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Brain Drain Hysteria Breeds Bad Policy

2 hours 53 min ago

Desperate times call for desperate measures. The Rust Belt, a region familiar to the air of anxiety, knows this all too well, particularly the “desperate measures” part.

A case in point: During the 1990’s, Pittsburgh, like many of its Rust Belt peers, was in the midst of a fit of brain drain hysteria. Strategic policy was needed. So the powers that be thought of a marketing campaign meant to saturate the minds of the educated “young and the restless” who were thinking about exiting the Steel City. Pittsburgh demographer and economist Chris Briem, in a 2000 op-ed in the Post-Gazette, picks it up from here:

“The focus on retaining vs. attracting workers is pervasive in local policies. One marketing character thought of by the Pittsburgh Regional Alliance, whose mission is to promote Pittsburgh, was the genial "Border Guard Bob." The image was of an older, uniformed sentinel on Pittsburgh's borders keeping our citizens, in particular the younger workers, from leaving the region. This is the same logic that inspired the East Germans to build a wall around Berlin and is likely to have as much success in the long-run.”

Luckily for Pittsburgh, Border Guard Bob never materialized. Policy-wise, building walls is terrible form in the age of information. Still, the aura of desperation remained in the region, despite its illogicality. For instance, in his 2002 piece called “Young people are not leaving Pittsburgh”, Briem crunched the numbers to find the region’s brain drain wasn’t. Yet he found it hard “to convince Pittsburghers that the outmigration of youth is not the problem it once was,” blaming “a persistence of memory” stemming from the regional exodus in the 1980’s.  

As a demographer and economic thinker in Cleveland, I can sympathize with Briem. Cleveland, too, is prone to bouts of brain drain hysteria. A recent report highlighted in the New York Times called “The Young and Restless and the Nation’s Cities” was enough set off a flare-up. The report found that between 2000 and 2012, Greater Cleveland added less than 800 25- to 34-year-olds with a college degree—an increase of 1%. The metro ranked second last out of 51 metros, behind only Detroit.

Obviously, those numbers are not good. That said, from a methodological standpoint, the study has its limitations. Specifically, the analysis cuts through four economic eras: 2000, the end of a prolonged expansionary period; 2005 to 2007, the middle of a jobless economic recovery; 2008 to 2010, the throes of a deep global recession; and 2011 to 2012, a period of economic recovery.

Why does this matter? Migration patterns are affected by quite different economic circumstances nationally. This is especially true for the 25- to 34-year-old cohort, who are the most mobile, if not fickle, group.

For example, Greater Cleveland’s lack of a young adult brain gain from 2000 to 2012 resulted from a substantial decrease of nearly 16,000 25- to 34-year-olds with a 4-year college degree from 2000 to 2006. The 2001 recession and subsequent jobless recovery hit Cleveland hard. However, my research at the Center for Population Dynamics at Cleveland State University showed that Greater Cleveland recouped the losses from earlier in the decade, gaining approximately 17,000 25- to 34-year-olds with a 4-year degree from 2006 to 2012—an increase of 23%.

Moreover, the Census recently released data for 2013, which allows a comparison of the nation’s top big-city metros for 2011 to 2013: the current era of economic recovery. Put simply, what large metros have the momentum? Has there been a shift in where the “young and the restless” are attempting to settle down?

The results are surprising. Cleveland ranks 3rd in the nation, with a 19.85% increase in the number of young adults with a college degree, behind the Sun Belt metros Nashville and Orlando. And no, this percentage “pop” for the region is not simply due to the fact that Cleveland had a really small base of young college graduates. In fact, the region’s 3-year gain of 15,557 ranks Cleveland 15th in total gains, despite being the 29th largest metro in the nation. To put this in perspective, Greater Cleveland had a larger total growth than Chicago, and nearly seven times the gain of Portland: the nation’s poster child for where the “young and restless” go to “live, work, play”.

Table 1: 25-to-34-year-olds with at least a Bachelor's degree, Change, 2011 to 2013 Metro Area 2011 2013 % Change 2011 to 2013 Total Change 2011 to 2013 Nashville-Davidson--Murfreesboro--Franklin, TN 82,588 103,239 25.01% 20,652 Orlando-Kissimmee-Sanford, FL 83,706 101,066 20.74% 17,361 Cleveland-Elyria, OH 78,392 93,949 19.85% 15,557 Riverside-San Bernardino-Ontario, CA 97,804 116,767 19.39% 18,963 Jacksonville, FL 47,792 56,256 17.71% 8,464 Austin-Round Rock, TX 119,482 138,240 15.70% 18,758 Seattle-Tacoma-Bellevue, WA 208,647 240,267 15.15% 31,620 Sacramento--Roseville--Arden-Arcade, CA 77,075 87,435 13.44% 10,360 Salt Lake City, UT 55,036 62,124 12.88% 7,088 Pittsburgh, PA 117,402 131,770 12.24% 14,368 Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 306,271 341,220 11.41% 34,948 Columbus, OH 106,144 118,224 11.38% 12,080 Houston-The Woodlands-Sugar Land, TX 266,289 295,230 10.87% 28,941 Buffalo-Cheektowaga-Niagara Falls, NY 52,231 57,727 10.52% 5,496 Dallas-Fort Worth-Arlington, TX 296,927 327,330 10.24% 30,403 New Orleans-Metairie, LA 54,104 59,616 10.19% 5,512 San Jose-Sunnyvale-Santa Clara, CA 135,306 148,978 10.10% 13,672 Detroit-Warren-Dearborn, MI 154,542 170,122 10.08% 15,580 San Francisco-Oakland-Hayward, CA 320,585 350,490 9.33% 29,904 Baltimore-Columbia-Towson, MD 150,003 163,941 9.29% 13,938 New York-Newark-Jersey City, NY-NJ-PA 1,216,127 1,327,778 9.18% 111,651 Los Angeles-Long Beach-Anaheim, CA 631,960 688,057 8.88% 56,098 St. Louis, MO-IL 134,267 145,978 8.72% 11,710 Oklahoma City, OK 58,027 63,084 8.71% 5,057 San Antonio-New Braunfels, TX 85,240 92,524 8.55% 7,284 Hartford-West Hartford-East Hartford, CT 59,780 64,784 8.37% 5,004 Denver-Aurora-Lakewood, CO 163,026 176,237 8.10% 13,211 Milwaukee-Waukesha-West Allis, WI 79,404 85,793 8.05% 6,390 Louisville/Jefferson County, KY-IN 50,790 54,849 7.99% 4,060 Virginia Beach-Norfolk-Newport News, VA-NC 67,664 72,888 7.72% 5,224 Tampa-St. Petersburg-Clearwater, FL 99,316 106,504 7.24% 7,187 San Diego-Carlsbad, CA 167,735 179,850 7.22% 12,114 Birmingham-Hoover, AL 47,340 50,675 7.04% 3,335 Kansas City, MO-KS 102,284 109,455 7.01% 7,171 Rochester, NY 48,844 52,212 6.90% 3,368 Boston-Cambridge-Newton, MA-NH 348,490 371,303 6.55% 22,813 Phoenix-Mesa-Scottsdale, AZ 163,995 174,694 6.52% 10,699 Providence-Warwick, RI-MA 64,205 68,349 6.45% 4,144 Raleigh, NC 76,164 80,447 5.62% 4,283 Indianapolis-Carmel-Anderson, IN 91,083 95,827 5.21% 4,744 Las Vegas-Henderson-Paradise, NV 59,998 63,058 5.10% 3,060 Cincinnati, OH-KY-IN 95,084 99,225 4.36% 4,142 Minneapolis-St. Paul-Bloomington, MN-WI 214,755 223,640 4.14% 8,885 Washington-Arlington-Alexandria, DC-VA-MD-WV 460,693 477,706 3.69% 17,013 Chicago-Naperville-Elgin, IL-IN-WI 558,464 572,324 2.48% 13,860 Atlanta-Sandy Springs-Roswell, GA 272,907 279,232 2.32% 6,325 Portland-Vancouver-Hillsboro, OR-WA 119,490 121,794 1.93% 2,304 Miami-Fort Lauderdale-West Palm Beach, FL 221,294 224,388 1.40% 3,094 Richmond, VA 59,907 59,289 -1.03% -618 Memphis, TN-MS-AR 52,911 49,412 -6.61% -3,499 Source: ACS 1-Year, 2011, 2013 Note: Charlotte was removed from the analysis due to substantial geographic changes in the MSA designation from 2011 to 2013. Created by the Center for Population Dynamics at Cleveland State Univeristy, October, 2014. 


What gives?

Part of the answer may be economic. For example, my colleagues Joel Kotkin and Aaron Renn recently analyzed the growth in per capita GDP from 2010 to 2013 for Forbes in a piece entitled “The cities that are benefiting the most from the economic recovery”. Cleveland ranked 15th in the nation, with a 6% increase. In terms of income, the metro is 5th in the nation in the total per capita income increase from 2010 to 2012, behind Houston, San Jose, Oklahoma, and San Francisco.

In understanding Cleveland’s nascent young adult brain gain, the broader economic performance is important. Healthier economies make metros “stickier” for those here and more of a magnet for those who aren’t. And while there also is the element of “Rust Belt Chic”, or the lure of so-called “authentic” places that counter the “Brooklynization” of American cities, Cleveland as a destination, or a “consumer city”, will always take a back seat to Cleveland as a “producer city”, which is a metro of good jobs, good schools, and affordable housing. The producer city focuses on the creation of value, not simply the consumption of things. This is not to say amenities, such as a good culinary and microbrew scene, are not important, it only says that if the talent you attract has nothing to produce or nowhere to live, well, all play and no work makes Jack a dull boy.

Talent attraction, then, is only part of the formula in Cleveland’s ongoing and difficult economic restructuring. Talent production is also needed, for both natives and newcomers, regardless of the age group. But emphasizing the latter entails knowing the score on the former. Brain drain hysteria breeds desperation.

And desperate times call for desperate measures—and bad policy.

This piece first appeared at Crains Cleveland.

Richey Piiparinen is a Clevelander, writer, and Senior Research Associate heading the Center for Population Dynamics at Cleveland State University.

New Zealand Seeks to Avoid "Generation Rent"

Tue, 10/28/2014 - 22:38

The political leadership and others in New Zealand are talking about the consequences of its land use policies. Under the "urban containment" land use policy (also called by terms like "smart growth," "growth management," and "livability") in effect in every urban area, house prices have doubled relative to incomes over the last 25 years. The principal causes have been the restrictions inherent in urban containment policy, such as making most suburban land off limits for housing development, (which raises its price, like rationing oil raises the price of gasoline), and requirements for upfront payment of large development impact fees (which can also be higher than they need to be). The association between urban containment policy and unaffordable housing is consistent with both with both economic theory and also considerable economic research. The title of a report by Paul Cheshire, Professor of Economic Geography at the London School of Economics best indicates the reality: "Urban Containment, Housing Affordability, Price Stability - Irreconcilable Goals." 

New Zealand Housing Unaffordability and Consequences

According to the 10th Annual Demographia Housing Affordability Survey, Auckland, the nation's largest city is now the 7th least affordable out of 85 major metropolitan markets rated. Auckland's median multiple (median house price divided by median household income) is 8.0, approaching triple the level that prevailed before the adoption of urban containment policy. The other largest cities, Christchurch and Wellington have seen house prices relative to incomes double since they have adopted urban containment policy (which were 3.0 or less). Obviously, when houses cost more than necessary, households have less discretionary income. This leads directly to two consequences with respect to affluence and poverty.

The first consequence of these policies is that households have less discretionary income (income after paying taxes and for necessities) to spend on other goods and services. Obviously this means a lower standard of living. This generally leads to a weaker economy, other things being equal, because households with less money are not able to purchase as much in goods and services as they would be able to afford if house prices had not been distorted.

The second consequence is greater poverty. When the price of housing rises, discretionary incomes can fall enough to force lower income households into poverty.

Land Use Policies Blamed for Poverty and Greater Inequality

Recently, Deputy Prime Minister and Finance Minister Bill English said in an October 7 press conference that New Zealand's land use policies have led to higher levels of poverty and increased inequality: "Inequality in New Zealand would have been improving had it not been for growing housing costs. So our planning processes have probably done more to increase income inequality and poverty in New Zealand than most other policies." Finally, the Deputy Prime Minister noted that house price increases have impacted the lowest income households most.

Minister English had previously expressed concern about the extent to which land use policy had driven up house prices, in his preface to the 9th Annual Demographia Housing Affordability Survey: "It costs too much and takes too long to build a house in New Zealand. Land has been made artificially scarce by regulation that locks up land for development. This regulation has made land supply unresponsive to demand (see: "Unblocking Constipated Planning" in New Zealand").

There was "pushback" on the Deputy Prime Ministers comments from the city of Auckland and the Green Party. Others saw it differently the well-read national blog, Whale Oil, however, opined that the Deputy Prime Minister "is onto something." Whale Oil continued "The squealing in unison means English is putting the pressure in the right places."  

Housing Minister Nick Smith has decried the situation in Auckland:  "We’ve got a rigid Metropolitan Urban Limit (urban growth boundary) prohibiting any new housing developments beyond the artificial line drawn 15 years ago." At the same time, he said that resulting land cost increases had been more responsible for higher house prices than any other factor. Auckland accounts for approximately one-third of the nation's population and has been growing rapidly, accounting for more than one-half of the nation's population growth between the 2006 and 2013 censuses.

On the government's website, the Housing Minister expressed the government's interest in reforming the Resource Management Act, which governs land-use planning. “It is the price of land and sections that has gone up so rapidly in unaffordable housing markets like Auckland, and it is the Resource Management Act and how it is implemented that is largely responsible for this cost escalation. The new law allowing Special Housing Areas is a short-term fix but we must address the fundamental problem with the Resource Management Act if we are serious about long-term housing affordability."

Business Concerns

Business interests are also raising concerns.

The Property Council (similar in its advocacy function to the Urban Land Institute in the United States) has indicated support for the reforms.

Other business support comes from ANZ Bank New Zealand Chief Executive Officer David Hisco. In expressing concern noting that" "The elevator of economic progress in New Zealand has always been home ownership for everyone - right across the socioeconomic spectrum. But at the current pace of house price rises we risk creating a generation of disenfranchised, second class citizens – ‘Generation Rent.’" He continues: "The housing affordability issue is a housing supply issue, pure and simple. In 1974 there were 34,400 new homes built. Last year there were 15,000 - less than half. It’s no wonder houses doubled in price in under a decade in Auckland. The solution is simple – urgently build more houses. To do that in places like Auckland we need to build more suburbs and allow intensification in existing areas."

In noting that the poor are the "biggest victims" of Auckland's land use policies, Eric Crampton (on Kiwiblog) says that Auckland should be allowed "to build both upwards and outwards: which would be a great step in reducing child poverty." Moreover, the Prime Minister, John Key, has expressed a particular interest in reducing child poverty.

Building upwards and outwards is not an option  under the urban containment dictum favoring intensification and prohibiting greenfield suburban development.

A similar connection between housing costs and high rates of poverty is indicated by California, which has the highest poverty rate, adjusted for housing costs, of all states as well as  the District of Columbia. California's major metropolitan markets have severely unaffordable housing costs, with a median multiple of 7.1. This is lower than Auckland (8.0), New Zealand's one major metropolitan market, but higher than Australia's (6.3). Dartmouth economist William Fischel and others have associated California's high housing costs with its land use policies. Fischel further noted that before these policies were implemented, house prices were about the same in California as in the rest of the nation, which have since more than doubled relative to incomes.

New Zealand: Land Use Policy Leader

There is virtual consensus among the world's governments that the standard of living should be improved and poverty eradicated. Yet, many governments have adopted land use policies that raise the price of housing, which has the inevitable effect of lowering standard of living and more poverty. New Zealand's government is seeking to restore an appropriate policy balance.

Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He was appointed to the Amtrak Reform Council to fill the unexpired term of Governor Christine Todd Whitman and has served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

Photograph: Downtown Auckland (by author)

Silicon Valley's Chips off the Old Block

Mon, 10/27/2014 - 22:38

Silicon Valley long has been hailed as an exemplar of the American culture of opportunity, openness and entrepreneurship. Increasingly, however, the tech community is morphing into a ruling class with the potential for assuming unprecedented power over both our personal and political lives.

Rather than the plucky entrepreneurs of legend, America’s rising tech oligarchy constitutes a narrow emerging elite. They are primarily beneficiaries of the limited pools of risk capital – nearly half of which is concentrated in Silicon Valley. They also have access to a highly incestuous club of skilled professional managers, lawyers, PR mavens and accountants that counterparts elsewhere are unlikely to enjoy.

