The Agenda

Enrico Moretti Geography and Economic Polarization

Enrico Moretti has written a short post for Fareed Zakaria’s GPS blog that distills the thesis of his excellent new book, The New Geography of Jobs:

Historically, there have always been prosperous communities and struggling communities. But the difference was small until the 1980’s, and has been growing dramatically since then. In 1980, the salary of a college educated worker in Austin was lower than in Flint. Today it is 45 percent higher in Austin, and the gap keeps expanding with every passing year. The gap for workers with a high school degree is a staggering 70 percent by some estimates. It is not that workers in Austin have higher IQ than those in Flint, or work harder. The ecosystem that surrounds them is different. The mounting economic divide between American communities – arguably one of the most important developments in the history of the United States of the past half a century – is not an accident, but reflects a structural change in the American economy.

Sixty years ago, the best predictor of a community’s economic success wasphysical capital. Workers in Flint and Detroit were among the most productive – and best paid – in the country because they had access to the most advanced machines. With the shift from traditional manufacturing to innovation and knowledge, this has changed. Today, the best predictor of a community’s economic success is human capital. A growing body of economic research suggests that a company’s success depends on more than just the quality of its workers – it also depends on the entire ecosystem that surrounds it, especially on the share of workers with a college degree in the community. Over the past three decades, cities with many college-educated workers and innovative employers started attracting more of the same, and cities with a less educated workforce and less innovative employers started losing ground. It is a tipping-point dynamic: once a city attracts some innovative workers and companies, its ecosystem changes in ways that make it even more attractive to other innovative workers and companies. This self-reinforcing trend inevitably magnifies the differences between winners and losers among American communities. The share of college graduates has increased by more than 35 percent in Austin, Boston and San Francisco since 1980, but it has declined in Flint. The same difference emerges for R&D expenditures, venture capital investment and patent per capita.

One natural conclusion is that we should make an effort to expand the size of America’s brain hubs. That is, our economy benefits as workers shift from cities like Flint to cities like Austin, which is why local land use regulations that constrain growth in the brain hubs are so pernicious.

I also recommend checking out Nick Schulz’s interview with Moretti. 


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