The number of U.S. tech opportunities is increasing. But to stop their concentration in a few cities, some policy experts are now calling for government intervention.
In the last decade, the tech industry has boomed, bringing the number of U.S.tech jobs to 3.5 million. But the gaping divide between a few large “superstar” cities — well-connected metropolises with high income — and other smaller urban areas is getting even wider.
This geographic gap remains even when you broaden the definition of what counts as a “tech job,” according to a new Brookings Institution report produced for the American Enterprise Institute.
Recent past research by the Brookings Institution has found that 90% of growth in the U.S. innovation sector occurred in just five cities. In its newest study, researchers at Brookings looked at “digital services” jobs — think software publishers, data processing and hosting firms, computer system design and other information companies. This analysis finds that while there are some smaller cities that are seeing promising growth in these sectors, the jobs are concentrating in a handful of cities, and it’s getting worse. The researchers, Mark Muro and Robert Atkinson, contend that this situation is unlikely to improve on its own, and has consequences that are not just economic, but political and social.
The worrying numbers? Five metro areas — San Francisco, San Jose, Austin, Seattle and Denver — have accumulated 28% of the new tech jobs of the last decade. This percentage climbs to 50% when looking at the top ten.
What’s more, these cities have seen their share of tech jobs increase by several percentage points between 2010 and 2018, even as other cities’ are declining. San Francisco’s share increased by 2.2 percentage points, and San Jose’s by 1.3 percentage points. Out of the 100 urban areas the report looks at, 93 saw their share of digital services positions increase by less than 0.2 percentage points, if not decrease altogether.
This not to say that other cities don’t see any benefits from the digital services industries.
“When we say that most places are not super dynamic and not increasing their share, that doesn’t mean that they’re not gaining jobs,” said Jacob Whiton, a research analyst at the Brookings Institution and author of the previous report this new research expands on. “Many are gaining a few tech jobs, but it’s not enough to offset the strong concentration in five or ten places.”
Overall, 16 cities saw their share of digital services job increase between 2010 and 2018.
That the less-advantaged urban areas seem to not be able to catch up with the few at top of the pack is hardly a new phenomenon. But it’s one that tracks with the expansion of the innovation and tech sectors in the 1980s, a previous Brookings report explains. The tech industry makes it uniquely hard for adjusted wage disparities to naturally even out over time the way they once did. Big tech attracts big tech, the authors argue; a new software company would find it much less attractive to settle down in somewhere like Akron, Ohio, than in a place where the digital economy is already well established, such as the San Francisco Bay Area. As a result, 83 cities had their share of digital services jobs either stagnate or decrease between 2010 and 2018.
“A place that got ahead on PC adoption in the 1980s is likely to be one of the places that is now a dominant platform,” said Muro, the Brookings senior research fellow and policy director who spearheaded the report. “It’s ‘the rich gets richer’ that’s part of the logic here.” Whiton also emphasized the central role research universities played in the emergence of these top five superstar cities as innovation hubs, like Stanford in the Bay Area.
To bridge the gap, the report argues that the federal government needs to take extensive action, — they recommend $700 million a year in federal investment for 10 years in 10 cities that have the potential to become new tech centers, such as St. Louis or Birmingham.
“This is no longer an academic exercise,” said Muro. “The trends may be so entrenched and so self-replicating that you may need government action to push back against them.”
Simon Johnson, a professor at the MIT Sloan School of Management and co-author of the book Jumpstarting America, gives similar recommendations, insisting that for innovation to continue taking place — and for the gap between superstar cities and the others to narrow — the federal government has to invest in new potential tech hubs, along with increasing its budget in research and development. Johnson and his co-author Jonathan Gruber identify 102 cities that, according to their calculations, could be the next big American “technology hub.” They suggest federal investments in 20 to 30 of these cities.
“We have a lot of talent dispersed across the country that would like to participate more in what’s next,” Johnson told CityLab. “But I’d be surprised if [the Bay Area] lost that edge.”