In contrast to the intense competitive environment that defined industries such as semiconductors, disc drives and personal computers in the 1980s, today’s “lords of cyberspace,” as author Katherine MacKinnon describes them, enjoy oligopolistic market shares that would thrill the likes of John D. Rockefeller. Google, for example, accounts for more than two-thirds of the market for Internet search. The fantastic wealth amassed by Bill Gates, like that of the other oligarchs, stems in large part from these kinds of “monopoly” rent; in his case, for consistently mediocre but dominant software.

Of course, these oligarchs, like feudal lords or rival gangs, sometimes fight among themselves, say, Google versus Apple over operating systems or, increasingly, over hardware segments of the industry. Yet, this struggle between oligarchs is far from a competitive free for all: Together, these two firms provide almost 90 percent of the operating systems for smartphones.

Faux Progressivism

Normally, progressives would be expected to decry such concentrations of wealth and power. But Silicon Valley has largely insulated itself from such criticism by taking “progressive” policy stances, notably on climate change, and by cultivating both a “hip” image and close ties to the Obama administration. When Steve Jobs died in 2011 during the Occupy Wall Street movement, the passing of this brilliant, but often ruthless, 0.00001 percenter was openly mourned as if he was a counterculture hero.

But this should not mask the fact that Silicon Valley entrepreneurs have turned out to be every bit as cutthroat – and odious to the individual – as any industrial group in modern American history. As technologist and author Jaron Lanier has suggested, the current oligarchical ascendency rests not on improving productivity or sparking broad-based growth, but mining the private lives of every consumer in order to reap riches from advertisers.

Google, while a prime offender, is hardly alone in pursuing violations of privacy. Consumer Reports has detailed Facebook’s pervasive, and often deepening, privacy breaches. Ironically, as one blogger noted, even as Facebook has been loosening privacy restrictions for teenage users of its site, company founder Mark Zuckerberg acquired property around his Palo Alto estate to better-protect his privacy.

Once seen as a liberating force, the social media firms are morphing into an overweening Big Brother. Apple’s new devices, the tech publication Wired recently noted, are aimed at “building a world in which there is a computer in your every interaction, waking and sleeping.” The ambition for control is remarkable. As Google’s Eric Schmidt put it: “We know where you are. We know where you’ve been. We can, more or less, know what you’re thinking about.”

Political, social implications

In the emerging era of the tech oligarchs, the rights of the individual computer user look increasingly like those of farmers or small-business people shipping products by rail at the turn of the 20th century; sitting at a home office or kitchen table, the individual computer user has precious little leverage.

These odds will be made even longer as Silicon Valley leadership pursues sweeping ambitions to influence the political class. “Politics for me is the most obvious area [to be disrupted by the Web],” suggests former Facebook president Sean Parker.

The success with which technology assisted President Obama’s re-election effort offers clear support to Parker’s assertion. And, not surprisingly, when Obama’s top aides leave government, several have landed lucrative jobs with the tech elite.

Some see this ascendency as a positive. One tech booster foresees the old “nexus” between Wall Street and Washington being replaced by one between Silicon Valley and the federal leviathan, which will usher the world into a “new age of abundance, connectivity, innovation and sharing.” This viewpoint is beyond naïve, and closer to delusional.

We often forget that, despite their green and counterculture allure, the tech oligarchs are, indeed, oligarchs, who live fantastically luxurious and consumptive lives. Google executives, for example, have burned the equivalent of upward of 59 million gallons of crude oil – for many years at subsidized federal rates – from 2007-13 on their private jets, even as they hectored regular consumers to cut back on energy use.

But nothing so mimics the arrogance and hubris of the tech oligarchs as their largely successful efforts to avoid taxation. Bill Gates had voiced public support for higher taxes on the rich but tech companies, including Microsoft, have bargained over, and legally avoided paying, their own taxes while higher taxes fell on affluent, but hardly megarich, taxpayers.

Similarly, the founders of Twitter have developed elaborate plans to avoid taxation and protect their suddenly vast estates. Facebook paid no taxes in 2012, despite making a profit of over $1 billion. Apple, which the New York Times described as “a pioneer in tactics to avoid taxes,” has kept much of its cash hoard abroad to keep it away from Uncle Sam.

The Road to Oligarchy

Emboldened by their access to individual data, the tech oligarchs could form the core of what a recent report from the professional services giant PWC described as virtual “ministates,” with control over markets and employees that more resemble an Orwellian nightmare than a technological utopia.

This influence will be enhanced by growing control of the media. In the past, more hardware-oriented companies provided the “pipelines” through which traditional media disseminated their products. But, increasingly, the oligarchs – taking advantage of the online shift – are devastating traditional media. Google’s ad revenue in 2013 surpassed that of newspapers.

The Valleyites are also moving into the culture business, with both YouTube (owned by Google) and Netflix getting into the entertainment content business. The oligarchs may need to source content from more-established vendors on the East Coast or in Hollywood, but they increasingly will control the financial purse strings as well as the critical pipelines.

Diminishing benefits to society

Tech industry boosters, such as UC Berkeley’s Enrico Moretti, claim the new tech oligarchs represent the key to a growing economy and greater regional well-being. This claim, however, is dubious, even in Silicon Valley. Tech companies restrain their employees’ wage growth through informal agreements to prevent poaching of each others’ employees and by importing relatively low-paid “technocoolies” to do their programming. Expanding this category of workers has become a major priority for tech firms – despite a surplus of American IT workers – such as Facebook.

Rather than enhancing middle-class opportunities, high-technology industries have promoted an economy with sharp divisions between the top employees and low-wage workers in retail and other service industries such as janitors, clerks and cashiers. The mostly white and Asian employees at firms like Facebook and Google enjoy gourmet meals, child-care services, even complimentary housecleaning; but wages for the region’s African-American and large Latino populations, roughly one-third of the total, have actually dropped, notes a 2013 Joint Venture Silicon Valley report. As Russell Hancock, the group’s president, observed, “Silicon Valley is two valleys. There is a valley of haves, and a valley of have-nots.”

In San Francisco, Silicon Valley companies provide free and more luxurious transport for the privileged few they employ, providing a daily reminder of the growing segregation between rich and poor. Increasingly large sections of the Bay Area resemble a gated community, where much of the working and middle classes fork over a large portion of their incomes in rent and often are forced to commute huge distances to jobs serving the Valley’s upper crust.

There is no denying that the tech oligarchs will continue to play a critical role in the American economy; and, as Mike Malone, among others, suggests, they likely may become even more dominant in the years ahead. This will not be all bad; the country similarly benefited from the often-ruthless actions of the industrial moguls. But, at some point, the public has to weigh how much power and money can be concentrated in a relative handful of companies and people without posing a threat both to our individual rights and democracy itself.

This piece first appeared at the Orange County Register.

Joel Kotkin is executive editor of and Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

Photo by TechCrunch (4S2A2079Uploaded by indeedous) [CC-BY-2.0], via Wikimedia Commons

RIP, NYC's Middle Class: Why Families are Being Pushed Away From the City

Sun, 10/26/2014 - 11:24

Mayor de Blasio has his work cut out for him if he really wants to end New York’s “tale of two cities.” Gotham has become the American capital of a national and even international trend toward greater income inequality and declining social mobility.

There are things the new mayor can do to help, but the early signs aren’t promising that he will be able to reverse 30 years of the hollowing out of the city’s once vibrant middle class.

As the cost of living has skyrocketed while pay has stagnated except for those at the very top, New York has shifted from a place people go to make it to a place for those who already have it made, or whose families have.

And once here, the rich are indeed getting richer even as the rest of the city is barely holding on.

Manhattan is now the most unequal county in America (it was 17th in 1980), with a Gini coefficient — which measures the disparity between the richest and poorest residents — higher than that of Apartheid-era South Africa.

Between 1990 and 2010, the city’s 1% saw their median income shoot up from $452,415 to $716,625 in 2010 dollars, even as the bottom 60% hardly saw their incomes budge at all, according to a recent City University study. The trend precedes Michael Bloomberg, the billionaire mayor who envisioned New York as a “luxury city,” and it won’t be easy for de Blasio to reverse — especially as he rolls out pricey new public-employee contracts and programs like universal pre-K that further expand the city’s dependence on its wealthiest citizens.

In 2009, the 0.5% of New Yorkers who made $1 million or more accounted for 27% of the city’s income (nearly three times their share nationally), and an even higher share of its tax take. But while the smart set that attends President Obama’s frequent Manhattan fundraisers has prospered, in no small part thanks to low-interest Federal Reserve policies that have helped big banks more than working people, just across the Harlem River roughly one in three Bronx households lives in poverty — making it the nation’s poorest urban county.Over the Bloomberg years, New York was the national leader in both luxury housing and in homelessness — with a 73% jump in the number of homeless families here. Last January, an unprecedented 21,000 children were in the city’s shelter system each night. This year, that number is rising.

And as the city becomes more economically unequal, it’s also become more racially segregated. Demographer Daniel Herz’ census analysis shows New York is now America’s second most racially divided city, behind only Milwaukee.African-American incomes in New York are barely half those of whites, as compared to nearly 70% in Phoenix and Houston.

And New York City now has the nation’s single most segregated public school system, according to a devastating report from the Civil Rights Project at UCLA.

As the 2014 report put it: “In 2009, black and Latino students in the state had the highest concentration in intensely-segregated public schools (less than 10% white enrollment), the lowest exposure to white students, and the most uneven distribution with white students across schools.”

Nowhere are these divergences more obvious than in nouveau hipster and increasingly expensive Brooklyn. In my parents’ native borough, the average income has actually dropped between 1999 and 2011, despite huge increases of wealth in areas closer to Manhattan.

Roughly one in four Brooklynites — most of them black or Hispanic — lives in poverty.

Bloomberg’s notion that if “we can find a bunch of billionaires around the world to move here, that would be a godsend,” with prosperity trickling down, hasn’t panned out, at least for most New Yorkers. The billionaires came, bought and flourished, but the same can not be said for Gotham’s middle and working classes.

Using Bureau of Economic Analysis data, analyst Aaron Renn estimates that the city’s per capita GDP has grown a bare 2.3% since 2010, below the mediocre 3.8% national rate and behind such traditional hard-luck cases as Buffalo, Cleveland and Baltimore.

The percentage of New Yorkers living in poverty has actually gone up by 1.1% since 2010, while household income has been flat.

Rather than forge a more upwardly mobile society, New York epitomizes what Citigroup researchers have labeled a “plutonomy,” an economy and society driven largely by the investment behavior and spending of the uber-rich. This creates great demand for low-end service workers — dog-walkers, baristas and waiters — but not much for New York’s middle or aspiring middle class.

Adjusting for the cost of living here, the average paycheck in New York is one of the lowest of any major metropolitan area. Put otherwise, working New Yorkers pay a huge premium to live in the five boroughs, one that repels middle-class individuals and families who aren’t compelled to be here.

The exodus of the middle class has been ongoing for 30 years, with New York by one measure now having the second lowest share of middle-income neighborhoods of America’s 100 largest cities.As the middle class has waned, even exemplars of the celebrated creative class — musicians, artists, writers — find the going increasingly rough, and unrewarding. Laments rock icon Patti Smith: “New York has closed itself off to the young and the struggling. New York City has been taken away from you.”

This is the dynamic New Yorkers elected de Blasio to fix. And he’s right the reality of rising inequality and, more important, diminishing opportunity, must be confronted.

Critically — and here de Blasio has better instincts than his predecessor — more emphasis needs to be placed on the outer boroughs. Even if Manhattan remains the prototypical luxury city, the rest of New York can be reinvented as a generator of middle-class jobs and opportunities.

One approach that’s paid dividends for workers in cities such as Houston, Dallas-Ft. Worth, Nashville and Pittsburgh is to concentrate on diversified economic growth.

Certainly some middle class jobs could be created by boosting such things as the port and logistics, resuscitating industries such as food processing and specialized household goods, and rolling out policies that encourage, rather than overregulate, smaller firms in the business-service industry.

But de Blasio’s press to bring in more tax revenue to pay for ambitious new programs, more generous social services and new contracts for city workers have the perverse effect of doubling down on Bloomberg’s bet on the wealthy.

His ambitious ramping up of green-energy policy could be the straw that breaks the back of what remains of the logistics and manufacturing industries in New York, something that has already occurred in California.

And his kowtowing to the teachers union and attempted assaults on charter schools threaten to further undermine the effectiveness of public education, something vital to middle and working class residents.

In fact, the effect of de Blasio’s policies may turn out to be more neo-Victorian than progressive. Rather than new homeowners, the city may see a greater concentration of people dependent on government largesse.

The poor-door phenomena, with a few lucky members of the lower class winning subsidized units in buildings for the rich, but with separate entrances and no access to luxury amenities, recreates not social democracy but the Victorian upstairs-downstairs society.

The critical point is this: New York is losing its role as a place of opportunity, and the de Blasio toolbox is unlikely to put back the ladder that’s been pulled up.

A great city does not only serve the rich, transforming others into their servants or recipients of noblesse oblige. New York need to be, as Rene Descartes described Gotham’s founding city, 17th century Amsterdam, “an inventory of the possible.”

That must hold true for most New Yorkers, not just for the very rich.

This piece first appeared at the New York Daily News.

Joel Kotkin is executive editor of and Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

Photo by Kevin Case from Bronx, NY, USA (Bill de Blasio) [CC-BY-2.0], via Wikimedia Commons

Affordable Cities are the New Sweet Spots

Fri, 10/24/2014 - 22:38

I’ve lived in San Francisco long enough (I’m getting old) that I’ve seen several waves of bright young people arrive, burn out, then move away. For some they were looking for adventure, found it, and then carried on with normal life elsewhere. But for most it was simply a matter of the numbers not adding up. Working a dead end low wage job while sharing a two bedroom apartment with seven room mates is only romantic for so long. I’m fairly inquisitive so I’ve kept up with many of these folks to see how they manage after they leave. I travel a lot and pop in to visit on occasion. The big surprise is that they aren’t moving to the suburbs the way previous generations did when they were done with their youthful excursions in the city.



Instead, they’re seeking out smaller less expensive cities with the same basic characteristics as the pricey places that squeezed them out. I’m very fond of one young couple in particular who spent time in Los Angeles, Baltimore, and Portland before finally settling down and buying a house in Cincinnati. Why Cincinnati? It’s a great town at a fantastic price. They bought a charming four bedroom century old home in an historic neighborhood a couple of miles from downtown for $50,000. Their mortgage is $300 a month. Okay, with tax and insurance it’s more like $500. And it wasn’t a fixer-upper in a slum. It’s a genuinely lovely place with amazing neighbors.

Who needs New Urbanism or Smart Growth when so many amazing old neighborhoods are just sitting out there in under-appreciated and radically undervalued cities all across North America? The Rust Belt has long since hit bottom and has already adjusted to every indignity that the Twentieth Century could throw at it: deindustrialization, race riots, white flight to the suburbs, population shifts to the Sun Belt… Now that the unpleasantness has run its course what’s left are magnificent towns ripe for reinvention. Personally I believe many of the boom towns of the last fifty or sixty years have peaked and are about to enter the kinds of steep decline we currently associate with Detroit – except the dried up stucco and Sheetrock ruins of Phoenix and Las Vegas won’t age as well as the handsome brick buildings of the Midwest.


Don’t get me wrong. Cincinnati isn’t San Francisco. It isn’t Brooklyn either, although they do have an elegant bridge by the same engineer. If you want to be a Master of the Universe in international finance, or the next super genius computer whiz, or a millionaire movie star you probably need to be in a bigger place. But most of us just want ordinary comfortable rewarding lives surrounded by good people. The big question is pretty simple. Do you want that life to involve a $500,000 mortgage on a bungalow in a coastal city, or a $50,000 place in the Midwest. Will you earn less money in Ohio? Probably. But since your overhead is one tenth the California or New York price you really don’t need the big salary or the stress that comes with it. It’s like moving to the suburbs except you get to live in a great vibrant city instead of a crappy tract house on a cul-de-sac an hour from civilization.

John Sanphillippo lives in San Francisco and blogs about urbanism, adaptation, and resilience at He's a member of the Congress for New Urbanism, films videos for, and is a regular contributor to He earns his living by buying, renovating, and renting undervalued properties in places that have good long term prospects. He is a graduate of Rutgers University.

