Charting the geography of the American jobs market

The average cost of a four-year college degree in the US is $102,000. Such an investment writes James Pressley in his review of Enrico Moretti’s The New Geography of Jobs, might just be worth it to help the country’s cities prosper

TIME for a brainteaser. You’re a patriotic American with a 17-year-old daughter, and you just won $102,000 (€81,000) in a lottery. One catch: The rules say the money must be spent for the public good.

You could give Uncle Sam the cash to repair roads. It turns out, though, $102,000 is the total average cost of a four-year college degree. Can you justify investing the money in your goth child?

Absolutely, judging from The New Geography of Jobs, Enrico Moretti’s persuasive look at why some US cities have prospered in recent decades while others have declined.

The short explanation for these diverging fortunes is that towns such as Seattle are teeming with college-educated workers in the hi-tech sector. Tune out, for a minute, the grim news about student loan debts reaching $1,000bn and graduates struggling to find jobs. Investing in a four-year degree produces an inflation-adjusted annual return of more than 15%, according to research from the Brookings Institution in Washington.

Moretti is a professor specialising in labour and urban economics at the University of California, Berkeley. He has combed through US census data and teased out a secular trend. Over the past 30 years, education has become a great divider, he says. Areas with many college graduates, including Boston and San Jose, have become “brain hubs”. They offer higher wages and longer life expectancy.

At the other extreme are traditional manufacturing centres such as Flint, Michigan. In between stand cities that could flip either way, he says.

This sounds blindingly obvious. Yet the winnowing has profound implications for today’s gnawing debate about why inequality has reached a level not seen since before the Great Depression.

Joseph Stiglitz and others have framed today’s income disparity as a conflict between the top 1% of earners and the remaining 99%.

For Moretti, the more consequential divide lies elsewhere — between the 45m workers who have a college education and the 80m who don’t. Today, innovation is becoming what manufacturing used to be, America’s “main engine of prosperity”, he argues.

Without question, innovation is throwing off dream jobs. Moretti introduces us to a digital programmer who designed a starship for Avatar and a mathematician who blended colours for Ratatouille and Toy Story.

But only 10% of US jobs are in the innovation sector, Moretti says. Yet the presence of these workers creates demand for local services, which provide the vast majority of today’s jobs.

Luring biotech scientists and software engineers to town creates more work for plumbers and yoga instructors. Everyone in town winds up earning more than they would elsewhere.

One drawback is that the cost of living also runs higher. Nor is there an easy fix for the Flints of the world, contrary to what Richard Florida suggested in The Rise of the Creative Class.

If all it took to ensure success was a flood of creative, college-educated kids, Berlin wouldn’t have such high unemployment, Moretti says. To get a Silicon Valley cooking, you need an intellectual such as William Shockley to draw a bunch of “hot minds” to your startup. One thing leads to another, and California ends up producing more patents than any other state.

To show how these forces play out, Moretti recalls what happened to Seattle. Three decades ago, the city depended heavily on manufacturing. Employers were scaling back and unemployment was high.

Then Bill Gates and Paul Allen decided to move Microsoft to Seattle. As it grew, Seattle became a magnet for other hi-tech firms, including Amazon. What’s more, millionaire Microsoft alumni set up some 4,000 new companies. So how can America boost the number of innovation workers in its ranks and, by extension, create more jobs for everyone else? The answer should be clear: Import them or grow its own.

Giving work visas to more foreign engineers and scientists would be a cheap solution. Educating more Americans would be costly, yet good for the future, assuming students can be persuaded to major in computer science and chemical engineering. Why not do both?

The New Geography of Jobs is published by Houghton Mifflin Harcourt.