An economist at Berkeley looks at the major shifts taking place in the U.S. economy and reveals the surprising winners and losers—specifically, which kinds of jobs will drive economic growth and where they’ll be located—while exploring how communities can transform themselves into dynamic innovation hubs.
“A timely and smart discussion of how different cities and regions have made a changing economy work for them – and how policymakers can learn from that to lift the circumstances of working Americans everywhere.”—Barack Obama
We’re used to thinking of the United States in opposing terms: red versus blue, haves versus have-nots. But today there are three Americas. At one extreme are the brain hubs—cities like San Francisco, Boston, and Durham—with workers who are among the most productive, creative, and best paid on the planet. At the other extreme are former manufacturing capitals, which are rapidly losing jobs and residents. The rest of America could go either way. For the past thirty years, the three Americas have been growing apart at an accelerating rate. This divergence is one the most important developments in the history of the United States and is reshaping the very fabric of our society, affecting all aspects of our lives, from health and education to family stability and political engagement. But the winners and losers aren’t necessarily who you’d expect.
Enrico Moretti’s groundbreaking research shows that you don’t have to be a scientist or an engineer to thrive in one of the brain hubs. Carpenters, taxi-drivers, teachers, nurses, and other local service jobs are created at a ratio of five-to-one in the brain hubs, raising salaries and standard of living for all. Dealing with this split—supporting growth in the hubs while arresting the decline elsewhere—is the challenge of the century, and The New Geography of Jobs lights the way.
Menlo Park is a lively community in the heart of Silicon Valley, just minutes from Stanford University’s manicured campus and many of the Valley’s most dynamic high-tech companies. Surrounded by some of the wealthiest zip codes in California, its streets are lined with an eclectic mix of midcentury ranch houses side by side with newly built mini-mansions and low-rise apartment buildings. In 1969, David Breedlove was a young engineer with a beautiful wife and a house in Menlo Park. They were expecting their first child. Breedlove liked his job and had even turned down an offer from Hewlett-Packard, the iconic high-tech giant in the Valley. Nevertheless, he was considering leaving Menlo Park to move to a medium-sized town called Visalia. About a three-hour drive from Menlo Park, Visalia sits on a flat, dry plain in the heart of the agricultural San Joaquin Valley. Its residential neighborhoods have the typical feel of many Southern California communities, with wide streets lined with one-story houses, lawns with shrubs and palm trees, and the occasional backyard pool. It’s hot in the summer, with a typical maximum temperature in July of ninety-four degrees, and cold in the winter.
Breedlove liked the idea of moving to a more rural community with less pollution, a shorter commute, and safer schools. Menlo Park, like many urban areas at the time, did not seem to be heading in the right direction. In the end, Breedlove quit his job, sold the Silicon Valley house, packed, and moved the family to Visalia. He was not the only one. Many well-educated professionals at the time were leaving cities and moving to smaller communities because they thought those communities were better places to raise families. But things did not turn out exactly as they expected.
In 1969, both Menlo Park and Visalia had a mix of residents with a wide range of income levels. Visalia was predominantly a farming community with a large population of laborers but also a sizable number of professional, middle-class families. Menlo Park had a largely middle-class population but also a significant number of working-class and low-income households. The two cities were not identical—the typical resident of Menlo Park was somewhat better educated than the typical resident of Visalia and earned a slightly higher salary—but the differences were relatively small. In the late 1960s, the two cities had schools of comparable quality and similar crime rates, although Menlo Park had a slightly higher incidence of violent crime, especially aggravated assault. The natural surroundings in both places were attractive. While Menlo Park was close to the Pacific Ocean beaches, Visalia was near the Sierra Nevada range and Sequoia and Kings Canyon National Parks.
Today the two places could not be more different, but not in the way David Breedlove envisioned. The Silicon Valley region has grown into the most important innovation hub in the world. Jobs abound, and the average salary of its residents is the second highest in America. Its crime rate is low, its school districts are among the best in the state, and the air quality is excellent. Fully half of its residents have a college degree, and many have a PhD, making it the fifth best educated urban area in the nation. Menlo Park keeps attracting small and large high-tech employers, including most recently the new Facebook headquarters.
