Coast-to-coast wannabe innovation hubs are reducing the likelihood that the work-from-home revolution triggered by the COVID pandemic will finally break that stranglehold of high-tech jobs in California and Silicon Valley.
Here’s the latest picture on this expectation: Not happening.
This is the conclusion of some new studies recently conducted by Mark Murrow and Yang Yu of the Brookings Institution.
There is a suggestion that we are on the verge of an entirely different geography. I don’t think the recent history or nature of the technologies point in that direction.
Mark Murrow, Brookings Institution
They found that although the pandemic caused some changes in the concentration trend of tech jobs in a handful of metropolitan areas, the largest established centers as a group “slightly” increased Their share in national high-tech employment from 2019 to 2020. (Emphasis on them.)
The arrival of disgruntled California entrepreneurs and the move to new hubs or even remote (but broadband-enabled) climates are common fodder in the news.
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The Times published a diary of sorts last year in which Geoffrey Wu, one such expatriate, wrote about his relocation to Miami to escape San Francisco’s crime and pandemic lockdown. He is still in Miami.
Yet “the big tech superstar cities aren’t going anywhere,” Murrow told me. “There is a suggestion that we are on the verge of an entirely different geography. I don’t think the recent history or the nature of the technologies point in that direction.”
Murrow, in coordination with other specialists in the geography of work, divides technical employment centers into three groups.
The superstar metro areas are: Silicon Valley and San Francisco; New York; Boston; Washington DC; Seattle-Tacoma; Los Angeles; and Austin. Next come the “rising stars”: Dallas, Atlanta, Denver, San Diego, Miami, Kansas City, Salt Lake City, St. Louis and Orlando. In the end, everywhere.
Superstars grew total tech employment by 0.3% during the pandemic – less than the 1.4% growth they experienced in 2015-2019, but positive nonetheless. Rising stars as a group increased their share by 0.1%, up from 0.5% in the earlier period. Both benefits came at the expense of the other hub.
“California metropolis truly retains their irreplaceable depth and strength,” says Murrow. “That’s not to say that there won’t be some movement. Early in this period we saw some moving out, particularly from the Bay Area, but it turned out that much of it was within California rather than Kansas.”
This shouldn’t be too surprising. The value of focused ecosystems in nurturing innovation has been documented for decades. As Stanford’s Nicholas Bloom and colleagues reported in 2020, elite educational institutions attract highly skilled innovators and turn their education to new technologies and new industries; His presence attracts others like him.
Thus Boston and San Diego became biotech hubs and Silicon Valley and San Francisco became centers of inventive approaches to computer hardware and software. There is a notable cross-pollination effect: according to UC Berkeley economist Enrico Moretti, inventors moving to a city with a larger group of inventors in the same area experienced “a large increase in the number and quality of patents produced”. .
The attractiveness of living and working in such a cluster outweighs the disadvantages of high living costs, taxes and overcrowding.
Eight of the 100 largest US metro areas (grey) have established technology centers, including the San Francisco/Silicon Valley Metro and Los Angeles.
“High-tech clusters tend to be located in cities with high labor and real estate costs – in cities such as San Francisco, Boston or Seattle – rather than in cities where costs are low,” Moretti observed, potentially increasing the intellectual productivity of those. more than the costs.
Tech companies are moving some operations away from their traditional headquarters locations or expanding elsewhere, says Moretti, but that was happening long before COVID. “I suspect that COVID-induced changes are accelerating the exodus of tech firms,” he says.
Murrow’s research points to an evolutionary change in high-tech geography resulting from the pandemic, rather than a “wholesale decentralization of technology.” There could be many reasons why there is no mass flight from large centres.
One is that most tech companies do not plan on giving up office work altogether, but expect their employees to work two or three days a week.
This hybrid system “allows employees to move from their place of work, such as from the city center to the surrounding suburb,” believes Bloom. “But it doesn’t allow an employee to move to another metro area entirely because they still have to go to work on certain days.”
Instead, Bloom found increased movement within metro areas rather than metropolitan areas – a trend he calls the “doughnut effect”, which refers to movement out of the central city and into suburbs or outskirts.
Bloom’s data is drawn from US Postal Service change-of-address records and Zillow’s tracking of fare increases.
Their findings cast doubt on the theory put forth by urbanist Richard Florida and economist Adam Ozimek, that remote working habits would lead to “zoom towns” in remote communities such as Tulsa, Boulder, Colo., and Bozeman, Mont. Inviting from traditional business hubs but for workers who only need to keep in touch with their bosses and coworkers digitally through the Zoom and Slack platforms.
While the Postal Service figures show some movement from densely populated cities to distant locations, this trend is “small relative to the within-subway movement from city centers to their suburbs,” Bloom wrote.
The pandemic-induced remote working seems to have opened the eyes of entrepreneurs to the potential of far less centralized workforces.
In a recent survey of tech startup founders, the share of respondents saying they would prefer to start a firm with a completely remote workforce from day one rose to 42.1% in 2021, from just 6% in 2020. In physical locations where founders said they prefer to launch their businesses, however, San Francisco still dominates at 28.4%, with New York in second place.
