Sunday, March 31, 2013

Talent Geography Of Charleston

When referencing "Charleston", I often wonder if I need to clarify the state. West Virginia or South Carolina? Most people assume I'm talking about Charleston, South Carolina. The other Charleston is lost in the wilds of Appalachia. This distinction impacts talent migration. THE Charleston's tech boom:

Charleston may be the 75th largest metropolitan area in the US but this historic city on South Carolina’s Ashley River has always punched far above its weight. It is home to a mere 125,000 people but has been declared everything from one of the “best-dressed” to “most hospitable” cities in America by magazines nationwide. Surrounded by water and steeped in history, its mix of architecture, culture and cuisine rivals that of far larger cities such as Boston or San Francisco.

Beyond the accolades, Charleston is emerging as a southern centre of industriousness as increasing numbers of young creatives – often with families in tow – come to settle here. Equal parts big-city refugees and wayward southern sons, they are arriving both for the sunny skies and nearby beaches, and to participate in the city’s thriving high-tech sector. ...

... At the opposite end of the market are buyers such as Cator Sparks, an Atlanta native who studied at the College of Charleston before moving to Manhattan in 1999. Last year, Sparks bought a three-bedroom 1890s home for $390,000 in the ascendant Cannonborough district. Cannonborough, along with neighbouring Elliotborough, is a historically working-class area that is attracting younger buyers as well as tech-industry arrivals, who are drawn by its independent boutiques and restaurants along the nearby Upper King Street corridor.

Emphasis added. The above is Rust Belt Chic migration without evidence of any sort of boomeranging. "Big-city refugees" are seeking big-city amenities in relatively inexpensive authentic (i.e. "working-class") neighborhoods. Also of note are the young creatives bringing families in tow. Instead of suburban NYC, talent is moving to urban Charleston.

One Charleston is on the map while the other is off the map. Globalization will favor the former and punish the latter. The fortunes of the two Charlestons continue to diverge. Even in a Flat World, geography still matters. People develop, in certain places.

Friday, March 22, 2013

Ironic Migration: Spain To Morocco

As US domestic migration settles back down into familiar patterns, the international scene continues to surprise. The stubborn economic crisis in Europe is largely to blame. The resulting talent flows are downright weird:

For generations, Moroccans have immigrated to Europe for work but now, in a surprising illustration of Europe's economic crisis, that trend is reversing –Europeans are coming to Morocco in search of jobs.

It's "the world upside down," writes Hein de Haas, co-director of the International Migration Institute, affiliated with Oxford University.

The number of Spaniards officially registered as residents in Morocco quadrupled between 2003 and 2011, according to the National Statistics Institute of Spain. Tens of thousands more are now believed to be in Morocco illegally. Before the crisis, Martinez says, no one in Spain ever thought they would come to Morocco for work.

Emphasis added. The movement from the core to the semi-periphery is strange enough. But a relatively better economy really doesn't explain the migration. Geographic arbitrage opportunities are helping globalization to diffuse:

Morocco may seem like a strange preference for a Spaniard. With its GDP one-sixth of Spain’s and an unemployment rate estimated at 30 percent, “Morocco is in a deeper crisis than Spain,” says Mehdi Lahlou, an economics professor at Morocco’s National Institute for Statistics and Applied Economics. Still, Mr. Lahlou says it makes sense that Spaniards would consider moving to Morocco for work.

Spaniards do not need a visa to enter Morocco for a stay of up to three months, and only need to step on Spanish soil – which includes Spanish enclaves in Morocco, such as Ceuta and Melilla – to renew their stay. (Moroccans, on the other hand, must receive a visa to legally enter Spain.)

Plus, with the euro to Moroccan dirham exchange rate currently at 10 to 1, Lahlou says Spaniards who work for European companies in Morocco or come with savings from home can “live like kings” in the country. These advantages, he says, allow Spaniards to easily move back and forth between continents looking for work wherever it may arise.

Emphasis added. The tyranny of the Euro zone is fueling an exodus from Spain. Morocco could devalue its currency to make exports more attractive. Spain has no such option. The fundamental draw is a cheaper cost of living. The rent in Europe is too damn high.

Fortress Europe is a one-way street. It's easy to leave, but difficult for citizens of non-member countries to enter. Furthermore, EU residents are notoriously inert. For a large and diverse labor market, there is surprisingly little relocation:

The Dutch are attached to the place where they are born and tend to remain living in the same locality as their family, according to new research on migration within the Netherlands by the Meertens Institute.

For example, 72% of the people who were born in Zuid Limburg at the beginning of the 20th century still have a great-grandchild in the area, the research shows. Zeelanders (60%) and Frisians (70%) are also more likely to live in the same province as their great-grandparents.

‘People tend to stay put in regions with their own dialect and culture, such as Friesland, Twente and Zuid Limburg,’ researcher Gert Bloothooft told the Volkskrant.

Spain is pulling a Pittsburgh, doing the fail. The Netherlands is amassing too much social capital. The long-term prospects for Spain are much better than that of the Netherlands. Most of the European Union is wasting a perfectly good crisis.

Revitalizing The Urban Core And Immigration

Cleveland is dying. The urban core is rotting, littered with vacant homes and blight. The population is spiraling downward. Those are the mesofacts for the City of Cleveland. A fresh round of doom and gloom from the most recent US Census data dump:

The areas of natural decrease stretch from industrial areas near Pittsburgh and Cleveland to the vineyards outside San Francisco to the rural areas of east Texas and the Great Plains. A common theme is a waning local economy, such as farming, mining or industrial areas. They also include some retirement communities in Florida, although many are cushioned by a steady flow of new retirees each year.

Over the last few years, increased immigration is the suggested cure for demographic decline. The reasoning is sound enough. But can immigrants save Rust Belt cities such as Detroit? Trends in urban geography suggest no, they won't.

Immigrants impact, sometimes more dramatically than the act of moving into the city, urban population via natural increase. Higher birth rates swell the ranks of children in local schools. As long as these kids don't leave, the future looks bright. But thanks to demographic convergence, immigrants populations have less children as they become better educated and more prosperous. Add to that improving national economies in the sending countries (e.g. Mexico) and the floundering US economy, there is less incentive to come here in the first place. Secondary domestic migration from gateway cities such as New York are more likely prospects for gains than direct immigration.

Flagging birth rates aren't the biggest drag on the Rust Belt immigration policy suggestion. A major shift in urban geography is much more vexing. Not-so-Rust-Belt Baltimore is growing:

Downtown Baltimore’s 130 percent population growth since 2000 has included few immigrants.  While Southeastern Baltimore has received an influx of immigrants — helping the city post its first population gain in six decades — few recent downtown residents have moved in from outside the U.S.

Kirby Fowler, president of Downtown Partnership of Baltimore Inc., said Thursday at the nonprofit’s annual State of Downtown meeting he’s been waiting for news of new population growth “for a very, very long time.”

“A lot of credit goes to the city’s ability to attract immigrants, particularly from Central and South America,” Fowler said. “But the trend in downtown has been more about in-migration than immigration. While downtown residents are ethnically and racially diverse, the data indicate that the growth of these residents will continue for the foreseeable future.”

Downtown Baltimore is 48 percent white, 41 percent black, 6.5 percent Asian and 4 percent Hispanic, according to Downtown Partnership’s annual report.

Like Cleveland, Baltimore's downtown is finally showing signs of residential rebound. I'd bet a little digging into ironic demographics of the inner ring would reveal a full-fledged back-to-the city migration. Across the country, urban cores are making a comeback. Immigrants aren't driving the change. College-educated young adults are responsible. It's gentrification. They are displacing immigrants, not joining the ranks.