By contrast, Visalia has the second lowest percentage of college-educated workers in the country, almost no residents with a postgraduate degree, and one of the lowest average salaries in America. It is the only major city in the Central Valley that does not have a four-year college. Its crime rate is high, and its schools, structurally unable to cope with the vast number of non-English-speaking students, are among the worst in California. Visalia also consistently ranks among American cities with the worst pollution, especially in the summer, when the heat, traffic, and fumes from farm machines create the third highest level of ozone in the nation.
Not only are the two communities different, but they are growing more and more different every year. For the past thirty years, Silicon Valley has been a magnet for good jobs and skilled workers from all over the world. The percentage of college graduates has increased by two-thirds, the second largest gain among American metropolitan areas. By contrast, few high-paying jobs have been created in Visalia, and the percentage of local workers with a college degree has barely changed in thirty years—one of the worst performances in the country.
For someone like David Breedlove, a highly educated professional with solid career options, choosing Visalia over Menlo Park was a perfectly reasonable decision in 1969. Today it would be almost unthinkable. Although only 200 miles separate these two cities, they might as well be on two different planets.
The divergence of Menlo Park and Visalia is not an isolated case. It reflects a broader national trend. America’s new economic map shows growing differences, not just between people but between communities. A handful of cities with the “right” industries and a solid base of human capital keep attracting good employers and offering high wages, while those at the other extreme, cities with the “wrong” industries and a limited human capital base, are stuck with dead-end jobs and low average wages. This divide—I will call it the Great Divergence—has its origins in the 1980s, when American cities started to be increasingly defined by their residents’ levels of education. Cities with many college-educated workers started attracting even more, and cities with a less educated workforce started losing ground. While in 1969 Visalia did have a small professional middle class, today its residents, especially those who moved there recently, are overwhelmingly unskilled. Menlo Park had many low-income families in 1969, but today most of its new residents have a college degree or a master’s degree and a middle- to upper-class income. Geographically, American workers are increasingly sorting along educational lines. At the same time that American communities are desegregating racially, they are becoming more segregated in terms of schooling and earnings.
Certainly any country has communities with more or less educated residents. But today the difference among communities in the United States is bigger than it has been in a century. The divergence in educational levels is causing an equally large divergence in labor productivity and therefore salaries. Workers in cities at the top of the list make about two to three times more than identical workers in cities at the bottom, and the gap keeps growing.
Cities with a high percentage of skilled workers offer high wages not just because they have many college-educated residents and these residents earn high wages. This would be interesting but hardly surprising. But something deeper is going on. A worker’s education has an effect not just on his own salary but on the entire community around him. The presence of many college-educated residents changes the local economy in profound ways, affecting both the kinds of jobs available and the productivity of every worker who lives there, including the less skilled. This results in high wages not just for skilled workers but for most workers.
I consider the Great Divergence to be one of the most important developments in the United States over the past thirty years. As we will discover, the growing economic divide between American communities is not an accident but the inevitable result of deep-seated economic forces. More than traditional industries, the knowledge economy has an inherent tendency toward geographical a...
"A persuasive look at why some U.S. cities have prospered in recent decades while others have declined."
"Moretti has written the most important book of the year, I can't recommend it enough. The Cal-Berkeley economic professor's book is extremely necessary for politicians and commentators alike, book that artfully slays myriad myths that cloud the economic debate. Brilliant."
"Enrico Moretti is a first-rate empirical researcher who has taught us much about the geographic impact of human capital and a variety of public investments. His book, The New Geography of Jobs, is well-written and filled with important facts and wise policy advice. It is an excellent addition to the literature on the economics of place. […] Both local policymakers and national leaders interested in policies with a geographical edge would do well to read the book."