Southern Indiana is More Than Just a Great View of Louisville

Thu, 10/23/2014 - 22:38

As part of a small project I’m doing in Southern Indiana, I spent two days touring around Clark and Floyd Counties to see what was up. As a guy who grew up in the area, it was great to get to see a lot of the positive things that have been occurring there. While perhaps places like New Albany and Jeffersonville might be considered small cities, the Southern Indiana portion of the Louisville metro area has about 280,000 people and is integrated into the larger regional economy. So it is participating in the economic and urban growth that’s also happening on the Kentucky side of the river.

The commercial development, particularly restaurants, in New Albany was impressive. Several Louisville establishments have set up shop there, joining locally-based businesses that offer a wide range of high quality goods. I’m talking about places like New Albanian, Quills Coffee, Toast, The Exchange, Bread and Breakfast, and more. There have also been a lot of infrastructure upgrades since I last lived there. For example, a recent streetscape project on New Albany’s Main Street was underway while I was visiting.

Toast in New Albany is one of the city’s many retail offerings. (Aaron Renn)

Talking with some of the employees of the various businesses, some of whom moved from out of town to the area, it was clear that many of them made a deliberate choice to pick downtown New Albany, seeing it as a place with huge upside potential—they didn’t just land there by accident.

There are some similar developments in downtown Jeffersonville, where the impact of the full opening of the Big Four Bridge as a pedestrian and bike crossing has been huge. I’ve walked across it several times now and am always amazed by the crowds. With extremely limited commercial development on the Louisville side of the river, Jeffersonville is raking in a ton of businesses, with an ice cream stand, several quality bar and grill places, and even a cigar bar tapping in. I expect this is only the start of a significant uptick in activity there.

The Big Four Bridge has been good for business in Jeffersonville. (Aaron Renn)

Clarksville remains the commercial center of the region and appears to be staying strong. It’s also got a huge redevelopment opportunity on its hands with the Colgate property and other prime real estate directly across the river from downtown Louisville. Not only is this the best skyline view of the city available, it already has pedestrian access across the Second Street Bridge to Louisville, albeit on a very narrow sidewalk.

Most people never see it since you don’t pass it on any major highways—yet—but the Port of Indiana industrial park near Utica is humming with activity. Likewise, I saw a ton of building in the River Ridge industrial park that spans Jeffersonville and Charlestown. That huge amount of space on a major highway is primed to explode when the East End Bridge opens, though tolls remain a huge question mark.

Overall, I was happy to see the kind of redevelopment that had long been talked about when I was a kid finally happening—though I must confess I miss the “LRS 102” lights on the Big Four. I’m expecting things to only continue to get better as these developments mature and grow.

This piece was first published by Broken Sidewalk.

Aaron M. Renn is an independent writer on urban affairs and the founder of Telestrian, a data analysis and mapping tool. He writes at about urban affairs at The Urbanophile.

Real Economic Payoff from Infrastructure

Wed, 10/22/2014 - 22:38

With the Obama proposal to get some money for infrastructure, it is time to revisit the payoff from investments in transportation. Investments that improve the performance of transportation in the US will pay for themselves in 17 years through increased economic activity and the resulting gains in federal tax revenue. The rate of return for national investments in transportation is 7%, significantly more than the cost of borrowing. Recently released research verbalizes a theory of why the performance of infrastructure matters for the economy.

Transportation provides the foundation for all economic activity. Transportation is used to bring labor and inputs to places of production, to deliver final goods and services to end users and to bring customers to the market place. How well is it doing its job? In an economy the size of the US even small improvements can mean big dollar gains. Making the investment to improve transportation performance can result in a measurable return on investment with a payback period that is well short of the life-expectancy of most transportation infrastructure.

Just as infrared is the invisible part of the spectrum of light, it often seems that infrastructure is the invisible part of the economy. It has become popular – especially since the turn of the century – to think of the economy as increasingly dependent on the insubstantial and the ethereal – emailing, e-trading, e-commerce. The reality is that all commerce – even e-commerce – eventually depends on transportation infrastructure. After all, someone has to get the computer components from the factory to the e-business; and when the computer hardware breaks down, someone will likely use transportation infrastructure to get to the place of business to fix it. No e-commerce can occur until transportation infrastructure is used to get the equipment to the location where rare earth minerals are extracted and to take those minerals to the factory – usually on another continent – where workers arrive via transportation infrastructure to build the computers in the first place. In many ways, there can be no commerce – “e“ or otherwise – without bricks-and-mortar infrastructure.

Despite repeated outcries for additional funding, transportation spending in the US was more than $100 billion under budget in the first decade of the new century. While there is much debate about how much to spend on transportation, since 1980 (1990), federal spending on transportation in the US has been $152.3 billion ($125.5B) less than budgeted. Federal spending on transportation exceeded budget in only four years: 2011 by $6.5 billion (the most ever), 2012 by $4.4 billion, 1996 by about $3 billion, and 1995 by $50 million. The $10.9 billion spending over-budget in 2011 and 2012 was necessary to fulfill commitments from 2009, when spending was under-budget by an extraordinary $40.7 billion. Excluding 2009, the average annual under budget since 1980 (1990) was $3.5 billion ($3.8 billion).

Figure 1 Federal Spending Over/Under-Budget 1980-2012

Data Source: Budget of the United States, Transportation Budget Authority FY 2011, Table 3.1 Outlays by Superfunction and function, updated with Table 5.1 from FY2014 tables; actual spending through 2012. Red on either line indicates spending over budget for that year. Author’s calculations.

Table 1 Federal Spending Under-Budget by Decade

Worse yet, transportation policy has been allowed to stagnate: the strategic economic goals and performance measures in the Department of Transportation’s 2014 performance plan are nearly identical to the 2002 plan. Economic competitiveness is one of the strategic goals set by the US Department of Transportation (Performance Plan FY2014, available at By their definition, economic competitiveness means maximizing the economic returns of the network and keeping the transportation system responsive to consumer needs. This may sound like the kind of initiative that would allow the US to stay globally competitive. However, these strategic goals are little changed from ten years ago; and most of the performance measures in the 2014 economic strategy were the same in 2002. Each strategic goal is also associated with a line-item in the federal budget, making them more than just slogans, making them actual cost centers.

Figure 2 Department of Transportation Performance Plans

Clearly, what the US needs now is better planning and strategic project selection, plus streamlined delivery processes to increase the productivity of infrastructure investment. Most of the existing transportation infrastructure could not handle the coming surge in demand. The surge is not only the result of organic growth in the size of the country, but also from an increase in the fundamental reliance of our economy on the use of transportation infrastructure. The result will be a nation falling further and further behind our global competitors.Yet, the world that business moves in has changed significantly as has the way that business moves. The service sector – the fastest growing part of the economy – is increasingly dependent on transportation. The services sector has the second fastest growing usage of transportation services (after construction) and remains the fastest growing sector in the US economy. Measuring the economy’s response to a change in the demand for transportation services, DOT-RITA conclude that “an investment in … transportation will have a greater economic impact than an equally sized investment in trade or utilities.” Investments to improve air transportation services would have the biggest economic impact. Except for rail transportation, the impact of improving the nation’s airports is bigger than investments in government and information services.

Table 2 World Economic Forum, Global Competitiveness Report 2009-2010

*The European Union economy is the largest in the world (CIA, 2013).  Scores are the result of responses to questions in the format: “How would you assess the quality of  [X] in your country? (1 = extremely underdeveloped; 7 = extensive and efficient by international standards),” where [X] is “Basic Infrastructure”, “Roads”, Railroads”, etc.  Scores for 2009-2010, US rank for transportation infrastructure was little change in 2012-2013 (13th). Details available at

What will it cost?

The US has more airports, roads and railways than any other country in the world – only Russia, China and Brazil have more waterways. However, the US is not alone in needing massive investments in infrastructure.

The total investment needed for all infrastructures worldwide is estimated at $53 trillion through 2030, with a total of $15.5 trillion just for transportation. The Organization for Economic Cooperation and Development and others estimate a cost equivalent to 3.5% of GDP to improve infrastructure across all sectors – water, energy and transportation. A report from McKinsey Global Institute (McKinsey Infrastructure Practice) calculates that this investment is 60% more than all spending in the last 18 years; and more than the estimated value of today’s worldwide infrastructure. Consulting firm Booz Allen projects the cumulative infrastructure spending needs for the US (and Canada) from 2005 to 2030 to be $936 billion for road and rail and $432 billion for airports and seaports (about $1.4 Trillion total). Dividing this between the US and Canada in proportion to real GDP, just over $1.2 trillion is needed to upgrade the performance of US transportation infrastructure to first class.

For the purpose of demonstration, let’s assume that the entire $1.2 trillion is invested in the US in 2014. The latest models demonstrate that the economic gains would begin to appear as higher GDP per capita in 2018. The economy starts 2018 at a level that is higher than it would have been without the investment in infrastructure. By 2025, the economy is larger by an amount greater than the initial investment in 2014. In financial terms, the investment has a 17 year payback period – substantially shorter than the life expectancy of transportation infrastructure. Taking 25% of the gain each year as government revenue (average government tax revenue as a percent of GDP in the US), the cumulative increased tax revenue will exceed the cost by 2025. A standard, basic financial analysis well-understood by both business executives and policy-makers shows a 7% internal rate of return – a number significantly higher than the borrowing costs for financing transportation infrastructure investments in the United States.

Paying For It

But what about the rest of the story: where does the initial funding come from to make the needed performance improvements? There is no “free ride” here – the construction and renovation of transportation infrastructure carries a hefty price tag that has to be paid one way or another. The options currently under discussion among researchers and policy makers in the United States are:

1. The status quo – which has not worked in over 20 years.

2. Reducing demand – One way to improve performance is to discourage the use of transportation infrastructure. Joel Kotkin reports the work of demographer Wendell Cox on the new migration to America’s “Efficient Cities” – resulting in net outmigration from America’s most congested cities.  Smaller populations are one way that the demands on infrastructure may fall naturally – but with potentially undesirable consequences for economic growth. While American’s do more driving than any other nation on earth, there is some new evidence that the long standing trend of increasing driving is tailing off.

3. Increasing user fees — Unfortunately, user fees are wrought with difficulties. First, “congestion pricing” fees are used to reduce demand rather than as a way to generate a revenue stream (with the obvious exception of some toll roads). There are several specific challenges: federal barriers to implementing fees and transaction costs are the most obvious. While the impact of fees as a revenue mechanism may be modest, there are additional implications for land use patterns and policies. Urban Land Institute provides an important cautionary note on tolling that could be applied to user fees in general. If the fees are permanent and not limited to rewarding investors in a particular facility, local policies will need to be established regarding the distribution of income beyond the designated payback period. The alternative, of course, is to tie the period of the fees to the reward and repayment of investors.

4. Public-Private Partnerships — Also known as PPP or P3 – cover a spectrum of financing options ranging from private concession operators to privately owned roads. At the lowest level on the PPP spectrum are private operators who raise their own financing for upfront costs and ongoing operations for concessions such as food service on highway plazas or newspaper stands inside train stations. Their revenue generally comes from sales. At a higher level, risk is allocated between public and private partners (e.g., public carries demand risk, private carries construction risk). Financing is often shared and comes in the form of both equity and debt. The revenue stream to repay debt (or reward equity investors) comes from user fees. In “build, operate, transfer” (BOT) cases, the government’s role changes from manager, operator and financier to regulator. Effective government controls on safety and security, anti-competitive behavior (access, pricing, service quality, etc.) are critical to the success of these projects. The final level is a purely private project which is used for public purposes. The private owner/operator builds the facility. A revenue stream is necessary to service debt, repay financial loans/borrowings, and reward capital investment. Freight railroads in the US are a good example of privately financed infrastructure in the US.

There is no lack of private money – especially under the current conditions of Federal Reserve intervention in the economy. According to a 2013 study by consulting firm McKinsey, an additional $2.5 trillion will be made available for infrastructure financing by 2030 if institutional investors meet their target allocations. The trouble is finding ways to direct revenue back to the private investors.

Other Revenue Streams

How do we create that revenue stream to attract private investment into public infrastructure? Americans are notoriously opposed to paying for public goods. Branded revenue opportunities are just coming on the table in the US but have been used wide and far in other countries.

Branded revenue streams – or private advertising in public spaces – has come a long way since realtors put their faces on benches or lawyers put their names on the backs of city buses. Branding now extends to the infrastructure itself. New York City’s Metropolitan Transit Authority added branding to turnstiles and train doors. More opportunities exist, including entrances, escalators, stairs, trains, overpasses, poles, walls, and even floors. Phoenix and Denver expect to earn up to $1 million in annual revenue from wrapping light rail trains in advertisements.

 Branding is not limited to print, either. New York, Chicago and Santa Monica are exploring LED advertising on the sides of busses. Dayton, Champaign-Urbana, Toledo (TARTA) and Kansas City (KCATA) have audio ads timed to promote businesses along routes. Just as advertising in metro transit is no longer limited to framed posters on subway platforms, highway advertising is no longer just for billboards. Why not, as pictured here, allow branding on overpasses? In November 2010 (USA Today November 22), cash-strapped California considered generating a much-needed revenue stream by allowing advertisements on emergency (“Amber-alert”) highway signs. But even these signs are virtual antiques. Ideas for where and what can accommodate an attractive yet discrete opportunity for a branded revenue stream are only limited by the number of pixels that can be used in an electronic display.

The Way Forward

All is not doom and gloom. There is a new, improving trend in the performance of transportation infrastructure in the United States. These improvements are a reflection of broad-based initiatives on both the supply and the demand sides. Meanwhile, the US continues to decline in the global rankings for poor transportation infrastructure (World Economic Forum, Global Competitiveness Index, shown earlier). Although US road, rail and even port rankings manage to stay in or near the top 20 in the world in the rankings, the US airport infrastructure quality ranking fell from 9th in the world in 2007-2008 to 32nd in 2010-2011 (currently at 30th).

The underlying question is not how much to invest it is how that investment can deliver improvements in infrastructure. Analysts at McKinsey estimate that streamlining infrastructure delivery alone could generate 15% in cost savings. Clearly, additional funding alone is not enough. We also need innovative ways to fund, build, maintain and operate the vital transportation structures that support economic activity.

Acknowledgements: Some of this material was previously published as STP Working Paper 2014_02, Calculating the Real Economic Payoff of Infrastructure. The Let’s Rebuild America initiative at the US Chamber of Commerce is headed by Janet Kavinoky. Funding for the project was also provided by the National Chamber Foundation in Washington, D.C. The original project team for developing indices to measure the performance of infrastructure in the United States was led by Michael Gallis and Associates of Charlotte, NC. The author is grateful to Kamna Pandey in New Dehli (India) for her slide show on revenue streams.

Susanne Trimbath, Ph.D. is CEO and Chief Economist of STP Advisory Services. Dr. Trimbath’s credits include appearances on national television and radio programs and the Emmy® Award nominated Bloomberg report Phantom Shares. She appears in four documentaries on the financial crisis, including Stock Shock: the Rise of Sirius XM and Collapse of Wall Street Ethicsand the newly released Wall Street Conspiracy. Dr. Trimbath was formerly Senior Research Economist at the Milken Institute. She served as Senior Advisor on United States Agency for International Development capital markets projects in Russia, Romania and Ukraine. Dr. Trimbath teaches graduate and undergraduate finance and economics.

This piece was originally published by IO Sustainability.

The Decline of the Midwest, the Rise of the South

Tue, 10/21/2014 - 22:38

The New York Times ran an article recently that’s nominally about football, but really gives insight into the decline of the Midwest and the rise of the South. Called “As Big Ten Declines, Homegrown Talent Flees,” this piece ties in perfectly with my recent essay on the differing social states of the Midwest and South. The NYT’s money quote says it all:

The SEC sold excellence. The Big Ten sold tradition.

Ironically, it is the formerly stigmatized “backwoods” South that has embraced excellence while the former industrial champion of the Midwest has spurned it. I don’t think that Midwesterners understand how much things have changed in the South. I hear the same stereotypical view of the South that might have had a lot of truth decades ago but have changes substantially. For example, those who think it is both a good thing and bad have quipped that Indiana is like an extension of the South into the Midwest. I don’t think so.

