Enrico Moretti -- The new geography of jobs
=============================================

Moretti's book attempts to answer the questions: (1) Where are the
"good" jobs?  (2) *Why* are they where they are?  (3) And is there
anything that can be done (by city government, by state governments,
by the federal government, or even by other organizations) to
redistribute good jobs?

First, a clarification -- What is a good job to you might not be
considered good by someone else.  And, what Moretti really seems to
be focusing on is the possibility of redistributing a variety of
kinds and grades of jobs so that changes in our economy and
businesses that have left sections of our country devastated, for
example by the loss of manufacturing jobs.  However, we should
recognize that there are regions of the U.S.A. that have lots of
jobs, but are devastated none the less because those regions contain
lots of people who do not, in a variety of ways, qualify for those
jobs.  One thing that makes "The new geography of jobs" valuable is
that Moretti is well aware of this and attempts to address these
different problems (or varieties of the same problem) in very
intelligent ways.

One aspect of this problem is the one that seemingly could be
answered by improving support that we give as a society to prepare
people for work.  Part of that is education; part of it is training;
and part of it is to enable more people to live in environments
where they are encouraged and able to live better lifestyles.  Of
course, education for and training for jobs that do not exist in a
given region makes little sense.

Central to Moretti's thinking is the notion of an innovation hub or
tech cluster.  These are regions of the U.S.A., and the world,
actually where innovative products are born, and they are the
regions that are attractors for both companies that do innovative
work and for workers that either do or will in the future work for
them.  It is essential in trying to understand Moretti's thinking
that we realize that the attraction works in both directions: the
presence of innovative companies in a region attracts workers and
the presence of workers in a region attracts companies.

In fact there is a genre of thought and writing about this idea:
it's centered around the growth of cities and the work they do.  We
should be aware that, while it is innovation and technology that
fascinates some of us and perhaps drives development now, analogous
mechanisms of development were once driven by manufacturing.  For
information and thought about that, you might read "Behemoth: A
History of the Factory and the Making of the Modern World", Joshua
B.  Freeman.  Another fascinating analysis of different cities and
the different forces that drove on energized their development is
"Cities in civilization", by Peter Hall.

*If* you are not willing to let market forces sort this out for you
(i.e. decide where the jobs will be and where the potential workers
will be), then you have two choices: (1) attempt to move the jobs
(and the companies that offer them) to where you want them or (2)
attempt to move the potential workers to where the companies and
jobs are.

But the *distribution* of jobs (across geography, across skill and
education levels, etc.) is only part of the problem.  Because of our
increasing ability to automate more and more tasks, there will be
fewer jobs for almost everyone, wherever you go, whatever your level
of skills and education.  Yes, there will be innovation hubs and
tech clusters, as Moretti says, but there will be a lot fewer jobs
of almost any kind almost anywhere.  Clustering in cities, even
moving to the *right* cities will not solve this problem, except a
small bit at the margins.

This is in part because the firms that do innovation work, Apple and
Google and all the smaller firms doing similar work, do not employ a
lot of people doing that well paid innovative work in comparison
with manufacturing firms and the numbers they would have employed.
This is in part because most innovative work produces products that
can be replicated, sold, and shipped (if they are shipped at all,
and most software these days is downloaded, not shipped) very
easily, cheaply, and with very little labor.

Moretti mentions jobs that can not be exported, traded sector jobs,
he calls them.  But, lots of those jobs cannot be exported or
performed overseas because they are service jobs, and that often
means that they pay poorly, have few benefits, provide irregular
hours, and in general are not the jobs that we can build healthy
lifestyles and communities on.

Moretti claims that firms that outsource jobs or that produce
innovative products or both create jobs locally.  That's likely
true, and *some* of those jobs will pay decent wages, *but* many of
them will be cleaning the bathrooms and hotel rooms and serving food
and coffee.  Many of those service jobs pay a low wage.  And, many
of these service jobs are the ones for which firms are working hard
to drive down wages even further.

And, we cannot ignore the fact that we have lots of potential
workers who have limited skills and education.  The idea that we can
train everyone or even a high percentage of possible workers to do
those new innovation jobs in the new innovative economy in the tech
sector is not realistic.

Innovation and trade and commerce do certainly contribute to the
overall prosperity of a society.  However, since our society and
economy has learned how to distribute those benefits so unevenly and
in such a skewed distribution curve, and since our government, the
U.S.A. Federal government, has decided not to attempt to moderate
that extremely distorted distribution of benefits, we end up with a
society containing regions that are not prosperous.