—Edward Glaeser, author of The Triumph of the City
"Decade after decade, smart and educated people flock away from Merced, Calif., Yuma, Ariz., Flint, Mich., and Vineland, N.J. In those places, less than 15 percent of the residents have college degrees. They flock to Washington, Boston, San Jose, Raleigh-Durham and San Francisco. In those places, nearly 50 percent of the residents have college degrees. As Enrico Moretti writes in The New Geography of Jobs, the magnet places have positive ecologies that multiply innovation, creativity and wealth. The abandoned places have negative ecologies and fall further behind. This sorting is self-reinforcing, and it seems to grow more unforgiving every year."
—David Brooks,The New York Times
"The New Geography of Jobs, examines how and why hiring is stronger in some U.S. cities than in others."
"In a new book, The New Geography of Jobs, University of California at Berkeley economics professor Enrico Moretti argues that for each job in the software, technology and life-sciences industries, five new jobs are indirectly created in the local economy. The jobs range from yoga instructors to restaurant owners. Mr. Moretti calculated such a multiplier effect by examining U.S. Census Bureau data from eight million workers in 320 areas during the past 30 years. Mr. Moretti says the data support the argument that technology innovators are one of the most important engines of job creation in the U.S.—with three of those five jobs going to people without college degrees."
—The Wall Street Journal
"Moretti has written a clear and insightful account of the economic forces that are shaping America and its regions, and he rightly celebrates human capital and innovation as the fundamental sources of economic development."
—The New Republic
"Whatever this month unemployment report turns out to be, it's probably not going to be great news for the Rust Belt. Best guesses are manufacturing jobs are still scarce. Meanwhile, new economy places like Silicon Valley continue to thrive. The difference? Location, location, location. So says economist Enrico Moretti in his latest book, The New Geography of Jobs."
"A bold vision."
—MIT Sloan Management Review
"It is a great and disturbing book about the sweeping changes that are going on in American communities."
"Moretti’s book suggests that for each additional job in the average high-tech firm, five additional jobs are created outside that firm in the local community."
—NPR All Things Considered
"Economist Enrico Moretti finds that earnings of a high school graduate increase 7% for every 10% increase in the percent of people in a city that are college graduates. While having more high-skilled workers around tends to raise everyone's salaries, Moretti's research shows that low-skilled workers benefit four to five times more than college graduates. Even as liberals work to find a way to counteract the problem of the 1 percent, they should view high skilled immigrants as a step toward turning America back into a true middle-class society."
"Professor Moretti is a visionary scholar and one of the most important new voices in economics."
—The Costa Report
"The book is an inviting read. It is dense with ideas, but spiced liberally with local detail"
—The Journal of Economic Geography
"The choice of where you live is the most important choice an American worker can make today."
—The Dylan Ratigan Show, MSNBC
"A fresh, provocative analysis of the debate on education and employment. . . A welcome contribution from a newcomer who provides both a different view and balance in addressing one of the country's more profound problems."
"If there's one current book I'd recommend to leaders in American cities today, it's Enrico Moretti's The New Geography of Jobs."
"An important new book."
"The New Geography of Jobs is arguably the most important book about urban economics published this year. Author Enrico Moretti, an Italian-born economics professor at Berkeley, analyzes the great divergence occurring between metropolitan regions in the United States. While much of his narrative about the innovation sector as the key driver in regional growth will be familiar to readers of Richard Florida, Moretti provides a valuable counter-balance to Florida’s theories about the creative class."
"Moretti's book is well-written, well-argued, and important. The New Geography of Jobs is the sort of economics that should be widely read, digested, and discussed."
—The Digital Quad
"The message of his very well written and prize winning book is important. And Enrico is right that we should pay attention to the geography of where smart people are choosing to work, play, and live their lives. Ultimately, it has consequences for all of us."
—The Creativity Post
"If you’re thinking of a career change or new employment, or if job creation is your Number One priority this year, this is a book you’ll want first. You’ll need solid, hard-core information to do it. And for that, The New Geography of Jobs is hard to resist."
"Enrico Moretti has written an important book that every student of local economic development should read. His perspective is dynamic, placing the present situation in the context of the evolution of industrial production and labor markets over the past 50 years."
—Berkeley Planning Journal
"Wow. . . Without referring to Charles Murray, Moretti blows Coming Apart totally out of the water, replacing Murray's moralistic sociology with solid economic...
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