Both Baltimore and Cleveland are undergoing this transformation. Domestic, not international, migration is the flow to encourage. Immigration policy is beyond the purview of cities. All mayors can do is lobby and make noise about being more welcoming.

If there is a foreign-born boom, it is increasingly found in the inner-ring suburbs as rents in center city become too dear. Forget ghettos such as Chinatown and Little Italy. Strip malls are where you get the good eats.

The new urban ghettos are full of repats, return migrants. They eschew the suburban neighborhoods where they grew up for the downtown pulse that reminds them of the good times they had in Big City. They are riding the wave of globalization that is reshaping the Rust Belt. Post-Great Recession, the immigration strategy doesn't make much sense. Immigrants are heading home, too. You want diversity? There's plenty to be had already present in these United States.

Thursday, March 21, 2013

Take Three: Urban Geopolitics And Chicago

I've covered the urban geopolitical worldview of Peter Taylor and Saskia Sassen. For Taylor, Chicago is part of the noise. For Sassen, Chicago is a geopolitical heavyweight. Urbanphoto throwing down the gauntlet:

Is Chicago "dying" as a world city?  Or "rising"?  Actual evidence for either point might help.

Fair enough. I submit for your consideration, "The Wealth Report 2013: The Global Perspective on Prime Property and Wealth." Turn to page 22. The rankings explained:

In our attempt to create the most rounded assessment of the locations that matter to the world’s wealthy, our Global Cities Survey examines four key themes: economic activity; political power; quality of life; and knowledge & influence.

To create each ranking we have scoured the world of urban academia and research and analysed the results of the most authoritative studies from the likes of the Economist Intelligence Unit and the United Nations.

For each theme, every city is ranked from one (strongest) to 40 (weakest). Aggregate rank determines each city’s final position in the survey.

Political and economic power are conventional geopolitical metrics. New York is number 1 in the world for economic activity. Washington, DC is number 1 for political power. Chicago isn't in the top 5 for either measure, ranking 13th for economic power and 29th for political power.

More about knowledge and influence:

Finally, we examine each city’s knowledge base, assessing educational status and the number and ranking of educational facilities. We then look at how well each city transmits this knowledge, looking at the number of national and international media organisations and news bureaux, and the international market share of locally-based media.

Chicago scores better than average, ranked 14th. However, New York (2), Boston (5), and Los Angeles (10) are superior. In fact, NYC, DC, and Boston rank ahead of Chicago overall. All hail Greater Greater New York. At best, Chicago can argue that it is America's most important city outside of the center of geopolitical power.

Richard Florida Fires Back

Yesterday, Joel Kotkin had his say. Today, Richard Florida gets the stage. I'm going to keep the spotlight on density and try to refrain from editorializing. Florida:

We need to leverage density, skill, and knowledge to propel further innovation, economic growth and development (lord knows our economy needs it), and at the same time we have to build new institutions, new strategies, and a new urban social compact to improve the lot of those at the bottom.

Density has costs and benefits. Richard Florida is proposing we maximize the benefits and minimize the costs.

Macroeconomic forces encourage density. Already, we are seeing tremendous benefits from urban agglomeration. The costs of density are the problem. Real estate refugees from cities such as New York and San Francisco are a good indicator of the ailment. Where business packs in, residents flee (if they can).

How do we better manage urban agglomeration? This is a task for planners and economic development professionals. Instead of another initiative to attract/retain talent, solve the density problem.

That last sentence is editorializing. I don't know how Richard Florida would react to the suggestion we put aside efforts to attract talent. However, he is clear about attacking the density problem.

Wednesday, March 20, 2013

Richard Florida And Density

Richard Florida and Joel Kotkin are at it again. Urban density is one of the polemics. Kotkin is the King of Sprawl. Florida is the Pied Piper of Gentrification. The latest from Kotkin (my focus on the density part of the argument):

To be sure, the leading “creative class” cities have much to recommend them, and some of them, such as Portland and Boston, have registered impressive rises in their per capita income in recent years. But over the past decade, most “cool cities” have not been enjoying particularly strong employment or population growth; in the last decade, the populations of cities like Charlotte, Houston, Atlanta, and Nashville grew by 20 percent or more, at least four times as rapidly as New York, Los Angeles, San Francisco, or Chicago. This trend toward less dense, more affordable cities is as evident in the most recent census numbers than a decade. ...

... Of course, some these ascendant cities now are sprouting their own “hip” neighborhoods. But these regions also accommodate far faster growth in rapidly expanding, family-friendly suburbs and exurbs. Equally important, none, including “creative class” hotspots Raleigh and Austin, are dense, transit-centered places of the kind urbanists suggest create economic vibrancy and attract the largest number of migrations.

In fact both Raleigh and Austin are both very low-density regions with only compact urban pockets surrounded by vast suburban communities. Take a walk in downtown Raleigh sometime; about five minutes from the densest central areas and you find yourself on tree-lined streets with nice single-family houses, essentially, older suburbs. Austin, too, is a relatively low-density place surrounded by the kind of suburban sprawl detested by Floridians; this is also the case with Charlotte, Atlanta, and other fast-growing cities.

I'm not cherry-picking the narrative to advance my own discussion of urban density. This is the battle Richard Florida is choosing to fight. His first salvo via Twitter:

My buddy Joel Kotkin gets it wrong again. 1).Creativity & skills in dense CITIES drive growth.2)And they raise wages overall for all groups.

Really, Richard Florida gets it wrong again. Florida has a bad habit of conflating residential and occupational density. I have no doubt that Kotkin is talking about residential density. As for Florida, he can't keep his story straight.

In Austin, you can have creativity and skills in a dense urban core as well as suburban sprawl. Occupational density drives growth and raises wages overall for all groups. Gentrification does not.

When Florida fires back, we will be faced with a false choice. Do we embrace Kotkin suburbanism or Creative Classism? We can have Manhattan without Park Slope. Hispanics needn't flee to Schenectady or Reading in order to advance the Innovation Economy. Somewhere in the middle is Rust Belt Chic.

Tuesday, March 19, 2013

Rust Belt Demography

Ohio is dying. You know the refrain. The Wall Street Journal leaning heavily on outdated mesofacts:

"I think Ohio can be the best state in the country and that's not political puff." So boasted Buckeye Gov. John Kasich at the Hamilton County Republican Party annual Lincoln-Reagan dinner this week. "Young people like Cincinnati," he added. "It's a cool, happening place."

Uh huh, and that's why new Census Bureau data show that last year Cincinnati was the 10th slowest-growing metro in the country, among those with populations greater than one million. The biggest population loser? Cleveland. Mr. Kasich can hardly be faulted for playing up a bad hand that he in large part inherited. Ohio's big cities have been shrinking for the past two decades. But then again, so have a lot of cities in the Rust Belt and New England, including Detroit and Providence, R.I.

Kasich, being a politician, likes to play both sides of the fence. When convenient to tout brain gain Ohio, he'll do so. He's also fond of scapegoating brain drain. Demography is used as a weapon in policy debates.

Rural America is dying. You know the refrain. Daily Yonder sounding the alarm:

The Census report spawned a number of headlines about "dying" counties.  In most rural counties with more deaths than births, however, the numbers were very close. In about half (463) of the 943 rural counties that had a natural decrease in 2012, there were 25 or fewer more deaths than births.

In this case, the narrative is more grounded and less sensational. Regardless, more deaths than births is not good news for US rural communities. Forgetting migration, this is a tale of demographic decline.

Or, is it? Our fixation with population growth is mired in an early 20th-century reality. Demographer Wolfgang Lutz with a fresh perspective:

In a recent book, "Whither the Child?" (Paradigm press, available here) Mr Lutz and two co-authors argue that if you take improving educational standards properly into account, the optimum fertility rate is lower than the replacement rate – 1.8 not 2.1. This happens because, they say, education is expensive (hence having slightly fewer children is rational) and also because better-educated people earn more and can therefore support more children and retired people through their labour.

