Thursday, January 14th, 2010

High Tech Won’t Save California’s Economy – Or Ours

I have another one up at New Geography this week, called “High Tech Won’t Save California’s Economy.”

The issue is not that California isn’t or won’t be a high tech powerhouse. It is, and it will be. The question is whether that will generate enough jobs to power California’s economy. I looked at job growth over the last two decades in Silicon Valley and San Diego (home to a major biotech cluster) and neither place generated particularly large numbers of jobs, though San Diego did ok.

This challenge has been well noted. For example, Richard Longworth in Caught in the Middle talked about how Chicago’s urban core boom hadn’t animated the entire region. These new economy companies are great, they just don’t generate as many good paying jobs as old line businesses once did. That’s ok if you are a small place like Singapore or Hong Kong, but not so great if you are state of 37 million people, or a metro region the size of Chicago.

While pulling stats for this piece, I quickly scanned Cook County, IL employment data. Cook County had almost 200,000 fewer jobs in 2008 than it did in 2000. But what really struck me was that it had about 70,000 fewer jobs in 2008 than it did in 1990. The contrast of this job decline over a span of time that saw Chicago experience arguably the greatest urban core renaissance in America puts the challenge facing all of us in stark relief, especially for those cities without even Chicago’s core boom. High tech and other normally targeted 21st century industries are vitally necessary, but are they enough?

As numbers from around the Midwest show, it’s not just California’s problem or Chicago’s, it’s pretty much everybody’s problem. And it’s a really hard one. This economy should crystalize for us all the paramount importance of not just finding future industries with high economic output, but ones that create plenty of jobs as well.

12 Comments
Topics: Economic Development

12 Responses to “High Tech Won’t Save California’s Economy – Or Ours”

  1. Jonathan says:

    What is this future industry with high economic output that creates plenty of jobs of which you speak? Sounds like a sure thing!

  2. Jonathan, there’s a well known tendency in human behavior for us to gravitate towards attacking problems we think we can solve, rather than the ones that are important. Many places think there’s a “high tech recipe”, so they are following it. That’s not to say one should not follow high tech, but we also should not ignore a major problem around creating enough middle class jobs simply because no answer is immediately evident.

  3. Aaron…….These are good points. It’s not only that “new economy” jobs might not be enough to energize a region. They might not even be enough to support the city where they are located. Again, Chicago is an example. More than any other Midwestern city, Chicago has transitioned from its industrial past to become a global city, partially because of its markets, business services, colleges and universities, etc. etc. All this has created a terrific number of jobs, both good and bad. But this has been going on for 15 or 20 years now, and the number of jobs in Chicago itself– indeed, the city’s total population — is lower than it was at the height of the industrial era. In other words, the new economy has not (yet) replaced the old economy.

    Will it? It’s still early days. Backers of bio science and biotech say they’re now where computers were 30 years ago, before they virtually reinvented the economy. Ditto nano. Ditto new energy. We can hope that all these will be big job generators in the future. But so far, the results aren’t there.

    In my book, I pointed out that, while economies are becoming increasingly centralized in major cities, these cities can’t carry the regions around them. Chicago can’t carry the Midwest, Des Moines can’t carry Iowa, Indianapolis can’t carry Indiana, etc. All these regions once generated a lot of jobs on their own, in farming or industry. No more. So if economies are urbanizing, then cities have to make up both for their own job losses and the losses in the surrounding regions. If cities can’t even compensate for their own job losses (which seems to be the case in Chicago), what hope then for the countryside?

  4. Great comment. I agree completely.

  5. Anonymous says:

    When I first started following the news during high school (~1990) a lot of people were talking about this here in Cleveland. How would service jobs ever replace the mills? I was convinced we had a problem and concerned.

    For the past 20 years, maybe longer, we’ve been borrowing to inflate consumption. Government borrowing, consumer borrowing, corporate debt, etc. I remember thinking in 2000, well, I guess we were wrong. We can have prosperity while de-industrializing. Now I’m thinking we were right.

    The dot com bubble and the housing bubble made us feel rich enough to take out the credit card. So now we have tons of retail and fast food, while industrial employment falls by the hour. The number of jobs has sort of kept up, but they are crap jobs and they are probably going away.

    There are five Home Depots within 10 minutes of my house. Five! In a shrinking county. Plus Lowes, Target, Officemax/Depot/Staple. Petco. Petland. Pet Plus. I will be very surprised if these all survive to 2012.

    From the civil war to the 1950s, falling need for agricultural workers synched up with the rising need for industrial workers. We could afford to limit hours to 40, mandate safety precautions, raise wages, and still let in immigrants. Today, the market is not creating jobs. Policymakers need to get off their ass and try something. Adjust the tax code, adjust the labor laws, offer general subsidies (if we can’t pick winners). People’s entire working lives are passing without an opportunity for steady middle class work.

  6. Kevin says:

    Hong Kong is roughly the same size as Chicago. About 7 million in HK, 8.7 million in the Chicagoland urban area…

  7. Thanks, Kevin. For some reason I thought it was about the size of Singapore (5 million). Chicago’s MSA is now up to 9.6 million.

  8. Alon Levy says:

    Are you sure 2008 vs. 2000 is the best comparison? 2000 was a boom year, whereas 2008 was a recession year; even in the growth years in between, job growth was anemic. Overall the nationwide employment-to-population ratio had a net decline from the 2000 peak to the 2007 peak, so it’s not surprising Cook County lost 200,000 jobs.

    P.S. Both Singapore and Hong Kong have significant hinterlands in the countries they were originally in. Singapore has Johor, Hong Kong has Shenzhen. Both Johor and Shenzhen are growing explosively due to their proximity to global cities and are among the richest cities in their respective countries.

  9. The NG article used 1990-2008 data. I would have included 2009 data but it hasn’t been released it. (The data set I used was the Quarterly Census of Employment and Wages, incidentally). For Chicago, even if you take a two decade view, it is still not completely pretty as I noted.

  10. cdc guy says:

    Richard, one explanation is that the nearer one gets to the dirt, the less-possible it is to outsource or automate beyond a certain point: sophisticated farm equipment won’t fix itself; grain elevators can’t load and unload grain themselves; ethanol plants can’t run themselves; cows can’t milk themselves; hogs can’t butcher themselves.

    So the rural/small town economy can and will carry itself once it shrinks to the right size, and it’s probably close to that now.

    Indianapolis doesn’t have to carry rural Indiana, with one significant caveat: barring significant natural or immigrant population growth. If Indianapolis does have to carry both immigrants and the excess sons and daughters of rural Indiana, we’re likely in trouble without significant commercial and industrial job creation.

  11. Alon Levy says:

    1990 is still a not very good baseline – it was a peak year, followed by a recession. The nationwide employment to population ratio had a net decline from 1990 to 2008, going from 62.8% to 62.2%.

  12. Any cutoffs would appear semi-arbitrary. As you know, there was a change in the job classification schema in 2000. This makes pulling the data pre-2000 semi-painful. So I used a University of Georgia database that did the work for me. I simply selected the maximum data range they had available for download.

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