Where the Jobs Are

You may think of this week’s blog as a book report, if you choose. The book is The New Geography ofJobs (Houghton Mifflin Harcourt, 2012), by Enrico Moretti, and it is packed with significant ideas about what causes job growth in the new economy. Moretti is an economic geographer, and his fundamental point is that job growth in the United States is clustered within certain “brain hubs,” and this clustering phenomenon is accelerating and self-perpetuating. But he also points out the threats to these engines of job growth.

The idea of brain hubs—geographical centers, such as the Silicon Valley, where the most creative work is being done—has been around for awhile. Richard Florida has popularized this concept, emphasizing how much our economy depends on creative work and on the creative people who do it. The rapid growth of dynamic, job-creating metropolitan areas serves as an important correction to the “flat-world” thesis that Thomas Friedman has made much of—the idea that modern electronic communication and cheap international shipping allow work to be done anywhere in the world where costs are lowest. This dispersal of work is indeed true for low-skill jobs in manufacturing, call centers, and several other industries, but not for the creative industries.

What the flat-world industries have in common is that they are all mature. Industries that are new or the segments of mature industries where a lot of creative research and development projects are going on are clustered in a very few locations. For example, consider your smart phone. The manufacturing happens in China or another low-wage, low-skill location, but the R&D happens in the Silicon Valley. Even Nokia and Eriksson, which are headquartered in two Scandinavian countries, do almost all their R&D in the Silicon Valley.

Why does this work cluster in brain hubs? Both Richard Florida and Enrico Moretti emphasize the collaborative nature of creative work and the labor-market advantages to both employers and employees of having a concentrated pool of high-skilled workers. They also note that these creative workers create numerous job opportunities for lower-skilled workers, thus enriching all sectors of the community.

Where Moretti parts company with Florida is over the question of what makes brain hubs grow. This is an important question, because it can lead to policy suggestions for how to transform a stagnant city into a dynamic one. Florida believes that R&D centers grow when creative people are attracted to cities that are tolerant and have many cultural amenities, but Moretti argues that these municipal attributes are the result rather than the cause of brain-hub activity. As a counter-example, Moretti cites Berlin, which is one of the most tolerant and culturally endowed cities in Europe, yet has the highest unemployment rate in Germany.

Moretti maintains that brain hubs become increasingly dense with highly-skilled workers because each newly arrived creative person contributes additional attractive power to the community. As long as the center continues to do creative work, it will continue to strengthen its pull on creative workers from elsewhere. Of course, this trend may not continue forever. Once low-skill manufacturing became the primary function of the automobile industry, Detroit lost its appeal as a brain hub, and the industry scattered to Southern states and foreign countries. The film industry has also scattered to many places, but because the work is inherently creative, Hollywood maintains its dominance as the place to find work and workers. (In fact, the same persistence of hubs is true of almost every art form.)

So what gets a brain hub started in the first place? Moretti argues that it is mostly a matter of happenstance—specifically, the arbitrary geographic choice of a creative genius who sparks an industry. For Silicon Valley, the common wisdom is that the presence of Stanford University was the driving force, but Moretti points out that there are many other universities just as prestigious that have not sparked brain hubs. What made the difference was the decision by William Shockley, the inventor of the transistor, to locate at Stanford, which had the result that some of his students and colleagues created the first integrated circuit at Fairchild Semiconductor—and the rest is clustering history. For the Seattle high-tech hub, it was the decision of Bill Gates to relocate from Albuquerque (where he had started the microcomputer software industry) to his hometown. By the time Jeff Bezos was ready to try his hand at selling on the Web (by founding Amazon.com), he had little choice but to move to Seattle, rather than his hometown (ironically, Albuquerque). Hollywood was a backwater until D.W. Griffith set up shop there and created the film industry’s first blockbuster, Birth of a Nation.

The main threat to America’s brain hubs—and, therefore, to America’s economy—that Moretti identifies is a shortfall of human capital. Brain hubs gain their power by drawing in brainpower, and it is questionable whether the flow will continue to be adequate, given the decline of our educational system (which used to lead the world in college graduates) and given the barriers that our immigration system creates against the entry of high-skilled foreigners. Ironically, as the creative centers become increasingly different from the rest of the nation—and Moretti points out that these snowballing differences are cultural and political as well as economic—it becomes increasingly harder for the nation to achieve political consensus on the need to fix these looming problems.