Emphasis added. A quick review of the Daily Yonder analysis, "In most rural counties with more deaths than births, however, the numbers were very close."

A quick review of the WSJ's beat down of Kasich, "Ohio's big cities have been shrinking for the past two decades."

We are concerned about population numbers. Are they going up or down? Lutz introduces a qualitative consideration, education. We should focus more on quality then on quantity.

Ben Winchester has the backs of rural communities:

"While we lose the kids, we gain the people aged 30 to 49 and a lot of these people coming into our rural communities are arriving with high levels of education, with earning power, with experience and with children," Winchester said. "It's counterintuitive."

The quality of the human capital that moves into rural communities is much better than those who leave (i.e. young adults). Global cities such as Chicago suck in the best rural talent and eventually spit out a more refined, efficient product. Chicago's brain drain is Mankato's brain gain. The headline still reads, "Mankato is Dying."

On the Ohio front, the Federal Reserve Bank of Cleveland rides to the rescue:

Columbus has the most educated cohorts generally. Across the country, state capitals often have unusually high educational attainment. This is especially true if they are home to a large state university, as is Columbus. The Pittsburgh trend is remarkable. Among older Pittsburgh residents, education levels are below the national average, like those of Cincinnati and Cleveland. For residents younger than 40, however, degree attainment jumps up to the levels of Columbus. If the highly educated cohorts in Pittsburgh continue to phase in, the city will eventually have a workforce like a university town rather than a former industrial center. Cincinnati, Cleveland, and Toledo can also anticipate modestly rising education levels based on cohort replacement. The education levels in the Dayton and Youngstown areas are essentially the same across the age cohorts, so these areas may not experience any rise due to the phasing in of more educated young people.

Emphasis added. Using the work of Wolfgang Lutz, we should make a distinction between Cincinnati/Cleveland/Toledo and Dayton/Youngstown when discussing Ohio's demographic woes. Concerning Cincinnati, Kasich is right and the Wall Street Journal is wrong. Just my two cents, the WSJ needs to find a different ax to grind.

Monday, March 18, 2013

Rethinking Urban Geopolitics And Global Chicago

Last week, Chicago was dying. This week, Chicago is still ascendant as a global urban powerhouse. Saskia Sassen's version of a new geopolitical order:

Besides these global urban networks with their specific agendas, we can detect a second emergent development inside nation-states: a number of geopolitical urban vectors where much of global geopolitics plays out. These may well be more significant than the national government as such, partly because they account for much of the global economy. At some point these urban vectors might become more significant for our global geopolitics than the countries within which they exist. Here are what I see as dominant vectors.

1. Washington/New York/Chicago

2. Beijing/Hong Kong/Shanghai ...

... There are major cities not included in this list, notably London. It stands alone, and succeeds by itself. It is, in that regard, probably the ultimate world city in this period –a major city without an empire. That is an achievement.

Two caveats for consideration. First, Sassen is gazing into her crystal ball and imagining the 22nd century. Second, she lists seven "dominant vectors". Within the seven there is an implied hierarchy, with the most dominant vectors approximating Peter Taylor's world view.

I don't see an obvious rhyme or reason to Sassen's geopolitical construct. Politics/finance/?. Sassen offers some hints in Foreign Policy magazine. Check out page 20 of this report:

[Washington/New York/Chicago] are becoming more important geopolitically than the United States is as a country. Chicago is rising fast as a geopolitical actor – think of the state visit by Chinese president Hu Jintao in January 2011, when he stopped not just in Washington but also in Chicago.

I don't find such anecdotal evidence to be compelling. It smacks of civic boosterism. But why did Hu Jintao stop in Chicago? What other evidence do we have of Chicago rising fast as a geopolitical actor? The evidence I have seen suggests otherwise.

Lastly, I notice how Sassen struggles to account for London. Taylor labels it as an extraterritorial arm of US hegemony. The same goes for Hong Kong and China, the primary hegemonic challenger. I reckon Taylor's model has much more explanatory power than Sassen's does. Still, that doesn't mean Chicago is dying.

Friday, March 15, 2013

Why Density Matters

What's the question? Density is the answer. Kaid Benfield takes aim at this peculiar urbanist cult:

A few days ago, I was reviewing some good work by colleagues describing NRDC’s advocacy for sustainable cities. The original draft stressed that dense living is the way to go. Wherever the word "dense" appeared, I crossed it out substituted the word "walkable." Not only is "walkable" a much friendlier word; it also captures so many more of the things we need to make the places where we live and work more sustainable and livable.

I think "walkable" is also well on its way to becoming a cliché. I digress. We've lost sight of why density matters. Benfield refocuses attention on goals of sustainability. In that view, density is beside the point. Walkable is a more useful concept.

The lust for density is pornographic. The best example is Tony Hsieh's Las Vegas project. Density solves everything. He conflates occupational density with residential density:

Tony Hsieh talks about his Internet juggernaut Zappos in the same way that urban planners talk about cities. In fact, the language is uncanny. He believes the best ideas – and the best form of productivity – come from "collisions," from employees caroming ideas off one another in the serendipity of constant casual contact.

This is only achievable through density, with desks pushed close together in the office, or – in the case of Hsieh’s ambitious plans to leverage the new Zappos headquarters to remake downtown Las Vegas – with company employees and community members colliding into each other on the street. For the kind of "collisionable" density he’s looking for in downtown Vegas around his company, he figures the neglected area (not to be confused with the Vegas Strip) needs at least 100 residents per acre.

If office density fosters creative thinking and greater productivity, then residential density should do the same. Right? Wrong. Hsieh's reasoning is specious.

Mind you, we're not talking about sustainability anymore. The issue is innovation. I'm open to reading some research the demonstrates a density dividend for residents. I haven't seen it. Occupational density is another story:

We have examined three reasons why firms may be willing to pay more to workers in bigger cities. First, there may be some static advantages associated with bigger cities. Second, bigger cities may allow workers to accumulate more valuable experience. Third, workers who are inherently more productive may choose to locate in bigger cities. Using a large and rich panel data set for workers in Spain, we provide a quantitative assessment of the importance of each of these three mechanisms in generating earnings differentials across cities of different sizes.

Emphasis added. The effect for workers exists regardless of where they live. The benefits of agglomeration can be found in metros of tremendous sprawl. Residential density is irrelevant. Tony Hsieh is hunting snipe.

Thursday, March 14, 2013

Urban Geopolitics: Why Chicago Is Dying

Before I discovered talent geopolitics, I learned about the geopolitics of global cities through the writings of political geographer Peter Taylor. The challenge for Taylor has been teasing out how urban economies challenge state sovereignty. One tension concerns international borders:

Contemporary globalization was initially heralded by talk of a new “borderless world.” This raised the profiles of cities, which, through the work of financial, professional, and creative firms, became the key nodes in this new, global economy. But economic globalization has proven far more complex than the simple notion that borders are disappearing. Businesses simultaneously work with and around borders. This inter-play of borders and cities is crucial. It’s rarely noticed how structurally similar the rise of a China-dominated East is to the established, American-dominated West. The economies of both regions pivot on a strategic triad of cities consisting of a national capital (Washington, Beijing), a global financial center (New York, Shanghai), and an extra-territorial global platform (London, Hong Kong). This latter pair, beyond the borders of direct economic jurisdiction by each dominant country, provides the necessary maneuverability for global business.

Instead of distinct from, state power is wielded through primary global cities. One way to use Taylor's construct is to analyze dynamics of the US urban hierarchy. Tweet from Ryan Avent regarding the US Census data dump today:

The Balt-Wash CMSA, at 9.3m, is close to displacing the Chicago CMSA (9.9m) as the country's third largest.

