The ‘winner-take-most’ economy

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In recent decades, the high-tech sector has been the key driver of economic growth and innovation nationwide. At the same time, a new report argues, it is responsible for increasing regional divergence, a growing gap between a handful of dynamic metropolitan areas and everywhere else.

In fact, the report states, “just five top innovation metro areas—Boston, San Francisco, San Jose, Seattle, and San Diego—accounted for more than 90 percent of the nation’s innovation-sector growth during the years 2005 to 2017.” Sixteen counties now account for one-third of the nation’s innovation jobs, and more than half of all such jobs are found in only 41 counties.

Rochester today finds itself among the 343 counties that the report labels as “left-behind places.” But there’s some good news: Thirty-five metro areas are identified as “potentially transformative”—and Rochester ranks high among them.

The report—titled “The case for growth centers: How to spread tech innovation across America” —was authored by researchers at the Brookings Metropolitan Policy Program and the Information Technology & Innovation Foundation. They examined metro areas nationwide to determine where innovation-sector job have been gained and lost. (For their study, they defined the innovation sector as comprising 13 of the nation’s highest-tech, highest-R&D advanced industries.)

The findings add to a growing body of evidence that tech-based growth is behind a widening economic gap that separates the “superstar cities” from the rest of the country. They describe it as a “crisis of regional imbalance.”

From 2005 to 2017, the top five metros boosted their share of total innovation employment in the U.S. from 17.6 percent to 22.8 percent. The No. 1 metro during that period was San Francisco-Oakland-Hayward, which added 77,192 innovation-sector jobs. Seattle-Tacoma-Bellevue ranked second, with a gain of 56,394. Rounding out the top five were San Jose-Sunnyvale-Santa Clara, 52,288; Boston-Cambridge-Newton, 26,066; and San Diego-Carlsbad, 19,949.

The Rochester metropolitan area, by contrast, added only 106 net jobs. Many other metros were net losers, including Buffalo-Cheektowaga-Niagara Falls, which lost 175 innovation-sector jobs.

While wealth and growth are highly concentrated today, the report’s authors believe a number of metro areas “have the potential to become one of America’s next dynamic innovation centers.” These are places with sizable, well-educated labor pools and strong research centers.

Among all the potential growth centers nationwide, Rochester ranks fifth. It trails only Madison, Wis.; Minneapolis-St. Paul-Bloomington; Albany-Schenectady-Troy; and Lexington-Fayette, Ky. Farther down the list are a number of notable cities including Pittsburgh, Salt Lake City, Columbus, Chicago and Nashville.

The report’s high regard for Rochester’s potential as an innovation center echoes the view expressed in a recent book by a pair of Massachusetts Institute of Technology professors. In “Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream,” by Jonathan Gruber and Simon Johnson, rates Rochester as No. 1 among potential tech hubs. In an interview with the Beacon before his visit here last spring, Gruber said: “We think that what makes a great candidate city is a large, high skilled working-age population, an excellent university base, and an attractive standard of living. Rochester, with 560,000 people age 25 to 64, where a third of the population has a college degree, and where the average house price is only $170,000, is a perfect fit.” 

Gruber acknowledged, however, that Rochester will have a tough time competing with the elite tech hubs. He said that “ultimately it will take a federal jump-start to really move a city like Rochester to ‘superstar’ status.”

That conclusion is shared by the Brookings-ITIF researchers. In what’s likely to be the most controversial part of their report, they argue that the “winner-take-most” dynamic that exists today is self-reinforcing and will only worsen unless the federal government acts. They propose a 10-year, $100 billion program that identifies eight to 10 new regional growth centers, providing each with up to $700 million a year in R&D funding, along with “innovation inputs” such as support for scientific and engineering research, regulatory benefits, and supports for high-quality placemaking.

They readily acknowledge that skeptics will say the federal government is not capable of efficiently picking regional winners. Their response: “(O)ne has only to examine the history of U.S. technology hubs such as Boston, the Bay Area, and North Carolina’s Research Triangle to see that the federal government has often played important, if not decisive, roles in helping new tech centers attain critical mass.”

Moreover, the authors argue, the cost of doing nothing—from reduced productivity and competitiveness to diminished economic inclusion and equity—is too high. 

“A concerted growth centers surge—while not a total solution of the nation’s now-acute set of regional imbalances—would represent a major break with past inaction and demonstrate that federal action can not only bring technology-based opportunity to more parts of the nation, but also spur more innovation and increased U.S. economic competitiveness,” they conclude.

Its recommendations aside, this report should spur serious debate in Washington. But these days, what are the odds of that happening?

Paul Ericson is Rochester Beacon executive editor.

2 thoughts on “The ‘winner-take-most’ economy

  1. That number of 106 innovation jobs is completely bonkers. I have personally worked with four companies that cumulatively have added over 500 jobs, all in tech, over the past ten years. They represent over 600 million dollars in acquisitions without those jobs leaving Rochester. And these are not the big known stories like Datto. Your publisher Alex has been involved in extremely innovative growth businesses that easily surpass that 106 number. I don’t know what their standard is but this makes no sense. The growth in higher ed tech and science talent alone here is big. And the time period they track is after the big three downsizing. The majority of tech jobs lost during that were due to retirement. This kind of number crunching bothers me because so many tech jobs in Rochester fly far under the radar of the Chamber-type orgs who are basically clueless about the real numbers. This has to change.

  2. Thanks for reading the article and posting your comments, Martin. I agree that a number of innovative firms have been adding jobs here in recent years, sometimes under the radar. In the Brookings-ITIF report, “innovation industries” has a specific definition; it spans 13 high-tech industry segments “whose R&D expenditures exceed $20,000 per worker and have a STEM-worker share of 45 percent.” (See page 18 in the full report.) Some of the job gains you’ve seen may be outside those segments. However, while it’s true that much downsizing at the Big Three had already occurred by 2005 (the report examined net change in jobs from 2005-2017), Kodak and Xerox alone still employed nearly 25,000 people here; today, the total is fewer than 5,000. Assuming the researchers included Kodak and Xerox in their analysis, that’s a loss of roughly 20,000 jobs that would need to be offset simply to achieve zero net loss.

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