For example, Charlotte built a light rail system. Dallas has poured a billion dollars into a downtown arts district. Atlanta has a multi-billion infill strategy around its former Belt Line railroad. Nashville eliminated downtown parking minimums and implemented a form based code. South Carolina has its German style apprenticeship program. North Carolina built Research Triangle Park – in 1959. Southern cities like Atlanta have proudly claimed and built success around their black heritage. And Charlotte’s Chamber of Commerce CEO said, “To understand Charlotte, you have to understand our ambition. We have a serious chip on our shoulder. We don’t want to be No. 2 to anybody.” Outside of Chicago, does anybody in the Midwest talk like that?

Sure, there are bits and pieces here and there in the Midwest that speak to excellence. But they are the anomalies in a region that has retrogressed. Whereas in the South they’ve massively elevated their game in the last 40 years and are working hard to keep getting better. Sure, low costs and taxes play a role in their success. Climate and the universality of air conditioning as well. But they aren’t content to rest on just that. They want to get better. Meanwhile the Midwest is regressing towards what the South used to be such as, for example, by turning paved roads back to gravel because they can’t afford the maintenance.

The NYT piece brings up an interesting factor driving the rise of the SEC vs. the Big Ten, namely the shift in underlying population ratios over time: “An instructive comparison is Michigan and Georgia. In 1960, Michigan had twice Georgia’s population; in 1990, it was nearly one and a half times as big; today, their populations are roughly equivalent.”

The decline in Midwest population and economic heft brings with it a price that has to be paid. It’s showing up in the football world today. But it’s sure to hit the academic prowess of the Midwest’s major state schools as well. How long can these places maintain their relative rankings of excellence without the financial firepower to play in the big leagues? There’s more inertia on the academic side, but don’t think it won’t eventually happen here as well. The same is true in many other aspects of civic life. Even mighty Chicago has nearly bankrupted itself in its efforts to keep up with other global cities.

The Big Ten obviously saw the writing on the wall and decided to expand outside the region. I dislike this for reasons of, naturally, tradition. But it’s a rational response to a declining marketplace. Similarly, the Cleveland Orchestra established a Miami residency in the pursuit of cash to keep its artistic excellence intact. Might some of these institutions at some point become Midwest in name only? Time will tell.

Not everyone agrees with the idea that the SEC vs. Big 10 comparison is a relavent proxy, basically saying that it’s ludicrous to say that football proves anything. I don’t think that it does. But I will make three points:

1. The differing fortunes of the two conference is yet another in an extremely long series of data points and episodes that demonstrate a shift in demographic, economic, and cultural vitality to the South.

2. Sports is one of the many areas in which Midwestern states have clung to traditional approaches, even though those approaches haven’t been producing results.

3. Demographic and economic changes have consequences. It’s not realistic to expect that the Midwest’s excellent institutions will necessarily be able to retain excellence when supported by hollowed out economies.

I’d like to throw up a couple of charts to illustrate the longer term trends at work. The first is a comparison of per capita personal income as a percent of the US average for Illinois vs. Georgia since 1950:

Here’s the same chart of Ohio vs. North Carolina:

If I put up the population or job numbers, the same charts would show the South mutilating the Midwest. (Indiana, Georgia, and North Carolina were all about the same population in 1980, but the latter two have skyrocketed ahead since then for example). What’s more, the South’s major metros score better on diversity and attracting immigrants than the Midwest’s major metros as a general rule.

These charts show the convergence in incomes over time. The decline in relative income of the Midwest is possibly in part to increases elsewhere, not internal dynamics. But think about what the Midwest looked like in 1950, 60, or 70 vs the South, then think about it today and it’s night and day. The Midwest may still be endowed with better educational and cultural institutions than the South, but we can see where the trends are going. Keep in mind that those things are lagging indicators. Chicago didn’t get classy until after it got rich, for example.

Now we see that Southern income performance hasn’t been great since the mid to late 90s. This is a problem for them. As is their dependence on growth itself in their communities. I won’t claim that the South is trouble free or will necessarily thrive over the long haul. But they seem to have a clearer sense of identity, where they want to go, and what their deficiencies are than most Midwestern places.

Richard Longworth seems to buy the decline theory but has a different explanation of the source, namely that Chicago has sucked the life out of other Midwestern states:

In the global economy, sheer size is a great big magnet, drawing in the resources and people from the surrounding region. We see this in the exploding cities of China, India and South America. We see it in Europe, where London booms while the rest of England slowly rots.

And we see it in the Midwest where, as the urbanologist Richard Florida has written, Chicago has simply sucked the life – the finance, the business services, the investment, especially the best young people – out of the rest of the Midwest.

To any young person in Nashville or Charlotte, the home town offers plenty of opportunities for work and a good life. To any young person stuck in post-industrial Cleveland or Detroit, it’s only logical to decamp to Chicago, rather than to stay home and try to build something in the wreckage of a vanished economy.

This seems to be a common view (see another example), even in the places that would be on the victim side of the equation. But I’ve never seen strong data that suggests this is actually the case. Are college grads and young people getting sucked out of the rest of the Midwest into Chicago?

Thanks to the Census Bureau, we now have a view, albeit limited, into this. The American Community Survey releases county to county migration patterns off of their five year surveys sliced by attribute. There seems to be some statistical noise in these, and for various reasons I can’t track state to metro migrations, but thanks to my Telestrian tool, I was able to aggregate this to at least get metro to metro migration. So here is a map of migration of adults with college degrees for the Chicago metro area from the 2007-2011 ACS:

Net migration of adults 25+ with a bachelors degree or higher with the Chicago metropolitan area. Source: 2007-2011 ACS county to county migration data with aggregation and mapping by Telestrian

This looks like a mixed bag to me, not a hoover operation. What about the “young and restless”? Here’s a similar map of people aged 18-34:

Net migration of 18-34yos with the Chicago metropolitan area. Source: 2006-2010 ACS county to county migration data with aggregation and mapping by Telestrian

This is an absolute blowout, with a massive amount of red on the map showing areas to which Chicago is actually losing young adults. Honestly, this only makes sense given the well known headline negative domestic migration numbers for Chicago.

I do find it interesting that there’s a strong draw from Michigan. Clearly Michigan has taken a decade plus long beating. There’s been strong net out-migration from Michigan to many other Midwestern cities during that time frame, and its the same in Cleveland, which also took an economic beating in the last decade. This is just an impression so I don’t want to overstate, but it seems to me that a disproportionate number of the stories about brain drain to Chicago give examples from Michigan. Longworth uses the examples of Detroit and Cleveland. These would appear to be the places where the argument has been truly legitimate, but that doesn’t mean you can extrapolate generally from there.

What’s more, even if a young person with a college degree does move to Chicago from somewhere else, will they stay there long term? They may circulate out back to where they came from or somewhere else after absorbing skills and experience. It’s the same with New York, DC, SF, etc. I’ve said these places should be viewed as human capital refineries, much like universities. That’s not a bad thing at all. In fact, it’s a big plus for everybody all around. Chicago is doing fine there. But it’s a more complex talent dynamic than is generally presented, a presentation that does not seem to be backed up by the data in any case.

Aaron M. Renn is an independent writer on urban affairs and the founder of Telestrian, a data analysis and mapping tool. He writes at The Urbanophile, where this piece originally appeared.

Photo courtesy of

Housing Affordability in China

Mon, 10/20/2014 - 22:38

Finally, there is credible housing affordability data from China. For years, analysts have produced "back of the envelope" anecdotal calculations that have been often as inconsistent as they have been wrong. The Economist has compiled an index of housing affordability in 40 cities, which uses an "average multiple" (average house price divided by average household income) (China Index of Housing Affordability). This is in contrast to the "median multiple," which is the median house price divided by the median household income (used in the Demographia International Housing Affordability Survey and other affordability indexes). The Demographia Survey rates affordability in 9 geographies, including Hong Kong (a special administrative region of China). The average multiple for a metropolitan market is generally similar to the median multiple.

The Economist Data and Methodology

The Economist develops its ratio from central government data on house sales and incomes in individual cities. Like the Demographia Survey, The Economist provides estimates for housing affordability from the perspective of the average urban household, as opposed to the "ex-pat" or "luxury" markets that are typically reported by real estate commentators. The Economist also estimates its price to income ratio using an average house size of 100 square meters (approximately 1,075 square feet). This is larger than the average new house size in the United Kingdom, but smaller than those in the United States, Australia, Canada and New Zealand.

With an overall average multiple of 8.8, China's housing is less affordable (Figure 1) than all of the nine geographies rated in the Demographia Survey, except for Hong Kong (14.9). Even so, China’s housing affordability has improved from a national average multiple of 11.7 in April of 2010.

Affordability by City

It appears that if The Economist had included Hong Kong in its China ranking, it would have been ranked the most unaffordable in the country. Hong Kong houses are much smaller than the Chinese average, at 45 square meters (480 square feet). This would have given Hong Kong, with an unadjusted multiple of 14.9, a house size adjusted multiple of more than 30.

For years, there have been press reports of astronomic price to income multiples in China. The Economist data indicates that in some cities (Shenzhen, Beijing, Hanghzou and Wenzhou) this has indeed been true. But incomes have risen faster than house prices in recent years, and average multiples above 20 are, for now, a thing of the past.

Shenzhen, the "instant" megacity next to Hong Kong, is ranked as the least affordable with an average multiple of 19.6. The Economist indicates that this may be the result of demand from Hong Kong residents. Shenzhen had reached an average multiple of nearly 25 in 2010. An even higher average multiple was recorded in Beijing, which reached 27 in 2010. Beijing house prices have fallen substantially, however, dropping to 16.6 in 2014, the second most unaffordable in China.

China's other megacities (over 10 million population) have lower average multiples than Shenzhen and Beijing. Shanghai has an average multiple of 12.8 and Guangzhou has an average multiple of 11.4. Tianjin, approximately 100 miles (140 kilometers) from Beijing and China's newest megacity has an average multiple of 11.2.

China's most affordable city is Hohhot, capital of Inner Mongolia (Nei Mongol), with an average multiple of 4.9. Generally, interior cities had better housing affordability than those along the east coast. For example, Changsha (capital of Hunan) has an average multiple of 5.9, Kunming 6.6, while the two leading cities of China's Red Basin, Chongqing and Chengdu, were somewhat higher (7.1 and 7.4).

Comparison to Other Demographia Cities

Yet the multiples for many Chinese cities are no worse than highly unaffordable cities in Australia, New Zealand, Canada, the United States, and the United Kingdom.

Outside Hong Kong, the other most expensive cities in the Demographia Survey would rank in the second 10 of Chinese cities. Vancouver, with a median multiple of 10.3, is more expensive than all but 12 of the 40 cities rated in China. San Francisco, with a median multiple of 9.3, would rank 15th. Sydney, with a median multiple of 9.0, would rank in a 16th tie with Dalian. San Jose, at 8.7, would rank in a 19th place tie for unaffordability with Wuhan and Ningbo.

A sampling of cities from China and the Demographia Survey is illustrated in Figure 2.

Toward an Affordable China

One of rapidly urbanizing China's biggest challenges is to improve housing affordability. This is an imperative, with easing of the hukou internal resident permit system and the one-child policy. United Nations projections indicate that China's urban areas will add another third to their population in the next 25 years, an increase of more than 250 million. China is better housed today than perhaps at any time in its history. But it needs to be still better housed, as internal migrants become permanent urban residents and as rural citizens move to the cities for better lives.

Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He was appointed to the Amtrak Reform Council to fill the unexpired term of Governor Christine Todd Whitman and has served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

Photo: Jinan

Look Out for Obama's Legacy

Sun, 10/19/2014 - 22:38

With public support for Barack Obama recently at low ebb, some might suggest that his will be a weak political legacy. But, in reality, the president’s legacy may prove profoundly important in having helped usher into power a new dominant political configuration whose influence will survive for decades to come.

In “The New Class Conflict,” I describe this alliance as the New Clerisy, which encompasses the media, the academy and the expanding regulatory bureaucracy. This Clerisy already dominates American intellectual and cultural life and increasingly has taken virtual control of key governmental functions, as well as the educations of our young people.

The Clerisy’s ascendency was predicted more than 40 years ago by the great sociologist Daniel Bell. The rise of knowledge-based industries, he predicted in his landmark 1973 book, “The Coming of Post-Industrial Society,” would establish the “pre-eminence of the professional and technical class.” This new “priesthood of power,” he suggested, would aim for the rational “ordering of mass society.”

Although usually somewhat progressive by inclination, the Clerisy actually functions much like the old First Estate in France – the clergy – helping determine the theology, morals and ideals of the broader population.

Nowhere is this function clearer than in the university itself, from which Barack Obama sprang, and which has become an essential part of his political coalition.

Campus intolerance

In allying with academia, the president has hitched himself to a sector that has, at least till now, enjoyed rapid growth. In 1958, universities and colleges employed under 370,000 people. By 2014 that number had expanded to roughly 1.7 million. Over that time, academe – once a true battleground of ideas – has become about as ideologically diverse as the medieval Catholic Church. President Obama, for example, reaped a remarkable 96 percent of all presidential campaign donations from Ivy League employees, a margin more reminiscent of Soviet Russia than a properly functioning pluralistic academy.

This level of unanimity, a recent University of California study suggests, is actually becoming more marked, with barely 12 percent of all faculty self-identifying as right of center. As in medieval academies, such uniformity feeds an attitude of intolerance toward other perspectives, as revealed in the cancellations of commencement speaker invitations this spring. More troubling still is a 2012 study finding that roughly two of five professors would be less well-inclined to hire an evangelical or conservative colleague than a more conventionally liberal one.

Saddest of all is the impact on students. Longtime civil libertarian Nat Hentoff notes a2010 survey of 24,000 college students, which found that barely a third thought it “safe to hold unpopular views on campus.” Recent years have seen the rise of such things as speech codes and the introduction of “trigger warnings” to alert students about what might be objectionable ideas or phrases, even in American classics.

Imbalanced media

We see a similar, if less well-enforced, spirit of uniformity running through the news media. There remain strong conservative outposts (largely the News Corp. empire), but a detailed UCLA study found that, of the 20 leading U.S. news outlets, 18 were left of center. A recent Indiana University study found that barely 7 percent of journalists in 2013 were Republican, compared with nearly a quarter in 1971.

Even Arnold Brisbane, a former ombudsman of the country’s premier news source, the New York Times, admits that group-think now increasingly overshadows objectivity. Brisbane says so many staffers at the newspaper “share a kind of political and cultural progressivism – for lack of a better term.” He suggests “that this worldview virtually bleeds through the fabric of the Times.”

One key part of Obama’s legacy is an ever-closer marriage between the organs of the Democratic Party and the press. At least 16 prominent journalists have joined the Obama administration, something of a record. Just this past week, the president’s former longtime press secretary, Jay Carney, announced he would become a commentator on CNN.

“This press corps,” acidly notes the former Jimmy Carter pollster Pat Caddell, “serves at the pleasure of this White House and president.”

Over the past few months, the president’s off-kilter performance and slipping popularity has irked even some of his loyalist media backers. But this shrinking fealty toward the Obama personage does not suggest an ideological shift from conventional progressive opinion on everything from women’s or minorities issues to the environment.

This is perhaps most evident with climate change, a critical issue, to be sure, where reporting about the decades-long “pause” in rising temperatures, or the recentexpansion of Arctic sea ice, has been left primarily to the right-wing media, who have their own agenda. The mainstream media seem to view anyone skeptical about any aspect of the climate change agenda – in good medieval fashion – as heretics, deluded or corrupt “deniers.” The Los Angeles Times, as well as the website Reddit, have chosen to exclude contributions from climate change skeptics.

Sometimes, you have to wonder what happened to an objective press. USA Today’s media columnist, Rem Reider openly justified limiting or eliminating coverage of “reality-challenged people” who refuse to accept what he calls “established truth.” I imagine there were cardinals and bishops saying much the same thing in 15th century Paris.

‘Vast left-wing conspiracy’

Much the same brain lock can be attributed to the entertainment media. When not indulging in portraying sex and violence, our television and movie people reliably push the same basic agenda as the rest of the media. As the liberal author Jonathan Chaitsuggests, the entertainment industry has come to constitute something of “a vast left-wing conspiracy.”

Theoretically, the third part of my New Clerisy – the government bureaucracy – could be impacted by election results. But even if Republicans or a center-right majority were to gain control of both houses of Congress, the president seems determined to grant “progressive” bureaucracies more direct power, allowing them to become something of an unelected permanent government. An electoral defeat this November, if anything, might make him even bolder to push rule by decree.

Like the members of the old First Estate, or the Soviet nomenklatura, the upper bureaucracy has evolved into a privileged – and cossetted – caste, with huge benefits and higher pay than their similarly educated private-sector counterparts, a status secured by their vast political influence. Since 1989, public-sector unions have been among the largest contributors to campaigns, giving overwhelmingly to Democrats.

