By Annalisa MerelliJanuary 4, 2020
Picture San Francisco. It has become, in recent years, the epitome of inequality: a city where the tech industry has brought incredible wealth, where the median price for a home is $1.3 million, yet 20% of the households earn just above $16,000, and homelessness is a problem so big there is an app to track outdoor human defecation.
But as it is in the micro, it is in the macro: San Francisco is also the symbol of another type of inequality shaping the US—that between cities. Most of the economic growth in the US is driven by the tech industry, and most of it is concentrated in a few key locations, which continue to become richer, leaving the rest of the country behind.
As a report last month (pdf) from the Brookings Institute and the Information Technology & Innovation Foundation outlines, nearly 90% of the whole growth in the tech sector that has occurred in the US between 2005 and 2017 has been concentrated in a handful of metropolitan areas in three states: San Francisco, San Jose, and San Diego in California; Seattle in Washington; and Boston in Massachusetts. Together, these areas account for nearly a fourth of all employment opportunities in the tech sector, having grown from providing 17.6% of jobs in 2005 to 22.6% in 2017. This growth happened at the expenses of the bottom 90%—343 cities around the country.
This is a problem for a few reasons, the report found. First, this kind of polarization means that a majority of people in the country find themselves away from the few places with growing opportunities and better job prospects. Then, in those hubs, the concentration of capital and professionals fuels inequality, causing a rise in the cost of living that prices out those who do not work in high-paying jobs.
Finally, the cost of living, or having a business, in those hubs becomes unsustainable, which means the research and development required for the tech industry to continue growing are often outsourced to other countries that, unlike the US, have less expensive tech hubs, where they can be sustained at a fraction of the expense.
But while this is a problem for individuals, and for the overall country, it is not a problem for the market: Agglomeration is rewarded by market forces, and attempts to organically promote the creation of other hubs outside the existing ones would be starting too late, and have no real chance of establishing an effective industry.