Superstar Effect: Rich Cities Get Richer

Emily Badger at the NYT has an article up on the trends of urban divergence which are further revealed by Amazon’s choice of cities for new major offices.

A small number of rich and internationally connected cities keep increasing their economic advantages — and as a result, the inequality widens between them and everywhere else.

Because of the pull of “superstar” cities, economists and policymakers fear what will happen elsewhere if the winners keep winning while many smaller communities are left behind. It’s possible Amazon executives genuinely believed a year ago that they might find a more surprising home (many observers are not so charitable). But, ultimately, the superstar magnet pulls them, too.

“It’s just absolutely hard-wired into technology economies,” said Mark Muro, a senior fellow at the Brookings Institution. “It’s not just a sort of interesting thing that happens — it’s inherent to the technology.”

Tech companies feed on highly educated and specialized workers, specifically dense clusters of them where workers and companies interacting with one another are more likely to produce new ideas. Washington and New York, as it turns out, are two of the most highly educated regions in the country, with already large pools of tech workers.
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By choosing to go where high-skilled workers and other prosperous companies already are, Amazon will effectively ensure that more companies follow it in turn. Opportunity will concentrate further. The differences between, say, New York and Scranton, Pa., will widen. This divergence, underway for about 30 years, has accelerated since the Great Recession.
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Drop a big Amazon headquarters into Washington or New York, and economists expect the 50,000 workers there to be more productive than if the same 50,000 jobs were dropped into Indianapolis. Simply putting them in New York, near so many other tech workers, increases the likelihood that Amazon invents more services, connects to more markets, makes more money.

Those added benefits are so strong, economists say, that it’s worth it to companies like Amazon to pay more — a lot more — for office space and employee salaries in New York City.

There’s a lot more in there and I don’t want to quote the entire thing. But one stat the really caught my eye is that NYC and DC alone accounted for half the net increase in national business establishments between 2007 and 2016. That’s insane.

Between 2010 and 2017, according to Brookings, nearly half of the country’s total employment growth occurred in just 20 large metro areas (places that are home to about a third of the population). The Washington and New York regions alone accounted for about half of the net increase in business establishments across the country between 2007 and 2016, according to the Economic Innovation Group, which tracks economic inequality across the country.

Click through to read the whole thing.

Google is getting ready to expand its New York City footprint to handle another 12,000 workers. This would give Google 20,000 total employees in New York.

New York in particular has been a big winner because it’s so huge and thus able to handle companies hiring 20,000 and 25,000 highly skilled workers in a way that other cities can’t really do.

Looks like as of now space constraints and high costs are not forcing elite sectors out of these coastal metropolises.

from Aaron M. Renn
https://www.urbanophile.com/2018/11/08/superstar-effect-rich-cities-get-richer/