Nowhere is this permanent government increasingly more evident than in the expansive agenda of the Environmental Protection Agency. Working intimately with allied environmental groups – but without congressional approval – EPA has been reaching to control the nation’s energy policy through administrative diktat.

Although a low priority for voters, climate change matters much to the Clerisy, perhaps, at least unconsciously, because it creates a perfect raison d’etre for more expansive control. But the EPA is no outlier; other agencies chafe to extend their power over information, immigration, transportation, education and even such functions of government as land use, traditionally determined by local elected officials. By 2016, our daily lives may be controlled more by unelected agencies than through the legislative process.

This is more than a reaction to Republican obstructionism, although that bears some of the blame. It also reflects a more authoritarian view among the Clerisy that democracy is too unruly, too determined by human passions and loyalties, to address the most serious issues. Former White House budget director Peter Orszag, for example, thinks we need to become “less democratic.” New York Times columnist Thomas Friedman, another key figure of the Clerisy, has praised the Chinese authoritarian system as better-suited to meet new challenges than is our clunky system.

Against such established and accumulated power, even a strong November showing by the GOP may have surprisingly little effect. Indeed, even with a Republican in the White House, the Clerisy’s ability to shape perceptions, educate the young and control key regulatory agencies will not much diminish. The elevation of the Clerisy to unprecedented influence may prove this president’s most important “gift” to posterity.

This piece first appeared at the Orange County Register.

Joel Kotkin is executive editor of and Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

Barack Obama photo by Bigstock.

A Newer Geography of Jobs: Where Workers with Advanced Degrees Are Concentrating the Fastest

Fri, 10/17/2014 - 22:38

This is a new report brief from the Center for Population Dynamics at Cleveland State University, download the pdf version here. The report was authored by Richey Piiparinen, Jim Russell, and Charlie Post.

In 1963, nearly 75% of America’s top 50 companies owned and extracted natural resources1. By 2013, only 20% of top firms were natural resource-based. Today, knowledge-focused industries such as IBM comprise over 50% of America’s top 50 firms. Translation: talent is the new oil.

But not every region has reservoirs of human capital. Historically, knowledge economies have gathered in select top-tier metros, termed “Islands of Innovation”2. Think Boston and San Francisco. There are numerous reasons for this, including access to select research institutions, as well as the productivity effects that arise when a cluster economy is formed3.

For scholars such as economist Enrico Moretti, this “Great Divergence”4 between “the best” and “the rest” will continue. “More than traditional industries,” writes Moretti in his book The New Geography of Jobs, “the knowledge economy has an inherent tendency toward geographical agglomeration.”

But is this trend inevitable? Will the divergence remain? One line of thought is that the cost of living in top-tier metros will inevitably lead to “capital equalization”5—loosely defined as the “convergence” between regions in job and income growth. Capital equalization was a key factor in the decline of the Rust Belt. Here, manufacturing jobs became automated or moved down South or overseas to cut labor costs. One could argue that capital equalization will re-map the geographies of the knowledge economy in a similar manner.

“The prediction of this view is the convergence of American communities,” writes Moretti. “Low-cost areas will attract more and more of the new, high-paying jobs. Cities that have been lagging behind-the Clevelands, the Topekas, and the Mobiles-will grow much faster. Bogged down by their high costs, San Francisco, New York, Seattle, and similar cities will decline.” That said, Moretti does not believe convergence is taking shape. “[T]he data don’t support this view,” Moretti continues. “In fact, the opposite has been happening.”

But there is data that do support this view, and it begins to sketch a newer geography of jobs that is enabling an increasing concentration of highly-skilled workers in America’s second-tier cities. AOL Co- Founder Steve Case has dubbed this convergence back into Middle America “the Rise of the Rest”6.

Where are America’s Highest-Skilled Jobs Clustering?

The most common measure of human capital is educational attainment, or the percent of a population  with a college degree. Not all human capital is equal. Generally speaking, the higher the degree conferred, the more productive the worker, and this is reflected in pay. For example, the national median income by education level is as follows: $27,350 for a high school graduate, $50,050 for a person with a 4-year degree, and $65,565 for a person with an advanced degree7. The fact that those with a graduate or professional degree are paid highest is indicative of their productive capacity in the knowledge economy.

Specifically, a region’s highest-educated workers are likely to be job creators, not just job consumers. This primarily comes about two ways: (1) through direct job creation, such as a research doctor starting a biotech spin-off firm; and (2) through indirect job creation, particularly relating to the “downstream” effect a high- paying job has on the local service economy. Put simply, more income, more spending, equals more jobs.

What metros are experiencing the fastest growth in its concentrationof workers with advanced or professional degrees? To answer this, the analysis used data from the Current Population Survey (CPS) to compare the educational attainment rates of the nation’s largest laborforcesfrom 2005 to 2013. Of particular concern was the percentage of people in a regional labor force with an advanced or professional degree, and whether or not top-tier metros gained higher- skilled workers at a faster rate than second-tier metros. Here, the rate was calculated as the percent point change between a region’s 2013 educational attainment rate and its 2005 educational attainment rate for workers with an advanced degree.

Table 1 shows the results. In line with the Great Divergence, Washington, D.C. and San Francisco are experiencing the 1st and 4th fastest rates of change in the employment of high- skilled workers, respectively. However, three of the top five fastest-growth metros are second tier: Providence, Indianapolis, and Cleveland— each with over a 5% percent point change. While these metros cannot match the top-tier metros in the number of advanced degree jobs gained— e.g., Cleveland gained nearly 44,000 grad-level jobs compared to 157,000 for San Francisco— the data nonetheless speak to a number of second-tier metros converging, or “moving up”, into the knowledge economy hierarchy.

Table 1 Percentage of Workers with Advanced Degree, 2005 Percentage of Workers with Advanced Degree, 2013 Percent Point Change Source: CPS 2005, 2013   Washington, DC 21.58% 27.48% 5.90% Providence 10.71% 16.30% 5.59% Indianapolis 11.63% 17.08% 5.45% San Francisco 17.49% 22.88% 5.39% Cleveland 11.68% 17.00% 5.32% Kansas City 10.88% 15.49% 4.61% Jacksonville 7.54% 12.07% 4.52% San Antonio 8.52% 12.32% 3.80% Denver 12.75% 16.54% 3.78% Sacramento, CA 9.07% 12.78% 3.72% Detroit 12.66% 16.26% 3.60% Minneapolis 12.30% 15.55% 3.25% Riverside, CA 5.08% 8.09% 3.01% Pittsburgh, PA 13.66% 16.57% 2.91% Chicago 14.70% 17.55% 2.84% Philadelphia 13.52% 16.22% 2.70% Charlotte 7.62% 10.14% 2.52% Orlando 9.28% 11.73% 2.45% Boston 21.03% 23.41% 2.37% Seattle 15.34% 17.71% 2.36% Phoenix 10.19% 12.50% 2.31% Milwaukee 12.32% 13.87% 1.55% Las Vegas 7.08% 8.56% 1.48% Portland 13.52% 14.98% 1.46% New York 17.14% 18.56% 1.42% Columbus, OH 12.95% 14.35% 1.40% St. Louis 11.91% 13.20% 1.29% Dallas 10.89% 12.16% 1.28% Baltimore 17.12% 18.28% 1.17% Virginia Beach 9.62% 10.57% 0.96% Houston 9.65% 10.60% 0.95% Miami 10.83% 11.68% 0.85% San Diego 14.27% 15.03% 0.75% Los Angeles 11.65% 12.38% 0.73% San Jose 23.33% 23.52% 0.20% Nashville 12.02% 11.70% -0.32% Atlanta 14.08% 13.36% -0.72% Cincinnati 10.23% 9.22% -1.01% Tampa 11.30% 10.05% -1.25% Austin 17.92% 16.35% -1.57%


To further illustrate this point, rankings were calculated to show the metros with the highest concentration of advanced-degreed workers in the labor force for 2005 and 2013. Change rankings were then calculated to determine just how far converging metros like Cleveland and Indianapolis were rising in the knowledge economy hierarchy. Figure 1 displays the results. Notice the top of the rankings are comprised of traditional top-tier metros. Also, the change in these metro rankings from 2005 showed no variance (ranging from -1 to +1), indicating little “wiggle room” in the top echelon from 2005 to 2013. The exception, here, was Austin, which dropped 9 spots to 13th. Moreover, two metros—Indianapolis and Cleveland—moved up from the middle of the pack to rank 9th and 10th, respectively. Providence also made a large leap: from 29th in 2005 to 14th in 2013. These figures indicate there is a notable economic restructuring occurring in Indianapolis, Cleveland, and Providence that is perhaps forming a next generation of innovation nodes.

Now, in the case of Cleveland, do the results mean the gritty Rust Belt metro is experiencing robust job growth? Not exactly. From 2005 to 2013, 78% of the nearly 54,782 jobs added for college graduates in Greater Cleveland were for those with advanced degrees—meaning job growth for people with only a bachelor’s degree was sluggish at best. What’s more, job losses for Greater Clevelanders without college degrees was substantial: a decline over 83,000 jobs from 2005 to 2013. In other words, while the region’s highest-skilled workforce is converging into the ranks of the national elite, the effect has yet to be found “downstream” in direct or indirect job creation.

This is not unexpected. Specifically, economic restructuring, particularly for manufacturing-based regions, is a process, and a working theory for the Center for Population Dynamics is that a concentration of advanced-degree workers is an important leading indicator to more widespread growth8. As this line of inquiry evolves, an eventual step is to set up a policy framework so that the region’s growing concentration of high-skilled workers can be strategically catalyzed to lead to broader economic opportunities, rather than missed opportunities. The Center for Population Dynamics is currently constructing a working policy paper that will help drive this effort.

This is a new report brief from the Center for Population Dynamics at Cleveland State University, download the pdf version here. The report was authored by Richey Piiparinen, Jim Russell, and Charlie Post.

1 See:

2 Hilpert, Ulrich. Archipelago Europe: islands of innovation: synthesis report. FAST, Commission of the European Communities, 1992.

3 Porter, Michael E. "Location, competition, and economic development: Local clusters in a global economy." Economic development quarterly 14.1 (2000): 15-34.

4 Moretti, Enrico. The new geography of jobs. Houghton Mifflin Harcourt, 2012.

5 See:

6 See:

7 Source: American Community Survey 1-Year Estimates, 2013

8 See:

Should the Gas Tax Go Local?

Thu, 10/16/2014 - 22:29

After approving yet another general budget stopgap for highway construction in July, legislators across the country are acknowledging the obvious: The Federal Highway Trust Fund, the primary pot of federal roadway dollars, is nearly out of gas.

The fund has been fed for decades by the federal taxes on gasoline and diesel fuel. But the gas tax hasn’t been raised in 21 years. At the same time, people are driving less, and using more fuel-efficient cars. As a result, federal fuel tax revenues have fallen to just 60 to 70 percent of gross federal highway expenditures.

The resulting fiscal dilemma has kickstarted a debate among policymakers on how to get the fund solvent again. Simultaneously, it’s also attracted attention from many planners looking for an opportunity to stress what they perceive as the unsustainability of America’s suburban low-density development.

The core of the argument by these critics is that current infrastructure funding policies do not hold drivers accountable for the costs of the roads. Nationally, gas taxes and vehicle fees cover just half of total local, state, and federal road spending. They contend that if roads had to be paid for directly by those who used them, we’d likely have denser development and fewer cars, and that planning policy should embrace an ambitious course to implement that future through centralized land use regulation and urban design.

But this approach is neither desirable nor necessary. Instead, there are ways to restructure infrastructure funding to make roads accountably solvent without turning society upside down.

A first step would be to reduce the enormous control the federal government has over road construction. When first created, the federal highway trust fund was designed to ensure only the maintenance of the national interstate highway network.

But today, the fund, which accounts for a quarter of all American roadway spending, is used for numerous other projects that can’t be justified as national priorities. As of 2011 20 percent of federal highway spending went to federal priority DOT projects. The remaining 80 percent was divvied out to states and communities via grants, many of them for capital outlays for new roads at the suburban edges of expanding regions. Communities should be expected to pay for these kinds of roads themselves, especially as the number of local projects continues to grow.

This federal spending has encouraged a lack of accountability at the local level. While it has given the federal government the freedom to address concerns about existing infrastructure projects — since 1990 Washington has reduced the share of bridges deemed “structurally deficient” from 25 percent to 11 percent – it has done little to ensure that local projects will be prioritized responsibly in the future. Instead, cities and states have accrued federal dollars primarily on the basis of marketing, regardless of whether the costs and benefits actually add up.

Balancing those costs and benefits is a crucial issue because, in the eyes of many planners, auto-dependent suburbanites are getting a free ride while urbanites who drive less are being unfairly taxed. Meanwhile, there is no clear answer to the question of how much people would be willing to pay for infrastructure in order to live at low densities if they were shouldering the costs directly.

Polling data does little to resolve the uncertainty. When asked, a majority say that they like their commutes, that they would rather drive than travel by other modes, and that they greatly value the positive attributes of living at low densities in detached homes with yards and privacy from their neighbors. This suggests they would be hard-pressed to relinquish the status quo. Simultaneously, however, they also overwhelmingly oppose raising the federal gas tax.

So where do the public's priorities really fall? This question could be better answered if more infrastructure were funded locally. Not only would it allow more accountability between those providing the funding and those accruing the costs and benefits, it would more democratically help solve the density issue by letting people vote with their feet. People would be free to choose between the wide-ranging densities and tax rates that compose the many competitive municipalities of most regions.

There are other benefits to concentrating road spending locally. Foremost among them is that communities and states are better equipped than the federal government to tackle congestion, one of the costliest contributors to road degradation

Since 1982, the primary federal approach to combat congestion costs through the gas tax has been to redirect an increasing portion of revenues to a Mass Transit Account under the principle of encouraging alternative modes of transportation. It hasn’t worked. Between 1978 and 1995 transit funding increased eightfold, while ridership increased just two percent. And by 2005 Americans indicated they still overwhelmingly rejected transit, even when both driving and transit were available.

Much of the gas tax has been wasted. The American Public Transit Association reports that about 15 percent of the gas tax is used for mass transit. Roads carry just 51 percent of their own costs. Ports, airports, and parking facilities, by contrast, paid for 80 to 100 percent of their own costs when measured the same way.

Cutting off the transit syphon would free up significant capital to patch gaps in the Highway Fund. Meanwhile, more effective approaches to reducing congestion could be tackled at the state and local level. These include regulations to stagger travel times and routes, clearing breakdowns more quickly, improving traffic light engineering, providing better traffic alerts, and limiting truck traffic (one of the worst congestion offenders) at certain times of day.

Most of the public debate has been on ways the gas tax itself could be restructured to keep the highway fund afloat. In addition to simply raising the gas tax, universal tolling and taxing people per mile driven are popular ideas for directly funding roads.

While popular, such “miles-based” approaches may not improve a roadway system that is a crucial tool for facilitating economic growth. Housing prices in the United States are lower than nearly anywhere else in the world in part because of roads that facilitate cost-efficient transportation between locations more efficiently than places where most residents are dependent on transit. This creates choice in where to live and work, and facilitates ladders out of poverty.

There are practical concerns as well. When polled, people have overwhelmingly indicated that their primary personal method for alleviating congestion is to take a less direct route to work. Discouraging indirect travel by taxing drivers per mile could actually end up exacerbating congestion, rather than relieving it.

The way the tax is designed now is a solid middle-ground approach, simultaneously charging users while incentivizing fuel-efficiency. If only the revenues were spent more efficiently, recent dips in Highway Fund revenues due to a drop in driving and an uptick in miles per gallon might be celebrated, not maligned.

It’s clear that roadway funding needs a second look. And while a more accountable approach would be a breath of fresh air, accountability may not resemble the high-density, high-tax, transit-rich future that some planners assume.

Roger Weber is a city planner specializing in global urban and industrial strategy, urban design, zoning, and real estate. He holds a Master’s degree from the Harvard Graduate School of Design. Research interests include fiscal policy, demographics, architecture, housing, and land use.

Flickr photo by Neff Conner: Highway traffic jam and construction in Bedford, Texas.

How Segregated Is New York City?

Tue, 10/14/2014 - 22:38

The online reaction to the reports on racial segregation in New York state’s public schools reminded me, yet again, that most people think of New York as an integrated city, and are surprised or incredulous when that impression is contradicted.