Aaron Renn (Urbanophile) has been the leading thinker about how DC is challenging Chicago's claim to "America's Second City" title. Taylor puts this competition into theoretical perspective. Geopolitically, DC and NYC matter. Chicago doesn't.

That bit of insight helps us understand how globalization impacts US economic geography. You are either part of the NYC-DC hegemony or you aren't. There is Greater Greater New York. And then there is the rest of the United States. In Taylor terms, you are either in the core (exploiter) or in the periphery (exploited). Puts quite a different spin on the problem of gentrification.

Where does that leave dying Chicago? In a tailspin of relative decline and a position of national, not global, prominence where the likes of San Antonio can take aim and knock it further down the urban hierarchy. Globalization has left Chicago behind.

Wednesday, March 13, 2013

Eds And Meds Economic Geography

I understand the concern about an eds and meds bubble. The Rust Belt knows all about putting too many eggs in one basket. We can't afford the spiraling costs of education and healthcare. Something has to give. How soon before the boom busts? A look at how the medical industry is agglomerating:

While Rochester is already a destination city for tens of thousands of Mayo patients and visitors each year, competition among several well-funded, global medical centers is part of the reason the clinic needs to build for the future.

The Cleveland Clinic is one of those competitors. A big-ticket medical complex is under construction right now in downtown Cleveland. Called the Cleveland Medical Mart, the $465 million facility is scheduled to open in July.

The center, officially the Global Center for Health Innovation and Cleveland Convention Center, is publically financed through a quarter- cent local sales tax passed in 2007. The one-million-square-foot campus will house big-name health manufacturers and service providers like GE Healthcare and the Cleveland Clinic.

Mayo and Cleveland Clinic are in a regional economic development arms race. The stakes are high, sky high. Those two aren't the only players. The above article also highlights Johns Hopkins (Baltimore) and MD Anderson Cancer Center (Houston). I don't know if UPMC in Pittsburgh merits mention. We're talking about massive public investment in the top exporters of medical services. This economy is diverging.

To put a bird on it, consider this exposé on the surprising variance of MRI (among other services) costs:

Castlight has seen some health providers reduce their fees once the data became public. In one particularly extreme example, a Midwestern hospital cut their charge for outpatient radiation by 60 percent after Castlight made the price public.

But others don’t necessarily see the need to compete on price. The Castlight site also includes information on quality, with rankings of various doctors’ outcomes on given procedures. Some hospitals might feel emboldened to charge more if they can deliver better results.

“Cleveland Clinic is probably one of the most expensive providers in their state, if not the country,” Colella says. “But the CEO, who is a visionary, says that train has left the station, and that they’ll compete on quality.”

Emphasis added. The Cleveland Clinic is playing a different game. Patients will pay more to travel to Northeast Ohio in order to receive care. The small Midwestern hospital with a smaller market has to mind its charges. Mayo doesn't.

So other cities, particularly in the Rust Belt, look to get a piece of the action. Buffalo is one such place. Now imagine the task of competing for the best talent. The pitch:

Buffalo’s charms are helping UB attract promising scholars in all academic disciplines, including Justin Read, associate professor of romance languages and literatures. “Buffalo is a big city, but it’s also a small town,” Read says. “There’s an authentic sense of community here. And the arts scene in Buffalo is incredible. For a city of this size to have the artists that it does is simply amazing.” ...

... After new recruits get past stereotyped notions of snow and chicken wings, they warm to some of Buffalo’s best characteristics: It’s an extremely friendly and family-friendly city with nice homes, and it’s easy to get around, even during rush hour.

“Recruits not familiar with Buffalo see the lakes, the shores, skiing, boating, golfing, hiking, proximity to Toronto, flights to everywhere and great summers.  They see the perks that other cities don’t have—all in one location,” says Mark Lema, chair of the Department of Anesthesiology.


“I enjoy Buffalo,” Wolfe said. “I’ve become a big booster for the city. I have to be, but I can do it in a sincere fashion. There are great recreational opportunities. The arts are excellent. The restaurant scene holds its own very well in comparison to even larger cities. And the cost of living, from a real-estate standpoint, is a big bonus.”

Barnabei and Tomaszewski were struck by the friendliness of the community. He recalled moving into his office – arms full, fumbling with his access card – when a woman saw him from the third floor of the building and came down to open the door for him.

“If you keep an open mind enough to give it a chance, it’s the kind of place that the more you look the more you find,” Martinez said. “If you just give it a chance, the more it gets under your skin and grabs you.”

I know this story. I march to the same tune. But most Rust Belt cities can count the same assets. Luckily for Buffalo, no one realizes this. I'd be more worried about a looming reckoning for eds and meds in Buffalo than in Cleveland. You have a handful of elite institutions at the top and then all the rest below fighting for a smaller slice of a shrinking pie.

Monday, March 11, 2013

Thomas Friedman And Richard Florida Are Wrong

I point out the false dichotomy between flat world and spiky town because this perspective is conventional wisdom. Geography still matters, and all that jazz. Yes, geography matters. It isn't dead. But this either Thomas Friedman or Richard Florida game won't explain much of anything, such as the prospects for Edmonton developing a nanotechnology cluster:

This story happens to be true. But fans of Thomas "world is flat" Friedman will recognise its type from his New York Times OpEds. Friedman is fond of such globalisation parables, often snatched from receptionists or taxi drivers. As Richard Florida (pdf) and others have pointed out, we should not overlook the world's spikiness. Geography matters, even, or perhaps especially, when it comes to science and innovation. This is why we are so fascinated by Silicon Valley. If we follow Friedman, Silicon Valley could be anywhere, and yet the businesses and universities that populate it show no signs of upping sticks.

Emphasis added. Maybe we shouldn't follow Friedman or Florida. Also, perhaps we shouldn't look at this issue through the lens of geography. I prefer economics and Enrico Moretti's book, "The New Geography of Jobs". Yes, I notice a book about economics has the word "geography" in the title. I'll get to that part in a minute.

During a long economic cycle, the economy diverges. Key economic activity concentrates in a few locations. The world is getting spiky. That's the upward part of the economic cycle. The downward part is convergence. The key economic activity is diffusing to other [more cost effective] places. The world is getting flat.

Evidence is mounting that the world is getting flat, in terms of the long economic cycle Moretti calls the Innovation Economy. California and New York are converging. Other cities are catching up to Silicon Valley. The coming tech boom in London:

As the internet evolves, many in business and government see London playing a central role in what comes next.

“It is all the great cities of the US in one,” says Joanna Shields, who left the top European job at Facebook to oversee our Government’s Tech City Investment Organisation four months ago. Like Washington DC, she explains, London is the seat of national government. Like New York, it has financial services and thriving art, fashion and media scenes. Like LA, it has creative industries. Like Chicago and New York, it has an advertising world. And technology is playing an increasingly meaningful role in all of these sectors.

Noting that more than a third of London’s population was born outside the UK, Shields says the city is “the most global city in the world. Everything you need is there.” ...

... “London is inexhaustible,” says Santiago Matheus, who in 2011 set up Method Design Lab, a programme run in conjunction with London’s Central Saint Martins School of Arts and Design. “Even when things are really choppy London keeps flying, because you have the government, the media, the creatives, the finance ... At any one time, even if two or three of those are struggling, the others keep the engine going. That’s what makes London the capital of the Western world.”

Rohan Silva, senior policy adviser to the Prime Minister, agrees. “A lot of  the US companies we talk to say part of the reason they want to be in London is that the workforce here is not just international, but more outward- looking. So you can hire people in London and then a year later say, ‘Hey, we want to open an office in Beijing’. London people are very likely to be up for moving to Beijing and setting up an office there.

Now we need to bring back the lens of geography in order to explain the above paradox, if you buy the Friedman-Florida dichotomy. The world is getting flatter in spiky town. I'd love to discuss the part of the passage about London's talent advantage I emphasized. That's another post for another day. Why London and not Edmonton?

Independent of the long economic cycles are knowledge flows. Knowledge is exchanged via the talent migration between major centers of knowledge production. There is a peculiar geography to this flat world. Only a handful of places are in play. This has major implications for economic development policy for resource cursed metros such as Edmonton. You don't have to be Silicon Valley or London to get a piece of the innovation action. For nanotech, see Albany, New York.

The world is flat and spiky at the same time. Better yet, a flatter world allows places to become more spiky. Which is to say, there is hope for Edmonton regardless of what is going on in Silicon Valley.

Sunday, March 10, 2013

Upscale Gentrification

"Flatworlding is still small and emergent. It's also on HBO."  An end to a post from last summer, I could have used it yesterday. Economic convergence is eroding New York City's position on top of the urban hierarchy. The best place to watch this drama play out is in Brooklyn:

“What many clients have told me is that they like the old Brooklyn vibe of these up-and-coming areas,” said Kristen Larkin, an agent with TOWN Residential. “They like the sense of community, friendliness of the neighbors, and the mom-and-pop shops that come along with it.” ...

... Stretching along New York Harbor between Greenwood Heights to the north and Bay Ridge to the south, Sunset Park has long been a magnet for working-class immigrants. Once almost exclusively Scandinavian, the area is now home to large Chinese and Hispanic communities. ...

... Erika Storella, a literary agent, and her husband, Daniel Heidkamp, a painter, were living in Greenpoint when they began hanging out at a friend’s art studio on the industrial waterfront in Sunset Park a couple of years ago. “We were drawn in by the sense of fresh creative energy in this neighborhood, as well as the beautiful park, the city views, and the historical details of the Finnish Co-ops,” she said, referring to some of the first co-ops in the city, on 43rd Street between Eighth and Ninth Avenues.

In January of last year, the couple, who now have a 6-month-old son, bought a two-bedroom co-op a half a block from Sunset Park for less than $300,000. The listing agent was Peter Bracichowicz, a Corcoran broker who specializes in the area. Mr. Heidkamp also moved his painting studio to Sunset Park from Greenpoint.

Ms. Storella’s commute to Midtown has doubled, to about an hour each way, and she pines for a good wine store. But there are benefits: “We appreciate the natural beauty of the neighborhood,” she said. “We walk through the park almost every day with our son. We eat a lot of dumplings and burritos, and there is a new organic/local restaurant that we frequent called Café Zona Sur.”

What urban pioneers are scrounging for in Brooklyn exists in ample supply all over the Rust Belt. But a Pittsburgh neighborhood can't claim close proximity to Manhattan. Or, perhaps it can.

Hispanics displaced by NYC gentrification are showing up in the Rust Belt cities, such as Schenectady, that form the Big Apple's near-abroad. The much celebrated Creative Class is spilling over into downtown Scranton. Along the lines of extreme commuting, Pittsburgh enjoys strong talent connectivity with both New York and Washington, DC. The Northeast is getting flatter.

The gentrification of Brooklyn's working class neighborhoods is also occurring at a much larger scale. I've seen the impact firsthand in Ohio City, a Cleveland neighborhood. Manhattan's sprawl has a radius of 500 miles.

The technological advancements of the last two decades make this possible. The economic spillovers from New York reach all the way to a part of Northeastern Ohio traditionally more in tune with Chicago. Chicagoland is shrinking. Greater greater NYC is growing. In terms of US economic geography, there is the NYC/DC metroplex and then there is the rest of the country.

Saturday, March 09, 2013

Flat World Urban Geography

You don't have to live in the city to benefit from agglomeration and density. Knowledge networks are transnational, stateless. Geography is dead.

That's the polemic between Thomas Friedman's Flat World and Richard Florida's Spiky Town. Balls of fire are hurled at the opposition's straw men arguments. The old "debate" has found new life thanks to Yahoo's infamous kibosh on telecommuting. Edward Glaeser muses:

Thirty years ago the cyberseers predicted that new technology would make face-to-face contact, and the cities that facilitate that interaction, obsolete. The technoprophets were just as wrong as the geniuses who thought telephones would halt urban growth.

Clearly, the world isn't flat. It's spiky. Proof from Ohio:

“New technology has redefined metropolitan areas, and metropolitan areas are no longer cities and their suburbs,” said Myron Levine, a professor with Wright State University’s Department of Urban Affairs and Geography. “People are interconnected over much greater distances as a result of transportation and new technology, which means you can often network at home and not be in the office everyday.”

Game, set, and match to Richard Florida. The world is either flat or spiky. The two geographies are mutually exclusive. Technology should have transformed the economic order of things in a matter of weeks. It hasn't. Thomas Friedman is a babbling idiot.

Thanks to technological innovation, urban economic geography is becoming flatter. In fact, a flatter world allows for greater agglomeration. A simple innovation such as the shipping container set into motion a massive transformation:

On April 26, 1956, a crane lifted fifty-eight aluminum truck bodies aboard an aging tanker ship moored in Newark, New Jersey. Five days later, the Ideal-X sailed into Houston, where fifty-eight trucks waited to take on the metal boxes and haul them to their destinations. Such was the beginning of a revolution.

Decades later, when enormous trailer trucks rule the highways and trains hauling nothing but stacks of boxes rumble through the night, it is hard to fathom just how much the container has changed the world. In 1956, China was not the world's workshop. It was not routine for shoppers to find Brazilian shoes and Mexican vacuum cleaners in stores in the middle of Kansas. Japanese families did not eat beef from cattle raised in Wyoming, and French clothing designers did not have their exclusive apparel cut and sewn in Turkey or Vietnam. Before the container, transporting goods was expensive--so expensive that it did not pay to ship many things halfway across the country, much less halfway around the world.

What is it about the container that is so important? Surely not the thing itself. A soulless aluminum or steel box held together with welds and rivets, with a wooden floor and two enormous doors at one end: the standard container has all the romance of a tin can. The value of this utilitarian object lies not in what it is, but in how it is used. The container is at the core of a highly automated system for moving goods from anywhere, to anywhere, with a minimum of cost and complication on the way.

Those three paragraphs explain much more than Richard Florida ever did. The changes took decades to manifest. It's not the innovation itself that has agency, but how it is used. As Tyler Cowen would tell you, we've barely scratched the surface of what the internet can do.

What's going on in Ohio is remarkable:

The areas separating Dayton from Columbus and Cincinnati that are located along the Interstate are attracting residential and commercial development, which has helped create a new “megapolitan area,” said Levine, the Wright State professor.

This urban geography is new and exciting. It is technologically driven. It's a trend worth tracking. All hail the technoprophets and cyberseers. The end of geography is nigh.

Friday, March 08, 2013

Tension Between People And Place

Geography is destiny. That observation isn't cause for celebration. It's a problem to be solved. People migrate to geographies of better opportunity.

Demography is destiny. Overpopulation plagues India. Population decline spells doom for Portugal:

According to data from the Portuguese Institute of Employment and Professional Training, during the first nine months of last year 24,689 people cancelled their unemployment registration due to a decision to emigrate. This compares with 16,977 in the first nine months of 2011. In September alone, 2,766 people signed off for the same reason, a 49% increase on September of 2011. Yet between January and September Portugal’s EU harmonized unemployment rate rose from 14.7% to 16.3%, suggesting that without so many people packing their bags and leaving the figure would have been significantly higher, and offering some explanation as to why government officials don’t do more to try and stop the flow.

