Stop Whining About the 'Fairness' of Tech Job Concentration

Five major cities have been hogging up the lion’s share of new hi-tech jobs. They are Boston, San Diego, San Francisco, Seattle and San Jose. They have accounted for, wait for it, 90% of new jobs in this sector of the labor market between 2005 and 2017. That left only 10% of the growth in this field – software, drugs, semi-conductors, chips, etc. – to the other 377 metropolitan areas in the country.

Nor is it merely that places such as Washington DC, Dallas, Philadelphia, Denver, Chicago and Los Angeles are not getting their “fair share” of this increased employment. They are actually losing such job slots, 45,000 between 2005 and 2012.

Not fair, you say? Too uneven, you charge? You can garner support in this opinion of yours from Mark Muro and Jacob Whiton of the Brookings Institution and Rob Atkinson of the Information Technology and Innovation Foundation.

According to Muro, one of the three authors of a study bewailing this phenomenon, “The superstar places are becoming extremely expensive, choked with traffic and struggling with big social costs like inequality gone wild and homelessness.”

Why all the whining? That is easy to see. Nerd jobs are clean; little or no pollution. They are relatively high paying; more tax revenue for the downtown boys and girls to play with. Geeks rarely commit mayhem on the streets; the crime statistics are negatively correlated with their presence.

But should the rest of us worry about this tendency to pile on high-tech jobs in only five cities? Not at all.

This is part and parcel of the economies of scale. It is often more efficient, and thus cheaper, to produce goods and services in fewer places rather than spread them all over the country. Synergism and all that.

Most of the iron and steel is manufactured in Pittsburgh. This is obviously “unfair” to every other city in the U.S. Would we be better off, economically, if the creation of this product were spread around all over the place? The Chinese tried this with backyard steel mills; the results were horrid. Want to see a Broadway play? You’ve got to go to New York City, not to Fargo, North Dakota, nor Salt Lake City. Can you imagine how the quality of plays would plummet if the necessary artistic talent were required to be spread evenly over all fifty states?  In similar manner if you want a beignet, or jazz music, New Orleans is the place to be, not Phoenix or Newark.

Will all this create “problems?” Of course it will. There will be tremendous transactions and other costs of moving people around the nation so as to satisfy this fetish against clumping up talents. Corn does better in Iowa than in Rhode Island, wheat is the province of Kansas, not Nevada, and for oranges, go to Florida, not Maine. Isn’t this “unfair?” Should we not also forcibly spread these industries around evenly, so that all vestiges of specialization, the division of labor, and, heck, common sense, go out the window, to satisfy the likes of people like these three authors? Canada will not allow intra-national transport of beer. As a result each province must manufacture its own. We certainly do not need that sort of central planning here.

But what about the fact that “superstar” places are becoming extremely expensive. If we abstract from government policies that boost rents and housing prices (rent control, zoning, requiring green spaces, regulations, etc.), this is the market’s way of inducing people to relocate so as to garner the benefits of specialization. How else are the inhabitants of these five cities going to be encouraged to make room for the highly productive incoming nerds? The only other way to accomplish this task is for government to engage in their forced removal. But this is the United States, relatively speaking the land of the free, not some totalitarian dictatorship which moves people around in the same manner that the grandmaster relocates the chess pieces.

            As for road congestion, the solution is peak load pricing. This is not the fault of agglomerating hi-tech workers. Inequality? If you add a few Bill Gateses to a city, it will of course rise. But, it will fall in the cites from which they depart.