This is somewhat jarring, since virtually every attempt to actually measure racial segregation suggests that New York is one of the most segregated cities in the country. This University of Michigan analysis of 2010 Census data, for example, suggests that New York is the second-most-segregated metropolitan area in the U.S., exceeded only by Milwaukee, and that about 78% of white and black people would have to move in order to achieve perfect integration. (Chicago’s corresponding number is just over 76%, good enough for third place.)

Why is this so surprising? One obvious reason, I think, is that most people’s conception of New York is limited to about 1/2 of Manhattan and maybe 1/6 of Brooklyn, areas that are among the largest job and tourist centers in the world. As a result, they attract people of all different ethnic backgrounds, especially during the day, even if the people who actually live in those areas tend to be monochromatic. Imagine, in other words, trying to judge racial segregation in Chicago by walking around the Loop and adjacent areas: you would probably conclude that you were in a pretty integrated city.

But it goes beyond that, I think. Segregation in New York doesn’t look like segregation in Chicago, or a lot of smaller Rust Belt cities. For one, there just aren’t very many monolithically black neighborhoods left in New York. Here, for example, I’ve highlighted every neighborhood that’s at least 90% African American (see note on method at the bottom of this piece):

Were we to do this in Chicago, half the South and West Sides would be lit up. But in New York, black neighborhoods have become significantly mixed, in particular with people of Hispanic descent. This is a phenomenon Chicagoans are used to in formerly all-white communities – places like Jefferson Park or Bridgeport, which as recently as 1980 were overwhelmingly white, now have very large Latino and Asian populations – but in New York, it’s happened in both white and black neighborhoods.

That said, white folks in New York have still on the whole declined to move to black areas, except for some nibbling along the edges in Harlem and central Brooklyn. That means that instead of measuring segregation the way we might in Chicago – by looking for very high concentrations of a single ethnic group – it makes more sense to look for the absence of either white or black people.

Here, then, I’ve highlighted all the places where white people make up less than 10% of the population:

It’s a lot. And, correspondingly, here are all the places where black people make up less than 10% of the population:

It’s also a lot. And if we put the two maps together, we see that these two categories cover the overwhelming majority of NYC:

The same pattern holds pretty well if we lower the threshold to no more than 5% white or black:

And there are even a significant number of areas that are truly hypersegregated, with fewer than 2% of residents being either white or black:

Because I now love GIFs, here’s a summary GIF.

What does all this tell us? For one, it confirms graphically what the Census numbers suggested, which is that the median black New Yorker lives in a neighborhood with very few white people, and vice versa.

But it also suggests a racial landscape that looks different from that of Chicago, and lots of other American cities, in important ways. In particular, where Chicago has a relatively simple racial geography – white neighborhoods at various levels of integration with Hispanics and Asians to the north and northwest, black and Hispanic neighborhoods to the south and west, with only a few small islands like Hyde Park and Bridgeport that break the pattern – New York’s segregated neighborhoods form a more complex patchwork across the city. That means that while a North Sider in Chicago might go years without having to even pass through a black neighborhood, lots of white New Yorkers have to get through the non-white parts of Brooklyn or the Bronx to reach job and entertainment districts in Manhattan or northern Brooklyn.

I imagine that structural-geographic fact, combined with New York’s relatively high level of black-Hispanic integration, goes a long way to explaining my anecdotal experience that white New Yorkers tend to be less ignorant and scared of their city’s non-white neighborhoods than white Chicagoans are of Chicago’s. (There’s some interesting research that suggests white people tend to be more sympathetic to brown people, and their neighborhoods, than black people and theirs.) There’s also, of course, the fact that Chicago’s segregated non-white neighborhoods tend to have much higher violent crime rates, and much more modest business districts, than New York’s, although that’s likely both an effect and cause of their relative isolation.

All of this is another reason that I’m kind of excited about the growing entertainment and shopping district on 53rd St. in Hyde Park, since the more that the South Side has “neighborhood downtown” strips that draw people from across the city, the more likely North Siders and suburbanites are to travel through the black and Latino neighborhoods that surround them, observe that many of them are actually quite nice, become less committed to shunning them, and thus contribute less to the social and economic dynamics that have created the institution of the ghetto, and the poor job prospects, failing schools, and high crime rates that accompany it.

In conclusion: New York is super segregated, but the numbers aren’t everything.

Also, let me have another Talk To Me Like I’m Stupid moment: suggestions for books about the racial history of New York? What’s the equivalent of Making the Second Ghetto or Family Properties? I’ve already read Caro’s Moses book.

Note:  This piece focuses on white-black segregation because that, for various social and historical reasons, has been by far the most significant geographic separation in American cities, certainly in the Midwest and Northeast. But by far the second most significant separation – white-Latino segregation – is also very extreme in New York. The same Census analysis that found NYC was the second-most-segregated metro area in terms of white and black people found that it was the third-most-segregated metro area in terms of white and Latino people. That’s obviously not the end of the story either, though. If you know about or are curious about some other aspect of segregation, leave a comment.

Daniel Hertz is a masters student at the Harris School of Public Policy at the University of Chicago. This post originally appeared in City Notes on April 14, 2014.

Photo by Mike Lee

The Unrest In Hong Kong And China's Bigger Urban Crisis

Mon, 10/13/2014 - 22:38

The current protests in Hong Kong for democracy reflects only part of the issues facing Chinese cities, as they grow and become ever more sophisticated. In just four decades, China has gone from 17.4 percent to 55.6 percent urban, adding nearly 600 million city residents. And this process is far from over: United Nations projections indicate that over the next 20 years, China’s urban population will increase by 250 million, even as national population growth rates slow and stall.

Overall this transition has been spectacularly successful. As it has urbanized, China, following the lead of Hong Kong, has become a much richer country, expanding its share of global GDP from 2 percent in 1995 to 12 percent in 2012.

China now boasts four megacities of over 10 million people, the most of any country. The population of Shanghai, a cosmopolitan world city decades before the Communist takeover of the country, has expanded almost 50% since 2000, and the ancient capital Beijing and the southern commerce and industrial hub of Guangzhou have grown nearly as rapidly. The U.N.’s growth projections suggest that the future list of megacities will include Chongqing, Tianjin and Chengdu.

Shenzhen, one of the four current megacities, epitomizes the speed of China’s urbanization. A small fishing village along the Hong Kong border with a few factories when I first visited three decades ago, the city rose as the focus of Deng Xiaoping’s first wave of modernization policies. In 1979 it had roughly 30,000 people; now it is a thriving metropolis of 13 million whose population in the past decade grew 56%. Its rise has been so recent and quick that the Asia Society has labeled it “a city without a history.”

Shenzhen has not only grown but thrived over the past three decades, as was evident on my most recent trip. In contrast to the often impoverished slum cities of the developing world, China’s cities have grown much as Britain’s did in the 19th century, upon the back of rapid expansion of manufacturing and trade. This sets Chinese urbanization apart from India‘s; manufacturing’s share of Indian GDP is half that of China. In the process, Chinese cities have become more tied to the global economy, exposing its people to international trends, as well as greater affluence. This is exactly what has happened earlier in Hong Kong, setting the stage for some of the recent unrest. At the same time, the leading cities of the West are, for the most part, barely growing, and much of that by dint of immigration. With plunging birthrates and generally anemic economies, the great cities of the Europe and North America are hardly likely to blaze a brash urban trail; they are more concerned with retaining what they can from their historical inertia. There is no city in the West — even Houston and Dallas-Fort Worth — that approaches the dynamism one now finds in China.

The Coming Chinese Urban Economic Crisis

China’s successful urban transformation now faces a challenge as the country’s export-led economy weakens. Labor costs are soaring and young adults, some four times as many of whom have attended college than those who came of age a decade ago, have little interest in factory work. At the same time, many of China’s most successful and talented people are seeking out lives abroad; two-thirds of the country’s affluent residents, according to one survey, are considering migrating overseas.

The labor crunch is most intense in China’s coastal cities, home to most of the urban population. These face greater competition from less expensive urban areas further west, such as Chongqing and Chengdu. But even these areas are facing a labor shortage, forcing companies to fill their ranks with not necessarily voluntary student laborers. There is also growing competition as well in labor-intensive industries like textiles from cheaper cities in places like Vietnam, Indonesia and Bangladesh.

Recent attacks by Beijing on multinationals, charging them for corruption and anti-trust violations, could make things worse. For political reasons, the government has decided to persecute the very companies that account for half of Chinese exports, charging corruption and anti-trust violation. China, where ironically the public is more favorable than most Westerners to large corporations, now faces an investment downturn as foreign companies look for safer havens such as in Mexico or to come back to the U.S.

The logical solution to this challenge, particularly for coastal Chinese cities, is to move up the value chain, much as Hong Kong and Singapore have already done. This means a greater reliance on finance, business services and technology. Shenzhen, for example, looks to Silicon Valley as a role model. But their attempt is taking place in an urban environment very different than that nurtured in California suburban garages. Instead we see typically immense infrastructure projects like the 15 square kilometer Qianhai development near the city’s main port. Qianhai hopes to lure service and tech employment from pricier, and for now, more unstable Hong Kong.

But in many cases, high-value industries depend on open access to information, something Beijing clearly sees as a threat to the political order; China’s great Internet Firewall is getting, if anything, higher and more difficult to breach, to the detriment of local knowledge workers. Government authorities realize that Hong Kongers’ access to western media, movies and culture makes them less pliable than those, even in neighboring Shenzhen, where access to major foreign publications, Google and many websites is highly restricted.

Health And Demographics

China is not only urbanizing, but doing it at extreme levels of density; barely four to six percent of all new floor space in the country goes to single-family houses. Even on the suburban periphery, there are few low-rise apartment buildings and even fewer houses; much of the construction, particularly for rural migrants, is also substandard, with buildings erected so close that sometimes residents of one can shake the hands of those next to it.

This has created a series of health problems. Dense urbanization, notes a recent Chinese study, has led to more obesity, particularly among the young, who get less exercise, and spend more time desk-bound. Stroke and heart disease have become leading causes of death.

Perhaps the best known result from intensified urbanization can be seen outside any window: pervasive air pollution. Beijing and Shanghai rank among the most polluted major cities in the world, just behind Delhi. This problem has become so severe that it has led, even in authoritarian China, to grass-roots protests, many of them targeted at new industrial plants and other facilities near cities such as Shanghai, Dalian, and Hangzhou.

More serious still has been the impact on birth rates. Even though the government has been relaxing its long-held “one child” policy, the density of Chinese cities continues to help suppress birthrates. This relationship between density and low fertility can also be seen in similarly crowded Singapore, Taiwan and Hong Kong, where there is no official limit on having more than one child. In Hong Kong some 45% of middle-class couples have abandoned the idea of having children, not surprising since the cost of raising a child is now estimated at over $700,000, more than twice than in the United States.

Given high prices relative to incomes, and dense conditions, Chinese cities appear to follow the same pattern, which over time is almost certain to slow economic growth as the population of elderly grows and the workforce shrinks. Already, notes National University of Singapore demographer Gavin Jones, the fertility rate of women in Shanghai has fallen to 0.7, among the lowest ever reported, well below the “one child” mandate and barely one-third the number required simply to replace the current population. Overall, the Chinese urban fertility rate is a weak 1.08.

The Future

Rather than look at the current unrest in Hong Kong as a singular example, we should understand that many problems faced in the former British colony are increasingly felt as well in mainland China. As cities reach middle class status and land prices soar, they need to move up the value scale, but this is very difficult to do under a fundamentally authoritarian system.

While authoritarian structures can work in an industrial city, they may be less effective in a more information-based economy, in which companies need to adjust to rapidly changing attitudes and trends. The problem here is that, in an authoritarian state, controls over information are often deemed mandatory; in a sense, in an information-dependent economy, this is like trying to run a car with watered down gasoline. At the same time, the health effects of dense urbanism, and the massive pollution of the surrounding countryside, augur poorly for many of the largest Chinese cities, which will be forced to compete not only with more open economies, but with lower-cost cities across the developing world.

Ultimately, China, whose urban growth has been a great success story, now must consider changing development patterns, perhaps looking at lower density and more dispersed development. One promising sign is that China’s smaller cities, particularly in the West, are now growing faster — with encouragement from Beijing authorities — than megacities. Recently released 2014 population estimates indicate reductions in the annual growth rates of both Shanghai and Beijing.

Ultimately, a shift towards dispersion — both within regions and between them — could have a many positive effects. It would allow people more living space, and if employment also was also spread out, a quicker and less rigorous commute, with related benefits gained in time and energy conservation. It would greatly help families and children by reducing the need for parents to migrate for work, separating as many as one in five Chinese families.

Clearly, new models are clearly called for, ones that look not only at bulking up cities, but humanizing them. This may be imperative if Beijing would like to avoid the prospect of a future characterized by an aging, alienated and increasingly unhealthy population.

This piece first appeared at Forbes.

Joel Kotkin is executive editor of and Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

Photo by Pasu Au Yeung.

California Bad to its Bones

Sun, 10/12/2014 - 22:38

Any serious student of California knows that the state’s emergence in the past century reflected a triumph of engineering. From the water systems, the dredged harbors, the power stations and the freeway system, California overcame geographical limits of water, power and its often-unmanageable coastline to create a beacon of growth and opportunity.

That was then, but certainly not the case today. Indeed, since the halcyon postwar days of infrastructure-building under Gov. Pat Brown, roughly one-in-five dollars of state spending went to building roads, bridges, water systems and the like. Today, this investment amounts to less than 5 percent.

As a result, California, once the exemplar of modernity, has among the worst road conditions in the nation, a tenuous, but still extraordinarily expensive, energy grid, as well as an increasingly uncompetitive port structure. Thinking itself a youthful magnet for building entrepreneurs of all kinds – creators of new communities, manufacturing and logistics industries – California is increasingly viewed by other places, both in the country and abroad, as an ideal place to hunt for skilled people, expanding industries and investment capital.

Why has this happened? To some extent, the shift away from infrastructure has a generational twist, reflected, for example, in the differences between Pat Brown and his son, Jerry, who, upon first taking office, in 1975, as recalled by a longtime adviser, Tom Quinn, expressed distaste for his father’s “build, build, build” thing.

This reaction was not totally illogical. Anyone who has lived here for decades naturally recoils from some of the consequences wrought by large-scale construction upon formerly bucolic areas, turning some of them into unsightly, often dysfunctional, messes.

Under any circumstances, Pat Brown-level infrastructure building is probably beyond the financial means of the state. At the same time, California’s modest population growth – in contrast with the huge increases of the Pat Brown era – means arguably less demand for new building projects.

Right now, the only dynamic growth sector of the state economy – social media and software – relies far less on traditional infrastructure than do older industries. Unwilling to pay California’s high costs for energy, water and other things, these tech firms tend to place their industrial projects, as well as their computer servers, in lower-cost regions, often states that tend to be more pro-active in their infrastructure investments.

Yet just because California can’t finance a second huge building program, there’s little question that new and effective investment in roads, pipelines, bridges and ports is desperately needed. Much of this work may be in retrofitting older infrastructure. The recent flooding on and around the UCLA campus from a broken Los Angeles city water main and frequent smaller water main breaks in Southern California are just one indicator that we no longer keep up even with very basic public needs. As the California League of Cities recently observed, the state’s “infrastructure is rapidly deteriorating. Quite simply, California is crumbling.”

The League of Cities suggested the state needs to spend some $500 billion over 20 years to maintain its economic competitiveness. But right now there’s little reason to think the current administration and bureaucracy is capable of spending money wisely. The recently completed $6.5 billion eastern span of the San Francisco Bay Bridge, built largely of steel imported from China, is widely suspected of being poorly constructed, and, according to one engineering expert, may need repairs well before its time. There appears to have been systematic “disregard for welding procedure,” with cracks already appearing on the bridge.

The fact that the state allowed such shoddy work, at taxpayer expense, should be a warning that other state projects might be facing similar issues. Indeed, one can already see, as professor and author Walter Russell Mead has suggested, a similar pattern of disappointment even in the initial phases of Gov. Jerry Brown’s high-speed rail project, with rising cost estimates as well as diminished projections of the train’s speed.

Ultimately, this boils down to a question of priorities. A state that can’t correctly maintain its existing pipelines and bridges is probably not a good candidate for bold new infrastructure adventures. This is not merely a conservative view, but one held by many liberals. Lt. Gov. Gavin Newsom has suggested that the money poured into high-speed rail may be better spent on “other, more-pressing infrastructure needs.”

