Talent rich cities winning
A core finding of Michigan Future’s research has been that the most prosperous places are now those with the highest proportion of adults with a four year degree. Because globalization and technology are driving us away from a factory-based to a knowledge-based economy. Knowledge-based services are almost exclusively the only sector of the economy to be structurally adding jobs and paying high wages.
Because knowledge-based enterprises and college educated adults are concentrating in big metros with vibrant central cities talent rich larger metros are the most prosperous places in the country. Think Silicon Valley, but also places like San Fransisco, New York, Boston, Minneapolis, Washington D.C., Seattle and Denver.
Three recent articles provide more data that this is dominant theme of which regions across the country are doing well and which aren’t.
In an article entitled The Great Divergence the Economist observes:
Cities have long been the most productive places to do business, because they bring firms, customers and workers closer together. A banker in New York is only a taxi ride away from her clients; a new restaurant there immediately has 8.4m potential customers on its doorstep. Where clever people congregate, innovation results.
For the most successful cities, these advantages seem to be getting bigger. In 2001 the richest 50 cities and their surroundings produced 27% more per head than America as a whole. Today’s richest cities make 34% more. Measured by total GDP, the decoupling is greater still, because prosperous cities are sucking in disproportionate numbers of urbanising Americans. Between 2010 and 2014 America’s population grew by 3.1%; its cities, by 3.7%. But the 50 richest cities swelled by 9.2%.
As detailed in a City Lab article Richard Florida and Karen King found that venture capital investments are shifting from suburbs to cities. As they write “venture capital is moving to dense urban areas that are more walkable and served by transit.” Florida writes:
Ultimately, our analysis reveals two big takeaways. The first is that more than half of all startup neighborhoods are urban, with 57 percent of startup companies and 54 percent of venture-capital investments located in urban ZIP codes. The second is that startup neighborhoods have considerably greater shares of commuters who walk, bike, or take transit to work. The share of workers who do so is nearly twice as high in neighborhoods with venture-capital-backed startups compared to the national average (16.6 versus 8.4 percent). In fact, a third of all venture-capital investment is located in neighborhoods with more than 30 percent of workers who walk, bike, or use transit when commuting, and more than a quarter of it is located in neighborhoods where more than half of workers do so.
Richard Florida also reports in City Lab on a study that shows that the regions that have withstood national recessions the best are those that have the highest concentrations of talent. Florida summarizes the research findings this way: “Ultimately, the study boils down to a few main takeaways. For one, knowledge- and talent-based economies are the best defense against severe recessions, while manufacturing-oriented Rustbelt metros and housing-propelled or tourism-based Sunbelt metros are much more exposed to the ups and downs of the business cycle.”