualifies. There are entertainment innovators, environmental innovators, even financial innovators. What they all have in common is that they create things the world has never seen before. We tend to think of innovations as physical goods, but they can also be services—for example, new ways of reaching consumers or new ways of spending our free time. Today this is where the real money is. A part of the $321 that Apple receives ends up in the pockets of Apple’s stockholders, but some of it goes to Apple’s employees in Cupertino. And because of the company’s great profitability, it has the incentive to keep innovating and to keep hiring workers. Studies show that the more innovative a company is, the better paid its employees are. 

You might think that the rise of innovation is pretty exciting if you work for, say, Google or a biotech company but that it doesn’t matter all that much if you’re a teacher or a doctor or a police officer. After all, the majority of Americans will never work for a high-tech startup. Why should they care about the rise of innovation? As it turns out, however, innovation matters not only for the well-educated workers who are directly employed by high-tech firms—the scientists, engineers, and creators of new ideas—but for most American workers. 

If you take a walk in one of America’s cities, most of the people you see on the street will be store clerks and hairstylists, lawyers and waiters, not innovators. About a third of Americans work either for the government or in the education and health services sectors, which include teachers, doctors, and nurses. Another quarter are in retail, leisure, and hospitality, which includes people working in stores, restaurants, movie theaters, and hotels. An additional 14 percent are employed in professional and business services, which include employees of law, architecture, and management firms. In total, two-thirds of American jobs are in the local service sector, and that number has been quietly growing for the past fifty years. Most industrialized nations have a similar percentage of local service jobs. The goods and services in this sector are locally produced and locally consumed and therefore do not face global competition. Although jobs in local services constitute the vast majority of jobs, they are the effect, not the cause, of economic growth. One reason is that productivity in local services tends not to change much over time. It takes the same amount of labor to cut your hair, wait on a table, drive a bus, or teach math as it did fifty years ago. By contrast, productivity in the innovation sector increases steadily every year, thanks to technological progress. In the long run, a society cannot experience salary growth without significant productivity growth. Fifty years ago, manufacturing was the driver of this growth, the one sector responsible for raising the wages of American workers, including local service workers. Today the innovation sector is the driver. Thus, what happens to the innovation sector determines the salary of many Americans, whether they work in innovation or not. 

A second reason that the rise of innovation matters to all of us has to do with the almost magical economics of job creation. Innovative industries bring “good jobs” and high salaries to the communities where they cluster, and their impact on the local economy is much deeper than their direct effect. Attracting a scientist or a software engineer to a city triggers a multiplier effect, increasing employment and salaries for those who provide local services. In essence, from the point of view of a city, a high-tech job is more than a job. Indeed, my research shows that for each new high-tech job in a city, five additional jobs are ultimately created outside of the high-tech sector in that city, both in skilled occupations (lawyers, teachers, nurses) and in unskilled ones (waiters, hairdressers, carpenters). For each new software designer hired at Twitter in San Francisco, there are five new job openings for baristas, personal trainers, doctors, and taxi drivers in the community.  While innovation will never be responsible for the majority of jobs in the United States, it has a disproportionate effect on the economy of American communities. Most sectors have a multiplier effect, but the innovation sector has the largest multiplier of all: about three times larger than that of manufacturing. Later we will discover why this is the case. For now, let me just point out that the multiplier effect has important and surprising implications for local development strategies. One is that the best way for a city or state to generate jobs for less skilled workers is to attract high-tech companies that hire highly skilled ones.

 

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