Nobel economist Paul Krugman recently suggested that among the ailments Japan was suffering from was a shortage of Japanese. Or put another way Japan’s slow growth is partly a by-product of the country's ageing and shrinking workforce. Looking at the country’s population dynamics Portugal certainly looks a likely candidate to catch this most modern of modern diseases. Not only does Portugal have the key ingredient behind the Japanese workforce shrinkage – long term ultra-low fertility – it has some added issues to boot. Japan may be immigration averse, but its inhabitants aren’t fleeing in droves.

Of course, a shortage is always relative to something. Many hold that the planet is overpopulated, and that energy constraints mean fewer people would be better. So shouldn’t we be celebrating all these children who aren’t getting born? Well, no, at least not if you want sustainable pension and health system, and that is what the developed world sovereign debt crisis is all about, how to meet implicit liabilities for an ever older population. One thing Portugal won’t have a shortage of is old people, since the over 65 age group is projected to grow and grow, even as the working population shrinks and shrinks. No wonder the young are leaving, even if the youth unemployment rate wasn’t 38.3%, just think of all the taxes and social security contributions the remaining young people are going to have to pay just to keep the welfare ship afloat. Patriotism at the end of the day has its limits.

In a nutshell, Portugal is dying thanks to demographic decline and outmigration. The real problem here is that geography, not demography, is destiny. Demographics measure population dynamics in a place, a territory. The issues change with the scale of analysis. Places develop, not people.

Portugal is dead. Long live the Portuguese. Staying, sticking it out, is the patriotic thing to do. Those who leave are ungrateful quitters, dine and dash nationalism. As a rule, we value place over people. This slant colors the work of social scientists. Policy is place-based, not people-based.

I'll plug the Clemens and Pritchett paper again. The concept of "income per natural":

While production has a place, people, not patches of earth, have well-being. The focus on income per resident has rested more on the spread and use of national accounts data and on statistical cost and convenience than on conceptual or welfare-theoretic foundations. But if income per resident is used as the measure of Salvadorans’ welfare it leads to untenable conclusions: if a Salvadoran moves from the countryside to San Salvador to get a factory job that raises her income 30%, this will be recorded as a welfare improvement for Salvadorans on average, but a 500% increase in income from a factory job in Texas does not (with, at best, only the portion remitted to residents counted).

Income per natural, not income per resident, can capture the economic development gains of the international migrant. An empty El Salvador is cause for celebration. Geography isn't destiny. People develop, not places.

Thursday, March 07, 2013

Rust Belt Chic Psychotherapy

I'll sum up my almost seven-years of blogging in one sentence. Rust Belt hometowns have transformed from a place you leave to one of return. All that seemed to be a liability is now an asset. A pejorative is recast as a source of pride. Between Buffalo and New York City:

As soon as it was humanly possible I left Buffalo and never intended to come back.  After an architecture degree from University at Buffalo, I moved to New York City to get my Master’s in Historic Preservation at Columbia University.  I became who I am today in New York City. I lived there for 19 years and I still consider it my beloved city.  Buffalo is like my family – I had no choice in it, I was born and raised here and can never change that.  NYC is like my best friend – I chose it.   But Buffalo surprisingly gave me the sound base to have the courage to become me in New York City. It took me a really long time to acknowledge that it was okay to be from Buffalo and now 28 years after I first left I find it’s okay to come back. 

The part of the passage I emphasized resonated with me. For most of my adult life, saying I was from the Rust Belt felt like an apology. I grew up in American decline. My hometown (Erie, PA) was a crumbling nowhere full of people with no discernible character or culture. I want to be anywhere but here.

Even when you move back, you aren't ever all the way back. You are like Salman Rushdie or a character in a Jhumpa Lahiri story. You belong to two places, neither of which will claim you as its own. In a metaphorical sense, you are stateless. You are always an outsider.

In this sense, Rust Belters are ahead of the curve. They connect cities, regional economies. They are migrants, people with entrepreneurial dispositions. Follow the returnees and figure out the new boom towns.

Brownfields are the new greenfields. The city that used to feel so suffocating is a place gleaming with possibility. But it isn't your hometown anymore. It's a step up from New York.

Wednesday, March 06, 2013

Expensive Rust Belt Cities

An "expensive Rust Belt city" rings like an oxymoron. But that's exactly what Pittsburgh is. Pittsburgh is also an inexpensive Rust Belt city, which is the dominant geographic stereotype for the region. I was made aware of this paradox way back in November of 2010:

Pittsburgh, a shrinking city, has a shortage of supply. With all the vacancy and blight, this may come as a shock to some. Perhaps the population is robustly growing.

I think the rush of people is yet to come. There's a bump, for sure. Newcomers are trying to cram into all the same places. In late 2010, I was on a cityLIVE! panel with Luis von Ahn. I recall him mentioning that Pittsburgh was expensive. Moderator Jesse Schell agreed. When all costs were considered, real estate was comparable to Los Angeles. The best talent liked only a few neighborhood. Supply was dear. Affordable Pittsburgh was a myth.

The economic health of metros paints with very broad brush strokes. Whereas the forces of globalization acting on an urban geography are almost hyperlocal. Our metrics tend to be too coarse to pick up on this transformation. Thus, a hot real estate market in "Southwestern Pennsylvania" jumps out of nowhere.

Emphasis added. Highly mobile tech talent expects Pittsburgh to offer considerable geographic arbitrage opportunities. The realty is ironic.

Aaron Renn (Urbanophile) emailed me a link to an article that makes this exact point, leading to a shocking conclusion. It's cheaper to grow a tech company in Chicago than in Pittsburgh:

He says the cost of living for employees – high-skilled, experience knowledge workers -- is 20 percent lower than in Pittsburgh. Before you go rushing to the online cost-of-living calculator, read on.

“The typical cost-of-living comparison makes Pittsburgh look 15 to 20 percent cheaper,” said Mr. Lowe, an economist by training, in an email. “But that analysis assumes a basket of goods that does not reflect the preferences of top engineering talent. Top talent, on average, lives in an urban environment and seeks out diverse experiences, from classic cocktail lounges to independent music festivals, as well as takes reliable public transit to one's office. Changing the basket to compare the preferences of our target talent pool, and its' the other way: Chicago is actually 20 percent cheaper.

“There has been a lot of discussion about building an economic ecosystem to encourage technology entrepreneurship. Our research reflects this important point in an apples-to-apples comparison,” he says.

Other costs are lower, too. Office rent is about 17 percent cheaper, too, because of a shortage of Class A office space in Pittsburgh.

“This was by far the biggest surprise,” said Mr. Lowe, who grew up in northwest suburban Palatine and attended to the University of Michigan before returning to Chicago to work at Boston Consulting Group, consulting on strategy for pharma and health care companies. That's where he got interested in innovation and R&D. So he earned a master's and doctorate in corporate strategy and entrepreneurship at the University of California at Berkeley. He was teaching at Carnegie Mellon when he launched his company in 2003.

Even the talent is more expensive in Pittsburgh than it is in Chicago. What gives? The source of the conundrum is the way we abstract cities.The geographic unit of analysis we employ can hide more than it reveals. The second issue are the mesofacts. Pittsburgh is shrinking. Of course the real estate will be cheap. Population growth is what fuels greater demand for space.

Downtown Pittsburgh is dying. Then how come office space there is more expensive than in Chicago? Better yet, why does parking cost so damn much? Chris Briem (Null Space) with some answers:

I've said this before, but time series of jobs located in the City proper are about as stable as any economic metric in the region, or in any other Northeastern US urban core, over many decades.  In 1958, the late Edgar Hoover and his team studying the Pittsburgh economy counted 294,000 jobs located in the city proper and 107,000 in the Golden Triangle specifically.  1958!  So well before the collapse of heavy industry in town.  Those numbers are virtually identical today which tells me there is a certain limit to how many jobs can efficiently be located in what are some relatively (very) constrained areas.  So those jobs 'forced' out of the city are if anything, being forced out by the jobs that want to be located here, or are fairly immediately replaced.  Not exactly a bad situation to have and one that has persisted through some very good and very bad economic times for the region.