Similar criticism has come from progressive journalist Kevin Drum of Mother Jones magazine,who called projections for the bullet train’s ridership and cost – now pegged at close to $100 billion, almost twice the original projection – “jaw-droppingly shameless,” an appropriate characterization based upon the method and documentation. He suggests that a “high school sophomore who turned in work like this would get an F.” Spending for Gov. Brown’s signature project grows exponentially, even as basic needs are ignored.

This spending on the nice, as opposed to the necessary, extends down to the local level, where infrastructure already often comes in second to ever-expanding public worker pensions. Los Angeles Mayor Garcetti is totally committed to spending more on expensive mass transit and housing densification, which itself strains infrastructure built for much lower density.

And, this priority persists even though we have particularly tepid population growth in Los Angeles and have seen very little increase the past 30 years in the percentage of people taking public transit to work. The insistence on building expensive light rail, instead of far-less-expensive bus-based systems, effectively chokes off funds for improving the day-to-day lives of most Angelenos.

Although there’s little hope we can go back to the era of massive building during the Pat Brown years, we could certainly get a lot smarter about how we can rebuild the state and return to sustained, widespread growth. The water crisis, which has plagued the state repeatedly over generations, would have been less severe had we built more storage facilities during the wet years, notes economist Bill Watkins, and improved our ability to move water across the state. Yet, as Sacramento Bee columnist Dan Waltershas pointed out, the environmentalists who suggest California may experience long-term drought conditions due to climate change have also opposed such practical steps to cope with the problem.

Much of this reflects the economic unreality of California politics. We neglect roads, bridges, ports and economic energy projects because, in many ways, these are not a priority of the green lobby, which prefers less growth, more density and a shift from cars to transit. So, instead, we get money spent on high-speed rail and ultracostly, environmentally damaging solar panel farms or inefficient wind turbines erected in the middle of the desert.

These energy costs hit hardest the state’s interior and heavily Hispanic working class but this doesn’t seem to much bother the state political leaders, who come overwhelmingly from the affluent parts of the Bay Area and coastal Southern California.

So in the name of trying to appear “visionary,” as Brown, Garcetti and their minions portray themselves, in the real world, our state falls ever further behind competitors, many of whom are rapidly improving their infrastructure – everything from roads and ports to parks.

We collectively may no longer be the vibrant young adult of the Pat Brown years a half-century ago, but there’s no reason for us to enter advancing middle age with politically induced decrepitude. It’s a disservice to the people who endure high taxes and relentless regulation with little benefit to their day-to-day lives.

This piece first appeared at the Orange County Register.

Joel Kotkin is executive editor of and Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

Photo by Thomas Pintaric (Own work) [GFDL or CC-BY-SA-3.0], via Wikimedia Commons

Opportunity Urbanism: Creating Cities for Upward Mobility

Fri, 10/10/2014 - 22:38

This is the introduction to a new report commissioned by the Greater Houston Parnership and HRG and authored by Joel Kotkin with help from Tory Gattis, Wendell Cox, and Mark Schill. Download the full report (pdf) here.

Over the past decade, we have witnessed the emergence of a new urban paradigm that both maximizes growth and provides greater upward mobility. We call this opportunity urbanism, an approach that focuses largely on providing the best policy environment for both businesses and individuals to pursue their aspirations.

Although contrary to much of the conventional wisdom about cities and regions, this is not a break with traditional urbanism, but instead a reinforcement of old traditions. Long ago, Aristotle reminded us that the city was a place where people came to live, and they remained there in order to live better. “A city comes into being for the sake of life, but exists for the sake of living well.”  In the end, opportunity urbanism rests on the notion that cities serve, first and foremost, as engines to create better lives for its residents.

The Houston and Luxury Models

We have focused on the Houston metropolitan area because in many ways it reflects the idea of opportunity urbanism more closely than any major metropolitan area. Across a broad spectrum—income growth, new jobs, housing starts, population growth and migration—no other major metropolitan region in the country has performed as well over the past decade. This was among the first major metropolitan regions to replace the jobs lost in the recession, and has experienced by far the largest percentage job growth since, with Dallas-Ft. Worth second.

In many ways, opportunity urbanism contrasts with the prevailing urban planning paradigm—variously called new urbanism or smart growth—which seeks to replicate the dense, highly concentrated mono-centric city of the past. At the core of this approach is the notion that policies of forced density, through regulatory mandates and often subsidies, are critical to attracting both young, educated people and the global business elite.4 This approach describes the successful city, in the words of former New York Mayor Michael Bloomberg, as “a luxury product.”

This notion of the “luxury city” can be seen to have worked, at least for some, in well-appointed older cities such as New York, San Francisco and Boston. Unlike most American cities, these boast long-established dense cores and transit-oriented commuter sheds. They possess great amenities tied to their past, from world class art museums and universities, to charming historic districts, parks and public structures.

But this model of urbanism does not fit the profile of most American metropolitan regions, which tend to be far more recent in their development, more dispersed and overwhelmingly auto-dominated in terms of commuting. Indeed, most of the fastest growing regions in this country—Houston, Dallas-Ft. Worth, Oklahoma City or Atlanta—function in a highly multi-polar model, that contrasts sharply with that of cities like New York, Boston or Chicago.

Prospects for Upward Mobility

The luxury paradigm has worked for some in some cities, but has failed, to a large extent, in providing ample opportunities for the middle and working classes, much less the poor. Indeed, many of the cities most closely identified with luxury urbanism tend to suffer the most extreme disparities of both class and race.

If Manhattan were a country, it would rank sixth highest in income inequality in the world out of more than 130 countries for which the World Bank reports data. New York’s wealthiest one percent earn a third of the entire municipality’s personal income-almost twice the proportion for the rest of the country.

Indeed, increasingly, New York, as well as San Francisco, London, Paris and other cities where cost of living has skyrocketed—are no longer places of opportunity for those who lack financial resources. Instead they thrive largely by attracting people who are already successful or living on inherited largesse.

They are becoming, as journalist Simon Kuper puts it, “the vast gated communities where the one percent reproduces itself.”  

Not surprisingly, the middle class is shrinking rapidly in most luxury cities. A recent analysis of 2010 Census data by the Brookings Institution found that the percentage of middle incomes in metropolitan regions such as New York, Los Angeles and Chicago has been in a precipitous decline for the last thirty years, due in part to high housing and business costs. A more recent 2014 Brookings study found that these generally high-cost luxury cities—with the exception of Atlanta—tend to suffer the most pronounced inequality: San Francisco, Miami, Boston, Washington DC, New York, Chicago and Los Angeles. Income inequality has risen most rapidly in the very mecca of luxury progressivism, San Francisco, where the wages of the poorest 20 percent of all households have actually declined amid the dot com billions.

Like other large cities, Houston also suffers a high level of inequality, but its lower costs have helped its middle and working class populations to enjoy a higher standard of living than their luxury city counterparts. The promise of the opportunity urbanism model also can be demonstrated by lower income disparities between racial groups, higher GDP growth, less expansion of poverty and the greater production of high-paying mid-skilled jobs. In these aspects, opportunity cities like Houston greatly out-performed their often more celebrated rivals.

How to Measure “Living Well”

We leave this introduction with one statistic that most encompasses the success of the Houston opportunity model and exposes the weakness of smart growth: the cost-of-living adjusted average paycheck.

Despite the assertions of Paul Krugman, among others, that the Texas urban economy is based on low wages, the fact is Harris County’s average household income is above the national average; close to that of Boston. But once the cost of living is factored in, Houston does far better for its citizens compared to any of the legacy cities. Houston, with Dallas-Ft. Worth a strong second, is able to provide its citizens the highest standard of living, as measured by average annual adjusted wages, of any major metro in America. This is different than subjective “quality of life,” but includes such basics as jobs, housing and overall cost of living.

Download the full report (pdf) here.

Joel Kotkin is executive editor of and Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

Metropolitan Housing: More Space, Large Lots

Thu, 10/09/2014 - 22:38

Americans continue to favor large houses on large lots. The vast majority of new occupied housing in the major metropolitan areas of the United States was detached between 2000 and 2010 and was located in geographical sectors associated with larger lot sizes. Moreover, houses became bigger, as the median number of rooms increased (both detached and multi-family), and the median new detached house size increased.

These conclusions are based on an analysis of small area data for major metropolitan areas using the City Sector Model. City Sector Model analysis avoids the exaggeration of urban core data that necessarily occurs from reliance on the municipal boundaries of core cities (which are themselves nearly 60 percent suburban or exurban, ranging from as little as three percent to virtually 100 percent). It also avoids the use of the newer "principal cities" designation of larger employment centers within metropolitan areas, nearly all of which are suburbs, but are inappropriately joined with core municipalities in some analyses. The City Sector Model" small area analysis method is described in greater detail in the Note below.

Increase in Detached Housing

America's preference for detached housing was evident across the spectrum of functional city sectors between 2000 and 2010. Overall, there was a 14% increase in detached housing in the major metropolitan areas. Among the major metropolitan areas (over 1 million population), the number of occupied detached houses rose the most (35%) in the later or generally outer suburbs and exurban areas (24%). Detached houses increased 2.8 million in the later suburbs and 2.5 million in the exurban areas. A smaller 50,000 increase was registered in the earlier or generally inner suburban areas. Most surprisingly, there was also a small increase (20,000) in the number of detached houses in the functional urban cores (Figure 1).

Smaller Increase in Multi-Family Housing

The increase in detached housing dwarfed that of new multi-family housing (owned and rented apartments). The increase in detached housing in the major metropolitan areas was six times that of multi-family housing. Overall, there was a four percent increase in multi-family housing in the major metropolitan areas, less than one-third the increase in detached housing.  There were slight decreases in the number of multi-family houses in both the urban cores and the earlier (generally inner) suburbs. At the same time, there has been a healthy increases in the number of multi-family houses in the later suburbs and exurbs, where the growth rates exceeded the increase in major metropolitan population (11%). In the later suburbs, multi-family housing increased 29% and in the exurbs the increase was 14% (Figure 2).

Larger Houses, Larger Lots

Yet overall, houses were getting bigger. The median number of rooms per house rose from 5.3 in 2000 to 5.6 in 2010. Increases in median rooms were registered in each of the city sectors (Figure 3). Nationally, the median size of new detached housing edged up five percent between 2000 and 2010. (By 2013, median new house size had increased another 17 percent to a record 2,384 square feet).

Lots also were getting bigger. Nearly all of the population growth (99 %) was in the later suburbs and exurbs between 2000 and 2010, where population densities are much lower and lots are larger than in the earlier suburbs and the urban core (Figure 4).

The preponderance of  urban planning theory over the past decade has been based on the notion that people would increasingly seek houses on smaller lots. For example, Arthur C. Nelson of the University of Utah predicted that the demand for housing on conventional-sized lots (which Professor Nelson defines as more than 1/8 acre, which is smaller than the smallest lot size reported by the Census Bureau) would be only 16% in the major metropolitan areas of California by 2010, relying in part on stated preference survey data. In fact the revealed preferences --- in other words what people actually did --- was four times the predicted demand (64%) in the conventional-lot-dominated later suburbs and exurbs of California's largest metropolitan areas between 2000 and 2010. This is despite California's regulatory and legal bias against detached housing on conventional lots (See: California's War Against the Suburbs). Outside California, later suburban and exurban detached housing represented 77% of new housing demand over the period.

Planning and Preferences

Urban cores and multi-family housing are favored by urban planning policy. Yet, large functional urban cores (high density and high transit market share, as defined in the City Sector Model, Note below) are few and far between, with only seven exceeding 500,000 population, a modest number equaled or exceeded by approximately 100 metropolitan areas. Overall, the functional urban cores of major metropolitan areas lost more than 100,000 residents between 2000 and 2010, while suburban and exurban areas gained more than 16.5 million. Predictably, the housing forms typical of the later suburbs and exurbs made strong gains. The preferences of planning are not those of people and households.


Note: The City Sector Model allows a more representative functional analysis of urban core, suburban and exurban areas, by the use of smaller areas, rather than municipal boundaries. The more than 30,000 zip code tabulation areas (ZCTA) of major metropolitan areas and the rest of the nation are categorized by functional characteristics, including urban form, density and travel behavior. There are four functional classifications, the urban core, earlier suburban areas, later suburban areas and exurban areas. The urban cores have higher densities, older housing and substantially greater reliance on transit, similar to the urban cores that preceded the great automobile oriented suburbanization that followed World War II. Exurban areas are beyond the built up urban areas. The suburban areas constitute the balance of the major metropolitan areas. Earlier suburbs include areas with a median house construction date before 1980. Later suburban areas have later median house construction dates.

Urban cores are defined as areas (ZCTAs) that have high population densities (7,500 or more per square mile or 2,900 per square kilometer or more) and high transit, walking and cycling work trip market shares (20 percent or more). Urban cores also include non-exurban sectors with median house construction dates of 1945 or before.


Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He was appointed to the Amtrak Reform Council to fill the unexpired term of Governor Christine Todd Whitman and has served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

Photo: Northern Suburbs of Minneapolis-St. Paul (by author)

America’s Newest Hipster Hot Spot: the Suburbs?

Wed, 10/08/2014 - 22:38

It’s an idea echoed everywhere from “Friends” to “Girls”Young people want to live in cities. And, we’re told, a lot of them (at least the cool ones) do.

It’s a common assumption. But it’s also wrong.

Between 2010 and 2013, the number of 20- to 29-year-olds in America grew by 4 percent. But the number living in the nation’s core cities grew 3.2 percent. In other words, the share of 20-somethings living in urban areas actually declined slightly.

This trend has occurred in supposedly hot cities like San Fransisco, Boston, New York and D.C., notes demographer Wendell Cox. Chicago and Portland, Ore., both widely hailed as youth boom-towns, saw their numbers of 20-somethings decline, too.

To some extent, this is an economic problem. Millennials can’t always afford the most popular cities, which have gotten increasingly expensive and unequal.  It doesn’t help that most young people, even with college degrees, are experiencing steadily dropping annual earnings. And their careers are progressing more slowly too.

But it’s not just that. According to the most recent generational survey research done by Magid and Associates, 43 percent of millennials describe the suburbs as their “ideal place to live,” compared to 31 percent of older generations.

Only 17 percent of Millennials identify the urban core as where they want to settle permanently. Another survey, by the Demand Institute (funded by the Conference Board and Neilsen), found that 48 percent of 20-somethings hoped to move to the suburbs one day. And contrary to popular myth, they hoped to own a single-family home. Sixty-one percent seek more space.

These findings may actually understate the suburban preference. As people age, particularly entering the child-bearing period between 30 and 50, they long have displayed a distinct tendency to move to suburban areas.

And why not?

A lot of the amenities that once drew people to gritty cities are popping up in the suburbs instead.

The New York Times documents a trend of people moving from Manhattan and Brooklyn to the verdant suburbs of the Hudson Valley. Increasingly, those towns boast art house films, vegan restaurants and other hip accoutrements.

Incipient hipster suburbs can also be found in places like Montclair, N.J., Claremont, Calif., and even Irvine, whose Millennial population last decade grew more than four times as much as that of downtown Los Angeles. Once a foodie desert, Irvine and its surrounds now boast dim-sum houses, Vietnamese, Korean, sushi and California cuisine restaurants.

That’s thanks to another trend: Immigrants are bypassing cities and moving to the suburbs in drovesaccording to Brookings. And they’re bringing good, cheap ethnic food along with them.

Nowhere are these changes more marked than among Asians, now the nation’s largest source of new immigrants. For example, in the New York metropolitan area, the Asian population grew both in numbers and in percentage far more rapidly in the suburbs than in the core city in the past decade. Nationwide, the Asian population in suburbs jumped by almost 2.8 million, or 53 percent, while that in core cities grew 28 percent.

great American ethnic culinary tour today would take you not to Manhattan, San Francisco, Hollywood or Chicago, but to places like the San Gabriel Valley, roughly 10 miles east of downtown Los Angeles. This highly suburban region of strip malls and giant food palaces arguably boasts the largest, and most diverse, collection of Asian restaurants in the nation.

A CNN survey of America’s top 50 Asian restaurants located seven in the area, the most of any region. That includes foodie havens like New York City. Three others were  in the heavily Asian suburbs of Silicon Valley.

As Tyler Cowen noted, the best places to find distinctive ethnic cuisine in Greater Washington is not in the urban core but in far-flung suburban strip malls, where rents are cheap, parking is adequate and there’s a built-in community of eaters craving home.

