Friday, March 1, 2019

America's Tech Hubs

Nothing like a good reality check to start the day. Today’s reality check comes from Joel Kotkin and Wendell Cox. It was published in the City Journal, the organ of the Manhattan Institute.

The issue is a sidelight on the New York City’s Amazon debacle. Apparently, the radical leftists and media enablers who chased Amazon from the urban jungle of Long Island City take it as an article of faith that New York will become more of a tech hub, because it has a strong talent base. That would include young millennials.

So, Kotkin and Cox ask whether New York is become a tech town. The answer will disappoint New Yorkers:

When Amazon decided to locate its second headquarters in New York, it cited the supposed advantages of the city’s talent base. Now that progressive politicians have chased Amazon out of town, the tech booster chorus has been working overtime to prove that Gotham, and other big, dense, expensive cities, are destined to become “tech towns” anyway, because of their young, motivated labor pools. That argument may sound great to New York Times readers or on local talk shows, but it is increasingly untrue.

The problem is that millennials are fleeing New York City in large numbers. The same is true of other overpriced urban hubs:

According to demographer Bill Frey, the 2013–2017 American Community Survey shows that New York now suffers the largest net annual outmigration of post-college millennials (ages 25–34) of any metro area—some 38,000 annually—followed by Los Angeles, Chicago, and San Diego. New York’s losses are 75 percent higher than during the previous five-year period.  

Where are they going? Kotkin and Cox tell us:

By contrast, the biggest winner is Houston, a metro area that many planners and urban theorists regard with contempt. The Bayou City gained nearly 15,000 millennials net last year, while other big gainers included Dallas–Fort Worth and Austin, which gained 12,700 and 9,000, respectively. Last year, according to a Texas realtors report, a net 22,000 Californians moved to the Lone Star State.

The other top metros for millennials were Charlotte, Phoenix, and Nashville, as well as four relatively expensive areas: Seattle, Denver, Portland, and Riverside–San Bernardino. The top 20 magnets include Midwest locales such as Minneapolis–St. Paul, Columbus, and Kansas City, all areas where average house prices, adjusted for incomes, are half or less than those in California, and at least one-third less than in New York.  

Millennials are spreading out around the country… and are increasingly avoiding the giant metropolitan hubs that are supposed to be so attractive. The reason, of course, is that they are unaffordable and, for a young family, barely liveble. Even when millennials move to large cities, they seem invariably to move to the suburbs:

The media frequently has exaggerated millennial growth in the urban cores. In reality, nearly 80 percent of millennial population growth since 2010 has been in the suburbs. Even in the Bay Area, the tech industry’s global epicenter, suburban Silicon Valley has continued to grow its STEM base rapidly, while San Francisco recently has seen rapid slowdown in tech jobs. Perhaps density, massive homelessness, and filthy and disorderly streets, not to mention unaffordable living costs, lose their appeal as couples contemplate childbearing.

The New York Times considers the city a tech outlet. In truth, it is not:

New York, for example, is not remotely the tech center that outlets like the Times suggest; according to estimates from the economic consultancy ESRI, its share of computer-related jobs barely equals the national average, well below even such unheralded spots as Dallas–Fort Worth or Columbus. Tech workers, and the capital to finance them, may come to Manhattan or San Francisco, but the growth of these industries is slower than in places like Austin, Nashville, or Orlando.

The supposed tech hubs are overpriced and overtaxed. Unless you have some very serious money, you  will have trouble bringing up a family in New York City. Since New York’s public schools, to take an obvious example, are not the place for your children to get an education, you will be forced to choose between private schools and the suburbs. A good New York private school now has a tuition at around $60,000 per year, per student. And that’s after tax dollars:

Core cities like New York, Los Angeles, Chicago, and San Francisco may be exciting for recent college graduates or tourists, but they still need affordable standards of living and strong economic and educational environments to attract and retain the young families critical to their long-term growth. A middle class cannot be sustained by only elite workers. Politically, a city with a shrinking middle class, as we see in many superstar cities, will exhibit ever-more radical politics as the young single population and poor dominate the electorate. The political problems evident in New York have surfaced in other pricey regions. Even in world-class tech center Seattle, a city council-imposed homeless tax on large corporations had to be repealed when Amazon responded by stopping construction on a downtown office tower.  

Kotkin and Cox recommend that big cities address basic conditions, concerning taxes, housing and schooling. I believe that they are being overly optimistic. The city is simply too far divided between the rich and the rest. And let’s not forget the influence of labor unions on the situation. Radical leftist politicians under the thumb of unions… it’s a toxic brew.

The imperative is not to increase subsidies for favored companies, as New York tried to do with Amazon, but to address the basic conditions—taxes, public safety, schools, housing—that ultimately determine long-term economic growth. No amount of subsidy can make up for these failings. The road to enhanced growth lies in addressing the very issues most urban politicians like to avoid.


Sherman McCoy said...

You're telling me?! I was going broke in New York on $1 million a year . . . back in 1988!

Sam L. said...

The NYT knows what it knows, and knows what it believes, and what it believes does NOT map one-to-one with reality. I have been fortunate to have never lived in the NYT's echo chamber.

UbuMaccabee said...

NYC is the most provincial place in America.

Sam L. said...

Millennials don't have a lot of money saved up, and haven't worked their way to higher wages.

whitney said...

Amazon is not going to hire local people wherever they go. They're going to use H-1B visas and bring in a bunch of foreign workers who were going to bring in their families and they're going to create a whole new community. It will not benefit the locals wherever they go. Think about Amazon as a global pirate ship looking for a safe harbor. Not good for the harbor

David Foster said...

Whitney....there are plenty of non-foreign workers in professional positions at Amazon, in field such as marketing, project management, finance, and logistics as well as software development. True, a lot would have come from outside NYC, but one of Amazon's primary reasons for being interested in the NYC area was probably proximity to the base of people in media, advertising, etc.