Trickle down and the Millennials continued

At its core, Thomas Sugrue’s critique of making retaining and attracting young professional a priority really should be aimed at regions and states, not cities. What Sugrue is arguing is that it is not an effective jobs and economic development strategy. City government has very little clout in either.

In his Free Press interview Sugrue says: “It’s a pretty commonplace assumption that if you gentrify neighborhoods, if you bring new investment to downtown, that its benefits will trickle down to the majority of the city’s population. There are benefits from new investment, including job creation, increased tax revenue and safety in the city, but on the other hand, the kinds of jobs that are being created by a lot of the downtown redevelopment are jobs for folks who have significant education, skills and means already. They’re not, by and large, creating stable secure jobs for folks down the ladder, for working-class folks in particular. Gentrification brings all sorts of small businesses, coffee shops, trendy bars, restaurants, art galleries and a vitality and energy to neighborhoods that have often been bereft of commerce for a long time. But again, these aren’t places that are bringing back the jobs that are essential to the city’s future stability and possible growth.”

Sugrue, in addition to attracting immigrants, offers an alternative: “The most important interventions to deal with poverty and underemployment are creating jobs and improving public education. And those have to be at the core of any effort to turn Detroit around. … Job training programs that are geared toward growing sectors of the economy, that allow for a retooling of worker skills to adapt to the new economy, those are good.”

Lets start with Sugrue’s assertion that concentrating young talent doesn’t bring jobs to others. The reason they are important to economic growth is both they are the most mobile and that knowledge workers––professionals and managers––are now, and will increasingly be, the core of the middle class. They will play the same role in the economy as high wage factory workers did for most of the 20th Century when they were the core or the middle class.

Their purchasing power will create demand for housing, retail, hospitality, etc. which will increase jobs in all those sectors. Not just in the neighborhoods where they live and work, but throughout the region and even the state when they vacation and purchase second homes. For most of the 20th Century Michigan policy was focused on meeting the interests of those high paid factory workers. Everyone understood they were the anchor of the state’s economy. No one argued that focusing on them was either trickle down or elitist.

Unlike high paid factory workers of the past, young professionals also grow the economy by being creators of new businesses and, where they are concentrated, attracting businesses. Those new businesses, just as those created by the immigrants Sugrue celebrates, create new jobs for more than knowledge workers. In addition, unlike high paid factory workers of the past who moved to where the jobs were, increasingly knowledge-based employers are moving to where the talent is. Talent being the most important asset to their enterprise and in the shortest supply.

Where talent concentrates you get more job creation. In a New York Times column entitled “Teach Your Neighbors Well”, Edward Glaser writes that the unemployment rate for all was lower in metropolitan areas with the highest proportion of adults with a four year degree or more. So the more college educated the region the lower the unemployment rate is for those without a college degree.

As Don Grimes and I laid out in our The New Path to Prosperity report all the job growth in America from 1990-2011 came in services. And the high wage growth was concentrated in knowledge-based services. Over those two decades manufacturing lost nearly six million jobs while knowledge-based services added more than 16 million jobs and other private services added 22 million jobs. Its almost certain these trends will accelerate, not reverse.

These are the sectors that retaining and attracting college educated Millennials will help grow. They are the growing sectors of the economy that Sugrue wants to train city residents for. Regions with vibrant central cities that are attractive places for mobile young talent will have more of those jobs than those who don’t. That is why retaining and attracting young talent should be an economic development priority for the city, region and state.

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