Monday, September 18, 2017

What Does Innovation Have To With Economic Segregation?

http://www.citylab.com; August 18, 2017

Hello Everyone:

Welcome to a new, albeit abbreviated, week on the blog.  The major Jewish holidays are upon us and blogger mama is demanding Blogger's attention.  That aside, a friendly reminder to all DACA-recipients and anyone who knows a DACA-recipient: the October 5th deadline is coming up quickly.  You must renew before this deadline if you want to remain eligible.  The United States Citizenship and Immigration agency is only accepting renewal forms.  For more information please go to http://www.uscis.gov.  Good luck and on to today's subject: innovation and economic segregation.

It seems that not too long ago, cities were doing whatever they could to attract high-tech companies, hoping that the companies would bring with them high paying jobs.  City after city created programs anticipating they would be the "next Silicon Valley." (http://www.citylab.com; June 20, 2017; date accessed Sept. 18, 2017)

However, with the backlash facing Airbnb and Uber and protests over the high tech companies' shuttle busses have combined to make the onetime saviors into villains.  The villains are being balminess for making cities less affordable and the increasing gap between the wealthy and poor.  Richard Florida points out in his CityLab article, "The Complex Relationship Between Innovation and Economic Segregation," "Indeed, America's leading high-tech centers-the Bay Area, Boston, New York, Washington D.C., San Diego, and Raleigh all rank highly on various measures of wage and income inequality."   (http://www.citylab.com; Apr 13, 2017; date accessed Sept. 18, 2017)

Thus, the question for today is "...to what degree do high-tech industry and economic segregation go together?"

A new study, Innovation, Skill, and Economic Segregation, published by Richard Florida and Charlotta Mellander (http://www.martinprosperity.org: July 28, 2017; Sept. 18, 2017), takes an in-depth look into this issue.  Mr. Florida explains their methodology, "Our analysis covers the majority of America's 350-plus metros.  Within them, we measure innovation both in terms of patents (the most commonly used measured of innovation by economists) and the concentration of high-tech industry.  We measure economic segregation through several models based on income, education, and occupation, as well as a combined measure of overall economic segregation based on all three."

Using these models, Mr. Florida and Ms. Mellander first looked at the connection between levels of innovation and economic segregation for the year 2010-the latest years of complete information.  Next, they studied the link between innovation and economic segregation between 2000-2010.  Combining regression analysis and Principal Component Analysis, the researchers examined "...the connections between innovation, high-tech industry and economic segregation.  Mr. Florida adds, "We control for factors like the population size, average income, and education levels of metros as well as levels of income inequality in order to make a distinction between high tech...and some of the factors that it may bring along with it."

Initial read, "innovation, high-tech industry and economic segregation appear to be closely connected."  A correlation analysis demonstrates the "close connection between economic segregation and patented innovations (0.26) and an even closer connection between economic segregation and the concentration of high-tech industry (0.63)."  The first number is about "the same age the correlation between economic segregation and income (0.26), while the latter is similar to the correlation between economic segregation and population (0.64) making it among the very highest in our analysis."

Be that as it may, the link between innovation, high-tech industry, and economic segregation becomes less obvious "...when we control for factors that are present even in low-tech metros-factors like population size and disproportionate levels of the rich and highly educated, which are also likely to bear  on economic segregation."  Richard Florida and Charlotta Mellander found just one example where the high-tech industry was directly connected to economic segregation.  "This is for occupational segregation, which describes the extent to which highly-paid knowledge workers are segregated from lower-wage blue collar and service workers."  However, across the remainder of their models, Mr. Florida and Ms. Mellander found that the high-tech industry was not statistically associated with economic segregation.

Instead, what they discovered was "...economic segregation appears to be more closely associated with three key factors: the population size, average income, and average education levels of a metro."

Mr. Florida reports, "In some cities, these factors may be partially attributable to high-tech industry, which has brought an influx of highly paid and highly educated workers to cities like Boston and San Francisco.  But many highly segregated cities don't have correspondingly high levels innovations."  When Mr. Florida do Ms. Mellander examined the 350-plus American metros, their study found that "innovation itself is not closely correlated with economic segregation as income and education levels are."  No surprise, they concluded that economic segregation closely hewed to income inequality.

In essence, "...economic segregation tends to be a function of the size and education levels of a metro, which are influenced by many industries other than tech n metros around the country."

Their research suggests that innovation alone may not be the cause for economic segregation in American cities.  However Mr. Florida adds this caveat, "...it is nonetheless in the interest of America's leading high-tech companies to stop extracting from the cities where they are located and use their tremendous resources and capabiities [http://www.technologyreview.com; June 20, 2017; date accessed Sept. 18, 2017] to make them less divided and more equitable-for example helping to improve infrastructure, rather than building exclusive transit systems."  It is these exclusive policies by specific companies that may be actually contributing to economic segregation and inequality.

The Trump Administration is threatening to cut off much needed aid to the high-tech companies' host cities.  The wise move would be for the companies to partner with the cities.  Richard Florida writes, "...high tech companies have no choice but to work with cities, neighborhoods, and residents to engender a new age of inclusive prosperity."

He concludes, "Innovation depends upon the clustering, diversity and intermixing of people in places." The level at which cities and metropolitans have become more segregated by income, education, and occupation, their ability to innovate and develop new technology is likely to decrease.  Over time, the increase in economic segregation is likely to deteriorate a metropolitan's innovation capabilities.  In essence, "The more segregated a place becomes, the less innovative it is likely to be."