Much the same can be said for Asian markets, temples or schools. Sugarland, some 22 miles further west of downtown Houston, is home to one of the nation’s largest Hindu temples. The largest Hindu temple in the world is now under construction in Robbinsville, N.J. — an exurb of New York some 60 miles south of Manhattan.

Indeed, in large parts of America, many successful malls are those that are getting “ethnicized.” A prime example is La Gran Plaza on the outskirts of Fort Worth, Tex., where a once-failing mall is now booming, converted to look like an old village in Northern Mexico, with loads of restaurants, markets, wedding and quincenara shops and a huge swap-meet.

This is in addition to live music and, on some Sundays, Catholic Mass.

As their demographics change, so too do the functions of suburbs. No longer mere bedroom communities, they are becoming economic centers of their own. Despite the constant hype about the new appeal of downtown locations, jobs continue to follow the migration of middle-class families. Having been widely written off for dead, suburban office space also  began to recover last year at a much quicker rate than in  city centers, according to the office consultancy Costar. Overall, suburbs already account for close to three quarters of the nation’s office inventory.

Suburbia is not the city’s antithesis, but its natural extension, particularly as young people morph towards adulthood.  Rather than vilify suburbs as fundamentally inefficient, deadening and wasteful, its time to focus on how to improve the preferred environment for work, interaction and raising the next generation for most Americans. Cities have changed too, of course, in many cases for the better. But the suburbs are evolving as well. And all indications suggest that they are likely to retain their preeminence as Americans’ preferred places to settle down.

This piece first appeared at The Washington Post.

Joel Kotkin is executive editor of and Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

The New Donut

Tue, 10/07/2014 - 22:38

Former Indianapolis Mayor Bill Hudnut used to like to say that “you can’t be a suburb of nowhere.” This is the oft-repeated notion has been a rallying cry for investments to revitalize downtowns in America for three decades or so now. The idea being that you can’t have a smoking hole in your region where your downtown is supposed to be. This created a mental based on a donut. You can’t let downtown become an empty hole. For reason that will become apparent soon, I call this model “the old donut”.

Filling in the hole became every city’s mission. Pretty much any city or metro region of any size has pumped literally billions of dollars into its downtown in an attempt to revitalize them. This took many forms ranging from stadiums to convention centers to hotels to parking garages to streetcars to museums and more. It’s popular today to subsidize mixed use development with a heavy residential component.

These efforts have paid off to a certain degree. Most big city downtowns have done very well as entertainment and visitor districts, eds and meds centers, etc. More recently we’ve seen an influx of residents, even in places where the overall city or even region has struggled or declined. Cleveland added about 4,000 net new downtown residents in the 2000s. St. Louis added 3,000. With most cities in some stage of an apartment building spree consisting of a few thousand units, these numbers should only improve.

Key weaknesses remain in private sector employment (declining in most places) and retail (not enough high income residents yet). And other than the tier one types of cities like Chicago, few places seem to have reached a sustainable market rate development level yet – pretty much everything is getting public assistance. Yet its pretty evident that most larger downtowns have made huge strides and are experiencing overall reasonable health.

In short, the donut hole has been filled in. Where does that leave us? I’d argue with a paradigm I call “the new donut”:

In this model, the old donut is inverted. What used to be the ring of health – the outer areas of the city and the inner suburban regions – are now struggling. Whereas the downtown is in pretty good shape, and the newer suburban areas are booming. (You might add in a fourth outer ring with troubles – these were the exurbs where very low-end housing proliferated because development standards were very low).

You see this in the population figures. Wendell Cox cranked the numbers and found that major metro areas gained 206,000 residents in the two mile radius from the center, but lost 272,000 residents from the 2-5 mile ring. Growth picked up strongly beyond that arc. This is the new donut area, though the start and end of it vary by metro and some have thicker rings of challenge than others.

We’ve got three decades of experience in downtown revitalization, but much less in dealing with this newer challenge zone. I’ve said that suburban revitalization may prove to be the big 21st century “urban” challenge. This is where it is happening in many cases. These areas have an inferior housing stock (often small post-war worker cottages or ranches), sometimes poor basic infrastructure, and are sometimes independent municipalities that, like Ferguson, MO, are often overlooked unless something really bad happens. Unlike the major downtown, they are often “out of sight, out of mind” for most regional movers and shakers.

What’s more, while downtown provides a concentrated location for massive public investment, this more spread out area is too big to fix by throwing money at it. And how many stadiums and convention centers does a region need in any event?

This is where we need to be doing a lot of thinking about how to bring these places back, look at what’s being done, etc. And also, given the inequality in the country, to try to think about ideas that don’t involve gentrification. One project that appears to be in this kind of zone, for example, is Atlanta’s Beltline project, though there’s a gentrifying aspect to this one. Regions that figure this one out will be at a big advantage going forward.

Aaron M. Renn is an independent writer on urban affairs and the founder of Telestrian, a data analysis and mapping tool. He writes at The Urbanophile, where this piece originally appeared.

The Cities That Are Benefiting The Most From The Economic Recovery

Mon, 10/06/2014 - 22:38

It is painfully clear that the current U.S. economic recovery has been a meager one, with the benefits highly concentrated among the wealthiest. The notion that “a rising tide” lifts all boats has been sunk, along with the good ship middle class.

Geographically as well, the recovery has been concentrated in a relative handful of regions. Nationwide, real per capita GDP rose a meager 3.8% from 2010 through 2013, according to new Bureau of Economic Analysis numbers. An analysis of the data by urban expert Aaron Renn shows that a handful of metropolitan areas have enjoyed much faster growth. For the most part, these are areas that have cashed in on the current technology or energy booms, and in some cases, both. Also, surprisingly, there have been some very good gains in some of the nation’s long-distressed industrial heartland metro areas, as the combination of energy development and a resurgent automobile industry have boosted regional GDP.

Tech Capitals

Of the nation’s 52 largest metropolitan statistical areas, many of the top performers have strong tech economies, led by the No. 2 metro area on our list, San Jose-Sunnyvale-Santa Clara, aka Silicon Valley, where real per capita GDP expanded 11.5% from 2010-13. Perhaps more surprising is the strong, tech-fuelled performance of No. 3 Portland-Vancouver-Hillsboro, Ore., where real per capita GDP grew 9.2%. The prime contributor has been the robust performance of late of Intel, the state’s largest private employer, which employs about 17,000 in Portland’s western suburbs around the town of Hillsboro, the company’s largest concentration of workers anywhere.

Other less heralded tech centers have also performed well, including No. 4 Columbus, Ohio (8.2% growth), and No. 8 Salt Lake City (7.3%), both of which are also benefiting from the surge in oil and gas production. Among smaller cities with strong tech communities, Fargo, N.D., and Provo-Orem, Utah, have enjoyed better than 10% real per capita GDP growth since 2010.

Energy Regions

Per capita growth in the energy states has been even more impressive. Placing first on our big cities list is Houston-the Woodlands-Sugarland, Texas, where per capita GDP rose 13.2% from 2010-13, a major achievement in a region whose population continues to grow rapidly. Zooming out to all 381 U.S. MSAs, no places come close to the two Texas oil towns that rank first and second overall, Midland (sizzling 38.8% growth since 2010) and Odessa (34.1%). Both lie in the Permian basin, an oil-rich geological formation that was first tapped in the 1920s and has seen a marked revival in production recently due to advances in extraction techniques like horizontal drilling and fracking. Also notable, the southern Texas town of Victoria clocked over 21% growth.

Among the largest metro areas, energy hubs also did well, including Oklahoma City (7th, 7.5%) and Dallas-Ft. Worth-Arlington (13th,  6.5%) and the San Antonio area (16th), which is benefiting from a gusher in the Eagle Ford Shale play. Economist estimate its development has pumped $87 billion into the south Texas economy.

Rust Belt Revives

The booms in tech and energy are well-known. But the most surprising wrinkle in our survey of per capita GDP growth is the revival of auto manufacturing, which benefits both from technological improvements and lower energy costs. Among the larger metro areas, the key winners have been Grand Rapids-Wyoming (fifth, 7.8%) and Detroit (tied for ninth, 7.2%), as well as the surprising 15th place ranking for Cleveland-Elyria.

These gains are heartening, but the real question may be how long this will continue. In part, the strong 2010-13 numbers reflect a recovery from very poor economic performance that has stretched on for decades, and population losses, which tend to skew per capita GDP numbers upwards. But signs of health in the nation’s long disdained midsection deserve applause.

Surprising Laggards

The recovery has not lifted most regions, just as it has not helped most Americans. Per capita income growth has been slow in most of the nation’s largest cities outside Texas. Given the enormous financial bailout from the federal government, as well as the massive spike in stock and real estate prices, one would have expected far better performance from New York, which ranks a middling 33rd out of the 52 largest MSAs, with below average 2.3% growth since 2010.

Chicago-Naperville-Elgin ranked 26th; Los Angeles-Long Beach-Anaheim, 38th, and  Philadelphia, 40th. Perhaps the biggest disappointment is 51st place Washington D.C.-Arlington-Alexandria, which had been a high-flier through the Recession amid strong federal spending. Per capita GDP since 2010 has fallen 3.4%. This disturbs some pundits, such as Richard Florida, but no doubt Washington’s fall from grace would be widely welcomed by most Americans.

And What About Poverty

Increasingly, many question not only the relative lack of growth, but that the growth we are experiencing is doing very little for the vast majority of Americans. Former Clinton adviser Bill Galston has noted that this recovery has “left almost everybody” out.

No group has been harder hit than the poor. The nation’s population below the poverty line has expanded a full percent since 2010. An analysis by demographer Wendell Cox shows that poverty declined in just seven of the nation’s 52 largest metropolitan areas from 2010-13: Louisville, Ky.; Oklahoma City; Nashville, Tenn.; Columbus Ohio; Grand Rapids; and Texas’ Austin and San Antonio.

Most of the areas with the strongest growth in per capita GDP posted smaller than average increases in poverty. In Houston the share of the population living in poverty rose 0.6% from 2010-13 to 16.4%, 11th highest among the nation’s biggest metro areas.

The results in California suggest strongly that the tech boom has not done much to relieve poverty in the Golden State, despite the much ballyhooed “California comeback” trumpeted by the likes of Paul Krugman. In reality it’s poverty, not prosperity, that’s on the march in most California cities outside the Bay Area. Since 2010, the percentage of the population of San Diego living in poverty has grown 1.3% to 15.2%, while that of Riverside-San Bernardino rose 1.7% to 18.2%, the third highest rate among the 52 largest metro areas in the country. Meanwhile the poverty rate in Los Angeles, the state’s dominant urban region, has risen 1.8% to 17.6% (fifth worst), and Sacramento, the state capital, has seen a 2.0% increase in poverty to 16.6% (10th).

This suggests that, for the most part, what has passed for growth has been too meager to reduce poverty. In many places, even ones growing rapidly, such as the Silicon Valley hub of San Jose, the number of poor continue to increase. Since 1999, poverty in the valley has jumped  from 7.6% to 10.5%. This also likely is a low figure, given the extraordinarily high cost of living in the Bay Area, as well as the rest of coastal California. According to the Census Bureau, California’s poverty rate is the highest in the nation when adjusted for the state’s exorbitant cost of housing.

For the most part, poverty has been reduced, or at least has grown less, in lower-cost regions that have ties to the energy and manufacturing revival, which tend to create opportunities for middle- and working-class residents. Until we figure out how to get growth whose benefits are widely shared, and reduce poverty, the one measurement likely to go up is cynicism about the efficacy of our current economic policies.

Real Metropolitan Area GDP Per Capita (2010-2013) Rank Metropolitan Area 2010 2013 2010-2013 Change 1 Houston-The Woodlands-Sugar Land, TX  $  63,816  $    72,258 13.2% 2 San Jose-Sunnyvale-Santa Clara, CA  $  89,806  $  100,115 11.5% 3 Portland-Vancouver-Hillsboro, OR-WA  $  63,025  $    68,810 9.2% 4 Columbus, OH  $  50,370  $    54,493 8.2% 5 Grand Rapids-Wyoming, MI  $  41,248  $    44,482 7.8% 6 Charlotte-Concord-Gastonia, NC-SC  $  51,819  $    55,802 7.7% 7 Oklahoma City, OK  $  45,993  $    49,441 7.5% 8 Salt Lake City, UT  $  57,790  $    62,008 7.3% 9 Nashville-Davidson--Murfreesboro--Franklin, TN  $  50,464  $    54,112 7.2% 10 Detroit-Warren-Dearborn, MI  $  46,314  $    49,653 7.2% 11 Pittsburgh, PA  $  48,710  $    52,053 6.9% 12 Cincinnati, OH-KY-IN  $  48,841  $    52,063 6.6% 13 Dallas-Fort Worth-Arlington, TX  $  57,032  $    60,730 6.5% 14 Birmingham-Hoover, AL  $  46,108  $    49,034 6.3% 15 Cleveland-Elyria, OH  $  52,169  $    55,430 6.3% 16 San Antonio-New Braunfels, TX  $  37,202  $    39,280 5.6% 17 San Francisco-Oakland-Hayward, CA  $  75,103  $    78,844 5.0% 18 Seattle-Tacoma-Bellevue, WA  $  71,404  $    74,701 4.6% 19 Minneapolis-St. Paul-Bloomington, MN-WI  $  59,168  $    61,711 4.3% 20 Sacramento--Roseville--Arden-Arcade, CA  $  43,905  $    45,764 4.2% 21 Austin-Round Rock, TX  $  50,094  $    52,110 4.0% 22 Denver-Aurora-Lakewood, CO  $  59,284  $    61,595 3.9% 23 Phoenix-Mesa-Scottsdale, AZ  $  43,156  $    44,803 3.8% 24 Boston-Cambridge-Newton, MA-NH  $  71,936  $    74,643 3.8% 25 San Diego-Carlsbad, CA  $  55,921  $    57,955 3.6% 26 Chicago-Naperville-Elgin, IL-IN-WI  $  55,727  $    57,752 3.6% 27 Providence-Warwick, RI-MA  $  41,698  $    42,994 3.1% 28 Louisville/Jefferson County, KY-IN  $  46,710  $    48,048 2.9% 29 Tampa-St. Petersburg-Clearwater, FL  $  39,066  $    40,153 2.8% 30 Buffalo-Cheektowaga-Niagara Falls, NY  $  41,497  $    42,550 2.5% 31 Baltimore-Columbia-Towson, MD  $  55,907  $    57,294 2.5% 32 Indianapolis-Carmel-Anderson, IN  $  58,590  $    60,038 2.5% 33 New York-Newark-Jersey City, NY-NJ-PA  $  67,499  $    69,074 2.3% 34 Riverside-San Bernardino-Ontario, CA  $  26,509  $    27,094 2.2% 35 St. Louis, MO-IL  $  47,876  $    48,738 1.8% 36 Milwaukee-Waukesha-West Allis, WI  $  55,767  $    56,734 1.7% 37 Miami-Fort Lauderdale-West Palm Beach, FL  $  44,386  $    45,145 1.7% 38 Los Angeles-Long Beach-Anaheim, CA  $  58,211  $    59,092 1.5% 39 Kansas City, MO-KS  $  52,916  $    53,677 1.4% 40 Philadelphia-Camden-Wilmington, PA-NJ-DE-MD  $  58,696  $    59,339 1.1% 41 Memphis, TN-MS-AR  $  46,534  $    47,014 1.0% 42 Richmond, VA  $  50,977  $    51,498 1.0% 43 Rochester, NY  $  44,825  $    45,202 0.8% 44 Atlanta-Sandy Springs-Roswell, GA  $  51,830  $    52,178 0.7% 45 Virginia Beach-Norfolk-Newport News, VA-NC  $  48,395  $    48,708 0.6% 46 Raleigh, NC  $  51,820  $    51,673 -0.3% 47 Las Vegas-Henderson-Paradise, NV  $  43,351  $    43,079 -0.6% 48 Jacksonville, FL  $  42,068  $    41,752 -0.8% 49 Hartford-West Hartford-East Hartford, CT  $  68,005  $    66,870 -1.7% 50 Orlando-Kissimmee-Sanford, FL  $  47,023  $    45,855 -2.5% 51 Washington-Arlington-Alexandria, DC-VA-MD-WV  $  76,035  $    73,461 -3.4% 52 New Orleans-Metairie, LA  $  61,325  $    56,943 -7.1% Analysis by Aaron M. Renn


This piece first appeared at Forbes.

Joel Kotkin is executive editor of and Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

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