I know from firsthand experience that this history lesson confounds the dominant view of Pittsburgh, even within the region. The physical geography informs a very constrained economic geography. It's also partly to blame for the bizarre Balkanization of the urban political geography. But does it promote the exodus of tech companies? The answer would seem to be yes, Pittsburgh doesn't have the room for them and that a tax-exempt UPMC is ready to fill the void left by any firm that leaves.

Monday, March 04, 2013

More Marcellus Shale Nonsense

When policy debates heat up, I'm tuned in to the threat of exodus. Taxes are too damn high and all the job creators are leaving. I've read a lot of similar bluster concerning the Marcellus Shale play. From PA Governor Tom Corbett to industry itself, fear-mongering is the rhetorical tool of choice. The latest spin from fracking battleground New York State:

New York has had a moratorium since 2008 on horizontal drilling and high-volume hydraulic fracturing, which frees natural gas from shale by injecting a well with chemically treated water and sand at enormous pressure. Other states in the gas-rich Marcellus Shale formation have seen local economies boom as drilling rigs have sprouted up.

Jim Smith of the Independent Oil and Gas Association of New York said Sunday that permit applications for conventional vertical gas wells, which are still allowed in the state but are less profitable than the far-larger shale gas wells, have dropped from about 600 in 2008 to below 200 in 2012 as the industry has moved to other states.

“For business owners, the opportunity is not here in New York,” Smith said. “We can assume the exodus we’re seeing now will continue” if the moratorium remains until results of the Geisinger study are in, he said.

I shrug. Will they come back if the moratorium is lifted? If those business owners don't, somebody else will if wells can be drilled profitably. I hope the door hits them in the rear end as they leave.

The drilling itself is not the big job creating bonanza so over-hyped of late. Energy intensive industry will pop up wherever there is a reliable supply of relatively inexpensive fuel. New York doesn't need to drill even one well to cash in:

The Constitution Pipeline is being designed to transport natural gas that has already been produced in Pennsylvania. The pipeline is not dependent upon nor does it require the development of new natural gas wells along the project’s proposed path. The pipeline is already fully contracted with long-term commitments from established natural gas producers currently operating in Pennsylvania.

Emphasis added. The proposed path cuts through New York State to feed energy demand there. You might have noticed that natural gas prices in the United States are low, really low. That's a result of over-production. There's plenty of gas in Pennsylvania to grow the economy in New York. Hence, the proposal to build the Constitution Pipeline. But wait. There's more to this story:

Cabot Oil & Gas's (COG) fourth quarter results report last Thursday (February 21, 2013) was nothing short of spectacular - positive surprises were many and significant and explain the stock's 11% rally on Friday.

In the context of the North American natural gas supply, Cabot is a relatively small player: The company ranked as #19 U.S. natural gas producer based on net volumes during Q3 2012. Nonetheless, its operating results have material implications for the industry as a whole.

First, the most recent wells confirm that the highly productive dry gas sweet spot in the Northeast Pennsylvania extends well beyond the four-five townships in Susquehanna County that have been initially proven up with production.

Second, the discussion during the call shows that well productivity in the area continues to improve fast, with each new generation of well designs and completion techniques.

Third, the company has a potential to emerge, within just four to five years, as a top five U.S. natural gas producer, likely passing by companies such as ConocoPhillips (COP), BP (BP), Chevron (CVX), and Royal Dutch Shell (RDS.A) in terms of net volumes. According to Zeits Energy Analytics' estimate, Cabot's gross operated production may exceed 3 Bcf/d by the end of 2017, limited only by the pipeline off-take capacity from the area. ...

... With recent well results in Northeast Pennsylvania suggesting continued rapid growth of supply from the area, the LNG export solution becomes very compelling. This increases the likelihood that the Cove Point project - which is almost ideally situated to provide an outlet for the Marcellus gas - will add to the growing list of U.S. LNG export projects with high probability of reaching completion.

Emphasis added. Cabot is sitting on the mother lode in Northeastern PA. The shale gas is so abundant in that part of the state that exports are feasible. There is enough for New York and Japan without any fracking to the north.

So, what's the rush? There isn't any. A few landowners would like to cash in on the shale gas bonanza. Moratorium or not, they've already missed the boat. The Governor of New York is dragging his feet. There isn't any pressure on him to open the state up to drilling. Better to focus on the downstream jobs boom that will occur at the end of a pipeline.

Sunday, March 03, 2013

The Other Great Reverse Migration

Perhaps you have seen the map. How did all those Steeler fans end up in the Carolinas? Deadspin takes a stab:

While it's difficult to find county-level internal migration data from before 1990, it's possible that a lot of Steelers fans ended up in North and South Carolina due to African-American reverse migration to the South. Many Northern cities have seen this in the past decade.

Deadspin is speculating. I don't think the guess is correct. But I could be wrong. In fact, I wish I knew more about Pittsburgh's African-American Diaspora. The national trend is well-documented. (As the links in the quoted passage attest.) This recent return migration is long (decades) after Pittsburgh's root shock exodus.

Via Chris Briem (Null Space), a wonderful piece of sports journalism about the Hockey Mom Diaspora in the "South" that didn't sit well with me:

Within the decade after the first Saturn rolled off the assembly line the NHL started looking for cities in which to put their expansion franchises. Nashville badly wanted one. The NHL granted a group of businessmen in Nashville a franchise on the stipulation that they sell 12,000 season tickets by a certain date.

"The owners who took a risk, starting a hockey league in the middle of the South in an area where people hadn't grown up with the game, they knew what they were doing when they came here," Herron explains. "They knew there were so many people moving to the area from Pittsburgh, Michigan, Chicago, all of these hockey towns. They reached out here first."

Both the Saturn Corporation and Local 1853 agreed to promote season-ticket sales among the plant workforce and in the community. They had no problem hitting their mark. In 1998 the Nashville Predators debuted on the ice.3

For years the team's fans called themselves "Preda-Wings" — they were Predators fans until the Red Wings came to town. But the popularity of the sport and the Predators has grown beyond the enclave of Midwestern transplants. "Now it's catching on," says Herron. "People like the game. You go to Predator games now and they throw the catfish on the ice." The catfish thing is an homage to the Detroit tradition of throwing a dead octopus on the ice.4 "When I first saw that I thought, That is just sweet! That is the Southern version!"

"When the Predators came to town, all my kids wanted to do was play hockey," says John Feeney, president of GNASH. "I was always a football guy growing up. My kids were never interested in football. It wasn't fast enough. It wasn't challenging enough. Just a lot of standing around."

Emphasis added. The Saturn automotive plant was near Nashville, in Spring Hill. You might think locals were thrilled, with the prospect of jobs. You'd be wrong:

"A lot of people in Columbia were anti-GM," one former GM transplant tells me. "They thought they should have got those jobs." The Nissan plant in nearby Smyrna opened years before with a mostly local workforce, so naturally the residents of Columbia and Spring Hill thought that Saturn would do the same thing. That's not how it worked in General Motors, though. Union members had the right to the jobs first, and there was no shortage of members in the Midwest who wanted to work for this "different kind of car company."

