Exploring the connection between technology, wages, and poverty.
Many mayors, economic developers, and economists believe that high-tech industry is a key factor in the growth and development of cities. Enrico Moretti of the University of California, Berkeley famously found that five additional jobs are created for every high-tech job. Still, local residents in high-tech hubs have voiced growing concerns about rising housing costs, escalating gentrification, and the widening economic gap between rich techies and just about everybody else. My own work has shown that the nation’s leading tech hubs number among its most unequal places.
A new study from Neil Lee and Andrés Rodríguez-Pose at the London School of Economics, published in the Annals of the American Association of Geographers, takes a closer look at who benefits and who suffers from high-tech development. To get at this, it examines data on the effects of the tech industry (mainly information technology and biotech) on wages and poverty levels for some 300 U.S metros between 2005 and 2011. It measures poverty as the share of families in a metro that are below the federally defined poverty line. While the average poverty rate in these metros rose from 13.7 percent in 2005 to 16.5 percent in 2011, the share of technology employment declined slightly, from 4.5 percent in 2005 compared to just 4.3 percent of total U.S employment in 2011.
The two maps below compare the main centers of high-tech industry with the concentration of poverty across U.S. metros. The first map charts the concentration of high-tech employment across the U.S. in 2011, with dark blue representing higher shares of tech employment (around 10 to 24 percent) and light blue representing lower shares (around 0.5 to 3 percent). Note the dark blue across the Bos-Wash Corridor and along the Pacific Coast, with some additional dark blue spots in Texas (Austin), Colorado (Boulder), New Mexico (Santa Fe), Kansas (Wichita), Indiana (Cedar Rapids), and Alabama (Huntsville).
The second map shows the share of households living in poverty across U.S. metros. Here, yellow represents the least amount of poverty (around 6 to 13 percent), while dark orange represents the most (around 27 to 38 percent). At first glance, there is little overlap between the two maps. Note the concentrations of poverty in metros in the Deep South, Rustbelt, California, and Arizona, while metros in the Northeast had some of the lowest levels of poverty.
For the most part, poverty and high-tech employment appear to be concentrated in different areas of the country. So what exactly is the relationship between the two? Take a look at the graph below. The line slopes downward, indicating a negative relationship between tech employment and poverty. In other words, metros with greater high-tech employment have less poverty, while metros with less high-tech employment have more poverty.
To probe these connections further, the study conducts a statistical analysis of the relationship between poverty and high-tech employment, while controlling for other key factors such as education (the share of adults with a college degree and above), metro size, manufacturing, race, gender, immigrants, and so forth. The bottom line: The study finds no evidence that high-tech industry helps to pull people out of poverty. Their analysis suggests that poverty is much more closely related to low levels of education than to tech employment, which is line with existing research.
The study also looks at the connection between high-tech employment and the wages of less-educated workers (those without a bachelor’s or associate’s degree). Here it finds a positive association, as indicated on the graph below. In metros with a higher share of tech employees, the salaries of less-educated workers tended to be higher. The study’s statistical analysis confirms this finding.
The authors conclude that “although the effects of tech do not seem to reach those in poverty and, particularly, in extreme poverty, they do affect the wages of those with the lowest level of education.” That said, my own research suggests that some of these economic benefits can erode when higher housing costs are taken into account.
Ultimately, the authors’ findings “reveal a more complex and nuanced picture than the black or white images typical in both the optimistic and pessimistic narratives.” Poverty is a result of forces beyond high-tech industry, and it is a mistake to scapegoat the tech industry for every issue related to economic inequality.
Still, cities and metros can clearly not afford to think of tech-based growth as a perfect way to lift all boats and allow wealth to trickle down to lower-income residents. Instead, they must also focus on providing skills training and targeted support for poorer residents. While highly educated and highly skilled workers benefit from a tech economy, and the wages of less-educated residents may improve, the economic situation of the least advantaged remains the same and may even get worse. Concentrated poverty remains the most daunting issue facing todays U.S. cities and metros, in high-tech and low-tech cities alike.