There have been some clues in recent years that the big business exodus from California has not happened as much as it should have.
Most of the tech sector has either returned to or exceeded pre-pandemic job levels by the summer of 2021.
In 2020, the major departures reported in corporate relocation were three: Oracle, Tesla and Hewlett Packard Enterprise. The Brookings study published this month mentions three major tech firms: Oracle, Tesla and Hewlett Packard Enterprise. (Brookings cites a fourth — Palantir, a money-losing software company headquartered in Denver but that by the end of 2021 employed fewer than 1,900 people in the US, some of whom work in California.)
Some claims about the California exodus aim to make political rather than economic or demographic. Consider an August 2021 paper by Lee Ohanian of the Hoover Institution and Joseph Vranich, CEO of a Texas-based business relocation firm.
Far from being a cool statistical survey of business moves, the paper includes too much regulation, such as the usual conservative beef about California. It also makes some surprising claims: “California is notorious for imposing exorbitant real estate taxes,” for example.
In fact, California’s property taxes are the 36th highest in the country; Texas, Wrenich’s home state, ranks seventh, with an effective rate more than twice that of California. Thanks to Proposition 13, California is notorious for having low real estate taxes, if anything.
Ohanian and Vranich, claiming that corporate headquarters are leaving California in “unprecedented numbers,” provide a database of 265 companies that did so from January 2018 to June 2021. The list includes nonessential businesses such as the NFL Raiders, who moved from Oakland to Las Vegas in 2020. However, the NFL actually approved the transfer in 2017.
Disney, the door is open to bring those jobs back to California—the state that truly represents the values your workers value. https://t.co/kbCi7Zgs90
— Gavin Newsom (@GavinNewsom) 13 March 2022
The authors do not make proper reference to this alleged exodus, which is how many businesses were created or relocated to California in the same period. The answer, according to the Census Bureau, is 133,503. In the same period, Texas added 90,916. (By the way, California still hosts three NFL teams, which is tied with Florida for any state.)
Due to the economic resilience of the region, communities are eager to establish themselves as remote tech hubs. Unlike service industries such as leisure and tourism, most tech industries barely experienced a hiccup in their long-term growth trends during the pandemic.
Although employment in semiconductor and computer hardware manufacturing fell from January 2020 to June 2021, Brookings found that software publishing, data processing and information services such as Google and Meta Platform (formerly Facebook) experienced only brief job losses in early 2020. happened, but by mid- 2021 there were a larger workforce than before the pandemic.
Tech hubs can’t inherently depend on attracting digital workers, Murrow says; They have to work to make themselves attractive to a digital workforce. That means building a tech infrastructure that includes broadband access, developing a Silicon Valley-like networking culture, and providing good schools and other important amenities.
The political environment is also an unavoidable factor. Whether aggressively conservative politics in Texas and Florida, including hostility towards the LGBTQ community and the contraction of women’s reproductive health rights, will slow the influx of young and well-educated workers is difficult to tell at the moment.
But early signs are worrying the leaders of those states. Tech journalist Kara Swisher, who is gay, recently canceled a tech conference scheduled for next year in Miami to protest the state’s so-called “Don’t Say Gay” law.
The law stirred employees at the Walt Disney Company, one of Florida’s largest employers, over the company’s silence about its enactment; California Gov. Gavin Newsom Invites Disney to Public reverse your decision To move 2,000 jobs from California to Florida. (The company has not responded to Overture.)
It is doubtful that, if ever, a 100% work-from-home job will amount to a substantial portion of employment. Moretti says that full-scale work from home only applies to 6% of workers. This is triple the level of 2% in the pre-pandemic era, but still an exception to the rule.
For all this, it is also true that some “rising stars” can provide metropolitan entrepreneurs and tech workers some of the qualities that established hubs have lost. That’s what Wu wrote about his decision to relocate to Miami.
Wu, who runs two businesses in startup mode and a venture investment fund, says he hasn’t found business reasons to regret moving from San Francisco. (The lack of decent Asian food is a shortcoming he mentioned.)
Wu told me that the tech community in San Francisco has become dominated by large established companies led by billionaires who have already made their fortunes. The tech community in Miami is “inviting more of the people who haven’t built it, who aren’t billionaires…. San Francisco is into Harvest Mode instead of Create Mode — it’s reaping the value of all the mobility that it created.” Has been in the last 20 or 30 years.”
As for Florida politics, “the most influential policy for ordinary citizens is the COVID policy,” he says. “I’m not used to wearing a mask or showing a wax card for every little thing, and it’s been great.”
Instead of keeping people away from conservative social policies, they say, change may result from the influx of a diverse workforce. “As people arrive, the jurisdiction’s policies will evolve to match the will of the constituents.”
There may be a cultural shift in what Moretti calls the “geography of jobs.” But “it’s still unclear how far this will go,” he says. “It will take at least a few years to know it.”