The "South" was overrun with blue collar Yankees. The problem is, Tennessee ain't a part of the South. It's the heartland of Greater Appalachia. Stories about the Great Migration usually discuss the relocation of African-Americans from the rural South to the urban North. Forgotten is the Hillbilly Highway:

Briars, first off, are what (some) Ohioans call workers transplanted from Appalachia. In the mid-twentieth century, Dayton was the port of entry for many Appalachians migrating from KY, TN, and VA looking for jobs as the coal mines were dwindling. After World War II, when factories such as General Motors were heavily recruiting, 7 million migrated north. The whites tended to settle in Ohio and Pittsburgh, while the blacks tended to settle in Detroit and Baltimore.

White Appalachians also settled in Chicago and Detroit in large numbers. There were discernible ghettos in those cities. Detroit's Little Appalachia still exists.

Another round of root shock has the Briars in a great reverse migration of their own. I figure more than a few of them ended up in Tennessee, where right to work didn't exactly mean no union in the auto plants. The Scots-Irish are back where they started.

Demographics Of The Higher Education Bubble

Yesterday, I covered the healthcare jobs bubble. Today, I'll look at eds instead of meds. The college student crisis in Japan:

The number of 18-year-olds in Japan peaked in 1992 at 2.05 million, dwindling to about 1.2 million by 2012. During that time, the number of four-year universities grew to 783 from 523.

Even greater energy has been poured into thinking up new departments and majors. According to the Ministry of Education, there were 207 new departments, majors and graduate programs in 2011, and an additional 236 in 2012. In 2006, a whopping 482 new departments and majors were introduced.

The boom has been happening for quite some time. Since the late 1990s, more than 2,000 new academic departments and faculties have been created in Japan, despite an aging population. Although dozens of departments are scrapped each year, that still leaves hundreds added to the pile annually.

Meanwhile, existing schools and departments are suffering. According to the Promotion and Mutual Aid Corporation of Private Schools in Japan, a Ministry of Education affiliate agency, 46 percent of private universities have empty spaces. The group said that nearly 40 percent of private universities were operating in the red.

Japan has been making an effort to attract more overseas students, but the relatively small number of foreigners is not enough to offset the growing number of university spaces.

Emphasis added. Japan's demographic crisis is staggering. Yet the higher education industry there spent two decades in denial. Good luck bailing out that sinking ship.

By way of contrast, Pennsylvanian post-secondary institutions owned up to shrinkage long before demographics became an untenable problem. Today, PA attracts the most out-of-state freshman. Higher education is a major export industry.

Globally, the United States is tops in "exporting" the college experience. Its graduate programs are a particularly powerful draw. Japan is late (too late) to the "Great Brain Race".

With mounting student loan debt and lower national birth rates, anxiety about the higher education bubble is acute. The concern is warranted, if you ignore the entire population outside of the United States. The alarm over the eds and meds economy is myopic in scope. Ask first if a "dying" city or country is importing students and thus exporting education. People develop, not places.

Saturday, March 02, 2013

Healthcare Jobs Bubble

The healthcare industry and higher education are booming. Eds and meds are anchoring the regional economies for many Rust Belt cities. This has some analysts concerned about a bubble. From Modern Healthcare:

The trends suggest regions betting on rebuilding their economies on the backs of resurgent healthcare sectors may be betting on horses that have already run their races. “Even as people migrate away from these Rust Belt cities and the Northeast, and toward the Sun Belt, the healthcare jobs seem to be more sticky,” said Chapin White, a senior researcher with the Center for Studying Health System Change, a policy not-for-profit in Washington. The jobs “seem to be staying in these cities where people are moving away from.” ...

... But cities with fast-growing populations tend to be less reliant on healthcare jobs, Modern Healthcare's analysis found. “Cities that are growing quickly are most likely adding diversified industries,” said Dr. Sheldon Retchin, CEO of the Virginia Commonwealth University Health System in Richmond and vice chairman of the federal National Health Care Workforce Commission, created by the healthcare reform law but not yet funded by Congress. The growth requires services such as healthcare, he said.  ...

... Not every metro area with excessive job growth was in decline. Richmond, Va.—which has grown its population since 2003 when its healthcare jobs per capita ranked well below the national average—added healthcare jobs on a per capita basis faster than any other region in the country, according to the Modern Healthcare analysis.

The analysis of Labor Department and census data shows that before the recession, the Richmond metropolitan area—composed of 16 counties and four cities—had an average healthcare job concentration of 46 per 1,000 residents, nearly equal to the national figure. By 2011, the area's intensity of healthcare provider jobs relative to its population had spiked 26.2% to 58, growing faster than the area's above-average 10% population growth.

Emphasis added. This is a good example of how place-centric thinking handicaps our understanding of the economy. More fundamentally, the fixation with population growth makes for specious conclusions. On the ground in dying Pittsburgh:

Children’s Hospital of Pittsburgh has received a $1 million government grant to look at the usefulness of telemedicine in determining which patients need immediate emergency care at the Lawrenceville hospital.

The goal is to develop educational programs for doctors at rural hospitals to make the best use of telemedicine in deciding which patients should be transferred emergently to Children’s for care. The program gets underway March 4 the Health Resources and Services Administration provided the grant, which totaled nearly $1 million.

About a quarter of all pediatric emergency visits are to hospitals in rural areas, which rarely have the equipment and expertise necessary to handle complex emergencies, according to Dr. Jeremy Kahn, project leader. The program will enable doctors in outlying hospitals consult with UPMC doctors to determine the best treatment for the patients.

Pittsburgh has been faced with the shrinking market problem for about half of a century. Thus, eds and meds are export oriented. Telemedicine is a technology that can expand the reach of Pittsburgh-based healthcare, which is like attracting high school graduates from other states to attend regional institutions of higher education.

Pittsburgh is the face of this country's demographic future. The fast-growing metros tend to be drunk on inmigration, such as an over-reliance on construction jobs. What happens when the people spigot stops? Rust Belt cities are way ahead of the curve, not behind it.

Friday, March 01, 2013

Rust Belt Chic Concierge

While studying the talent geography of San Antonio for Graham Weston's 80/20 Foundation, Richey Piiparinen and I made an exciting discovery. College graduates were moving to, not away from, the metro. That's the brain gain that Mayor Julián Castro referenced earlier this week in his State of the City address. Richey and I were hired to look into San Antonio's brain drain problem. Everyone was overlooking the brain gain because return migrants and newcomers weren't connecting. Talent was lost in a sea of sprawl thanks to parochial bubbles and barriers. From Syracuse is one possible solution:

"The idea is that we customize them to the needs of the person the way -- for lack of a better term -- a cultural concierge would do," Heagerty explains. "What we really do is kind of show what's available because exploring is great, you're going to find some stuff, but you're not going to shake as many hands or meet as many connectors as you would with Christi and myself."

Christi Smith, who serves as Assistant Connection Officer for NOexcusesSYR, adds she moved here five and a half years ago from the Rochester area.

"It was really difficult for me especially being a transplant," Smith said. "I worked all the time and didn't know what was going on."

But Smith, a SUNY Brockport graduate, discovered many options for things to do and realized she would never want to leave. "I fell in love with [Syracuse]," she says with a smile.

In fact, the name NOexcusesSYR illustrates their goal: they don't want to see young professionals become "ex-Cuses" and leave the area, and they want to show that there really is "no excuse" to not see what the area has to offer.

Emphasis added. We heard the same thing in San Antonio from focus group participants. In fact, the session acted like a mixer. Return migrants and newcomers mingled. Contact information was exchanged. The sense of community was transformed, at least for those in the room.

You go where you know. Cities such as Syracuse and San Antonio are black boxes for prospective migrants. They don't have the brand power of Austin or Portland. Newcomers are economic accidents. Return migrants may know the lay of the land. But they typically feel alone and isolated (something I learned from focus groups in Cleveland). For a city looking to redevelop, a "cultural concierge" acts as a catalyst as well as urban psychotherapist. As a result, locals look less perplexed when you tell them you chose to move to the Rust Belt.