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Why geography matters in fixing U.S. unemployment
Location, location, location. U.C. Berkeley professor Enrico Moretti says in his new book that it's more important than ever to move towards areas with highly educated workers in order to find employment. Here, Nam June Paik's "Electronic Superhighway" art piece.
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Enrico Moretti.
Kai Ryssdal: Whatever the May unemployment report turns out to be, it's probably not gonna 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." Good to have you on the program.
Enrico Moretti: It's good to be with you.
Ryssdal: Now, I thought digital technology and telecommuting and all of that meant that distance was dead, right? And geography with jobs didn't really matter?
Moretti: Well actually, the opposite is true.
Ryssdal: Really?
Moretti: Geography matters more and more. In fact, if you look at the economic map of America today, you don't just see one country -- you see three, increasingly different countries. On one end, you have cities like San Francisco or Seattle, Austin or Raleigh with a strong, innovation-based economy and a labor force that is one of the most creative and best paid on the globe. On the other extreme, you see cities like Detroit or Cleveland or Flint with a shrinking population and shrinking salaries. In the middle, there is the rest of the country, which appears undecided on which direction to take.
Ryssdal: You know, it's interesting: You mentioned San Francisco and Seattle, and then Detroit and some of the Rust Belt cities, and the thing that pops to my mind when you say that is the income and wealth disparity between those two different kinds of cities. And I wonder if the mobility that you talk about in this book, about how that's important to be able to get a new job -- that mobility is sort of slanted against the poor, right? Because if you're poor, you can't just get up and go and find a job?
Moretti: That's right. There are enormous differences in the propensity to relocate for American workers. Almost half of their college graduates move out of their state by age 30, and a lot of it has to do with they're seeking better economic conditions in different cities.
Ryssdal: Say that again: Half of college graduates move out of their birth state by the time they're 30.
Moretti: Almost half of college graduates move out of their birth state by the age of 30.
Ryssdal: That's kind of amazing, actually, isn't it?
Moretti: It is. And it's even more amazing when you compare it with the mobility rate of high school graduates or high school dropouts.
Ryssdal: They stay, right? They probably stay in their hometown?
Moretti: They do. The lower mobility of less-educated Americans has large economic costs. If the less-educated people were more able and more willing to move to cities with better job opportunities, the gap between college graduates and high school graduates would shrink.
Ryssdal: Let me get you to the geography of this thing for a second, in keeping with the title of the book. How did Silicon Valley become Silicon Valley and the center of high-tech innovation in this country? I mean -- and with apologies to those who are listening -- you've got Route 128 in Boston, you've got Virginia outside Washington, D.C., that has AOL, but those places are a distant second to Silicon Valley. How did that happen?
Moretti: It is not that the ones in Silicon Valley are smarter or work longer hours. It's the entire ecosystem that surrounds them that is different. And in particular, the number of highly educated workers. You know, new ideas and successful innovation are rarely born in isolation. Economic research shows that being around smart people makes us more innovative and more productive. And ultimately, companies are willing to pay for that higher degree of innovation and productivity. We live in an economy where talent has become one of the scarcest resources.
Ryssdal: Human capital, right?
Moretti: Human capital is the key to success, both for cities as well as for companies.
Ryssdal: Enrico Moretti is a professor of economics at the University of California, Berkeley. His new book is called "The New Geography of Jobs." Thanks a lot for your time.
Moretti: Thank you for having me.
Ryssdal: You can read an excerpt from "The New Geography of Jobs" here.
Many college graduates do move out of the state they were born in soon after graduation to take a job. It is much easier for a single 21 year old recent graduate to relocate than someone who has been out of college for 15-20 years, is married to someone who also has a career, has a couple of kids in school and and owns a home with a big mortgage, and possibly has elderly parents or in-laws living nearby who are starting to need help. When someone suddenly finds themselves without a job at age 35 or 40 relocating to a new city is not as easy as calling up a college friend or fraternity brother who lives there and asking if you can crash on their couch until you find a job and a pad like you could when you were in your early 20s. Even if your frat brother who you haven't seen since the 10 year reunion back in 2002 would still be cool with you crashing at his place in Silicon Valley his spouse probably wouldn't.
Sure, there may be a great job in another city but first you have to find it. Since you don't live in one of these cities it will be tough to network with employers there even if you have the skills. You can't just drop by HR for an interview if they are in California and you are in Florida. You can't just move out there and look for a job because you are married and your spouse still has a good job, and you own a house you can't sell for enough to pay off the mortgage. This is because the real estate market in the town where you live has tanked since the company you worked for was the largest employer and they outsourced all the jobs to China. How are you going to pay rent in a new city and the mortgage on the house where you used to live that you can't sell, and probably can't rent either because the largest employer left town.
Lets say you actually are lucky enough to be recruited for a job in another city and have everything lined up but your spouse who earns nearly as much as you did before the layoff, will have to quit his or her job so you can move there to take it. Even if your spouse can find a job in the new city too, there is still the HUGE issue of the house with the upside down mortgage. Do you just let the bank foreclose which will completely wreck your credit, and possibly result in the bank suing you? The whole deal gets so complicated it is easier to just stay put, collect unemployment or Social Security Disability if you have a chronic medical issue that qualifies (many people do by age 40) than trying to deal with the hassle of picking up and moving your life across the country for a job that probably will have no more job security than the one you just got laid off from.
Many very qualified people all across America who are out of work are doing just that. If companies want to hire them they need to make it possible for them to work from where they live. You can't cram everyone in the USA into a few huge cities. That just overloads the power grid, creates gridlock on highways, causes water shortages, and air pollution. Traffic jams, brown outs, smog, and water shortages have already become problems out in California because there are TOO MANY PEOPLE living there. The last thing California needs is even more people in Silicon Valley.
I'm not an economist or socialogist, but this seems leave out the huge economic benefit of a social and family network. It actually costs very little to relocate, especially if you don't have a home to sell. Greyhound is full of people moving around. Once you get to Silicon Valley and found your job as a housekeeper, what are you going to do when your car dies, or your daycare falls through? In your hometown, your family and neighbors and church can help. I can't see how moving into an high-tech area when you don't have high-tech skills will make you more secure financially.
Listening to this on my way home to the suburbs of Toledo really brought up feelings of annoyance and irritation - another midwest bashing session... I have lived in 4 continents, grew up in a 24-hour capital city and moved to Ohio 20 years ago, to Toledo 3 years ago for a job in the auto part industry where I get paid well enough to have my husband work parttime and take care of the kids who are able to go to a good parish school. We didn't have to get a half a million dollar home to live in an excellent school district, of which there are more than a couple, with affordable options of 2 all-girls and 2 all-boys high schools, plus more than a couple more top-notch schools; where it takes me 15 minutes to get to work, and we actually know our neighbors, and we can bike down the streets safely, get to the library or get a hot fudge sundae at the Penguin Palace up the road. The symphony just played Carnegie and the excellent Art Museum is free including the glass blowing demo, and we run into people we know at the farmers' market. World class universities are within 2-hours, and yes, believe it or not, there are still educated and smart people in Ohio.
I understand what the numbers say, but there is definitely a disconnect between the workers in the "knowledge economy" in a "culture of innovation" and those that provide services to keep Silicon Valley running, who can't afford a 2-bedroom apartment unless they live miles away. Oh, and isn't it California that is running multi-billion dollar deficits? Ultimately what opens opportunities are good education (which does not necessarily equate to a college degree), flexibility, and doing a dxxn good job.
When I was a kid in the 70's, we would see on tv the layoffs in the "rust belt" and I would look out at the job listings in NC. It seemed to me that it was a simple choice, you packed up and moved. The people on tv would complain that there were no jobs there and that they had lived there all their lives and they did not want to leave their family.
In the 80's I would hear the same thing when layoffs happened, and after pointing out job prospects in other states. They don't want to leave their family or where they grew up. Being a third generation military brat it was something I could not get my mind around. You could get a job by moving. People move all the time, I moved a minimum of once every two years, some times more when dad would get promoted or transferred. What was the problem with these people?
Now that i'm older I understand that people don't want to move. They are not brought up that you will move a lot. Out side of the military, moving really only comes to peoples minds when they are at college. They think about all the great places the degree will take them, places the could go, and that they will be able to go back home anytime they wanted because they will have the funds to do that.
I would bet that the military is the best way a high school grad gets out of the "I can't leave" mindset.
I still don't have sympathy for people who won't move to get a job and would rather whine about not having government unemployment "helping" while they keep looking for that high paying job they don't have anymore.
