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Why geography matters in fixing U.S. unemployment

Kai Ryssdal May 31, 2012
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Shelf Life

Why geography matters in fixing U.S. unemployment

Kai Ryssdal May 31, 2012
HTML EMBED:
COPY

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.

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