Competition among firms has and will continue to drive down wages.
Automation of repetitive and physical tasks (e.g. parts assembly)
has and will continue to drive down the cost of labor.  But, that's
only the start.  Automation and intelligent machines and AI will
begin to drive down the cost of work even if it is not repetitive
and even work that is not physical.  And, "gig" labor strategies
show that we have still more to learn about innovative was of
reducing labor costs.  Amazon's Mechanical Turk, Uber and Lyft show
that we, perhaps more correctly, firms can restructure even the
availability and scheduling mechanisms for labor.  It's impressive
that these "on demand" labor scheduling strategies can provide labor
without the "burden" of permanent employment.  I'll let someone else
argue about whether it's an blessing (for employers, and perhaps for
those who want a more flexible work schedule) or a disaster (for a
few of those who need a more dependable livelihood).  I've even seen
a Web site for "Maids on demand": a home cleaning service in the
"gig" economy.  And, once this service has become automated, and can
be backed up by "big" data on prices and availability, that labor
cost can be tuned and gamed to the lowest possible, "competitive"
cost.

Rationalizing costs and prices -- With respect to the labor market,
we usually hear about this process being used to drive labor cost
*down*.  Is it possible that those seeking work could use it to push
labor costs (compensation) *up*?  That's a question that is worth
exploring.

Innovation does indeed produce economic value.  But, who benefits
from that increased value.  We are seeing, in the U.S.A., that this
created value and profit can be spread very unevenly and can be
spread in ways that are much less than optimal for our society.

Moretti spends a good deal of time talking about and analyzing
"spillover effects".  Some of these have to do with living
conditions and lifestyle choices.  For example, if you live near or
associate with others who have healthy lifestyles and habits, then
you are likely to enjoy a healthier life also.  If you live near
others who receive high wages, then your own wages are likely to be
higher, also, although at least some of that benefit may be eaten up
by the fact that you are likely paying high housing costs in order
to live there.  Conversely, if you associate with others who smoke
tobacco and who do not exercise and who watch too much TV and who
use online social media obsessively, then you are likely to engage
in at least some of those practices and suffer some of similar
effects.

In discussing the innovation hubs and tech clusters and the
resulting concentration and uneven distribution of prosperity,
Moretti also considers what can be done to influence that dispersion
or distribution, e.g. what can be do to attract employers to a
region that lacks them.  But, while reading this, I have to ask
myself: are we really willing to pay what it would cost to do that?
Are we serious enough to spend the amount of money that would have
anything more than tepid results?  And, even those questions ignore
considerations about whether we could institute and control policies
that produce the results we intended.  After all, markets and
economies are notoriously chaotic and unpredictable.  The idea that
they are *controllable* in any practical way seems like a stretch.
(See below for articles that discuss these difficulties.)

The converse strategy from trying to get innovation hubs and tech
clusters to form where we need them is to encourage individuals to
move to where the technological and other sorts of work are.
Unfortunately, we already do a good deal of that.  The result is the
kind of sorting that is discussed in "The Big Sort: Why the
Clustering of Like-Minded American is Tearing Us Apart", by Bill
Bishop.

Moretti even considers the possible use of "relocation vouchers", or
basically paying people to move somewhere else, hopefully where the
jobs are.  But, if you pays someone to move, and then they are
unable to find work, then they likely end up with no livelihood
*and* without the support of family and friends.  That's a risky
strategy.

Moretti describes "thick labor markets", along with their
implications, consequences, and benefits.  Again, this seems to be a
story that leads to even more concentration in restricted
geographical regions, and a desert of opportunities in many wide and
distressed areas.

Another writer and thinker who is working in the same problem area
is Richard Florida; see, for example, "The New Urban Crisis: How Our
Cities Are Increasing Inequality, Deepening Segregation, and Failing
the Middle Class—and What We Can Do About It".

And, for a detailed account of how and why a company relocated its
manufacturing and the jobs that went with it, see: "Somerdale to
Skarbimierz James Meek follows Cadbury to Poland" in "London Review
of Books", Vol. 39 No. 8 -- 20 April 2017 pages 3-15.  This article
will give you some idea of why it is so complex and difficult to
influence the behavior of firms with respect to where to locate and
relocate their plants.

Some idea of the trade-offs and difficulties of trying to lure firms
and about how the problem of trying to rejuvenate depressed
industrial areas has no easy or even hopeful solutions, can be found
in the following articles: "When All Else Fails, Tax Incentives
Probably Will, Too", by Eduardo Porter (New York Times, 5/8/2018)
and "Lessons From Rust-Belt Cities That Kept Their Sheen", by
Eduardo Porter (New York Times, 5/1/2018).

Given the difficulties described in the above articles, it would be
appropriate to talk about incentives and about how those incentives
might be tweaked, not to fix, but to encourage job creation and
retention in some stressed regions.  Might be, but you can *not*
have all the job growth you want in all regions.  You can possibly
do just a little better at producing a few more jobs.  But, the
message seems to be that there are going to depleted areas, and,
since you cannot expect all those in need of work to migrate, you
will end up with distressed people.


05/09/2018

.. vim:ft=rst:fo+=a: