Economists are grappling with ways to share the wealth found in the tech sector that is overly concentrated in Silicon Valley and a few coastal cities with communities in the U.S. heartland.
They propose to spread out the economic development power of innovation industries to communities such as Rochester, New York, and Madison, Wisconsin, among dozens of others.
However, they face an immense task that could take years to remedy with $100 billion or more of federal government spending. The political will of Congress will be called upon, as well as the cooperation of hundreds of state and local governments and private industry.
One approach aired in recent days by researchers at Brookings Institute and the Information Technology & Innovation Foundation suggests the U.S. should create up to 10 new regional growth centers in the heartland with each area getting R&D funding worth $700 million a year for 10 years at a potential cost of $100 billion. They found that 90% of innovation sector job growth from 2005 to 2017 went to just five cities: Boston, Seattle, San Francisco, San Jose and San Diego.
Another similar approach described in early 2019 by two MIT economists has been adopted by U.S. Rep. Ro Khanna, a Democrat who represents Silicon Valley. Khanna hasn’t divulged all the details yet but will introduce a 21st Century Jobs Act in January that is expected to call for government support for technology educational institutes in the heartland and minority areas, coupled with a multibillion-dollar price tag.
What the industry is saying in Madison and more...
In a series of interviews, five engineers and industry officials told FierceElectronics that it makes sense to bolster tech growth with federal incentives in places such as Kansas City, Missouri, or Columbus, Ohio, or dozens of other places. But they questioned how the process would work on a practical level and how it will remain fair and effective.
Cities and states already compete aggressively for jobs of all kinds, especially those in tech, and they often devote generous numbers of staff and resources to attracting government grants and luring private sector jobs. Just hours after the ITIF and Brookings study surfaced on Dec. 9, Wisconsin Gov. Tony Evers and the state’s economic development officials began strategizing ways to take advantage of possible federal R&D funding.
That 93-page study, “The Case for Growth Centers: How to spread tech innovation across America” identified 35 heartland cities that could be potential growth centers. It named Madison, Wisconsin, as the number 1 most eligible with the nearby Milwaukee area ranked the 17th most eligible. With research universities in both areas, the Milwaukee to Madison region could be a prime spot for new tech jobs.
“We have an incredibly high number of college grads hanging out around the city of Madison,” said Buckley Brinkman, CEO of the Wisconsin Center for Manufacturing and Productivity, in an interview. “There’s an IT and startup hotbed here, but we won’t ever be confused with Silicon Valley.
“The problem we have is exactly what’s described in the report,” Brinkman continued. “We have many of the elements of east and west coast tech cities, but we don’t have the capital that’s sitting on the coasts. We have really smart people here, but not folks with credentials and the high-octane movers and shakers when compared to some big cities. We don’t have a deep bench of talent, but if the money comes, then the talent will come.”
Brinkman said the Brookings and ITIF study is right on. “I buy their theory that the tech hubs are going to continue to gain, and the rest of the country will continue to lag with really serious economic and social issues…We have to do something to counteract that.”
Retention and attraction of talent is also a concern for universities in Wisconsin. “If you talk to the academicians here, they get frantic about losing students” to jobs in other regions, Brinkman added.
An infusion of R&D capital to the Madison area would “require rebuilding with the people you have and applying tech in a sensible way. There’s no one way of doing this,” Brinkman said.
The MIT economists that have worked with Congressman Khanna identified 102 places for “jump-starting America” based on their numbers of college graduates, home prices, crime rates, commuting times and number of patents granted per thousand workers in each location. The top finisher was Rochester, New York, with an average house price of $170,000, 34% of adults with a college degree and 1,808 patents per 1,000 workers.
Propping up tech job opportunities in heartland cities like Pittsburgh or Syracuse, New York, matters on a personal level for engineers and chip designers, not just to policy wonks. That’s especially true for young workers interested in advancing their tech careers and salaries but also in maintaining the ability to have a job where they grew up or went to college with hopes of maintaining a high quality of life for their families.
From KC to Portland to Denver
“The big tech cities in the U.S. are also some of the worst cities to live in with traffic and building density and homelessness,” said Herb Sih, co-founder of Think Big Partners in Kansas City, Missouri, a consultancy on smart city issues. “There’s an increasing recognition that when Google comes calling, maybe I’m not going to move to Silicon Valley and Google needs to accommodate me with Skype or telework. They want to live with a quality of life. People are tired of the rat race in large metro areas.”
Duane Benson lives in the Portland, Oregon, area and is director of marketing for Milwaukee Electronics and Screaming Circuits. “We get good tech jobs in this area, but the more jobs we get, the lower the quality of life gets for those workers,” he said. “Commutes get longer, housing gets more expensive.”
Benson said the answer, generally, is not to send high tech jobs to smaller, more remote cities. “The supply chain does not reach out to those smaller cities,” he said. “The cultural and community things that tech workers want are less likely to be there. We need to be real creative in the areas where people want to live. High income jobs cannot exist without low-income jobs in support and low-income jobs cannot exist if low-income earners cannot afford to live in an area. We need fast, easy and inexpensive ways for people to get around and to add community housing in the mix…Attempting to create new tech centers without solving these problems will just end up re-creating the problems in other areas.”
Phil Marsh, an engineer, lives in Denver and works for Carbonics where he helps develop new semiconductors based on carbon nanotubes. He said the typical big tech cities tend to be congested and very expensive and are “a major drag on my future career choices. I was raised in a rural area but love working in semiconductor and software development technologies. I don’t feel at home living in a massive, crowded city and have been forced to choose between a lucrative career versus a nice place to live.”
Businesses move to big tech cities partly because their decision makers “are wealthy enough to not be put off by the expense of living in such places and have lived in large cities all their lives. I think I’m not alone and the idea you have to site yourself in Silicon Valley in order to access talent is just untrue. I suspect there are plenty of great engineers and developers who would jump at the chance to leave Silicon Valley if they could move to a smaller, less expensive city to work.”
Spreading out jobs to smaller cities would require flawless internet and further development of virtual and augmented reality to enhance remote work or even remote robotics and mechanics, he said. “The only solution to high housing costs and other problems with overcrowded cities is to spread out the workforce,” Marsh said.
Bob Bennett lives in Parkville, Missouri, a quaint community north of Kansas City, Missouri, where he worked as chief innovation officer until April. He recently founded B Square Civic Solutions to work on smart cities projects for other cities and is chairman of the Cities Today institute. He is leery of any proposal that involves federal spending coupled with too much federal oversight.
“The concept of the feds spending money in the heartland is good but given the performance of the feds I’ve seen they are not competent and not a good partner,” he said. “So many controls can muddy up the work. They can make an impact if they were to go back to a focus on infrastructure. We don’t need a new federal bureaucracy. We need to invest in the priorities that have been picked by mayors and governors.”
When he worked for Kansas City in recent years, four tech-related companies from San Francisco relocated to the city on the Missouri River. “They saw greater value for the salaries being paid,” he said. “There’s quality of life and lack of traffic and all the things you think about with the Midwest. We had connectivity with high speed fiber from Google and all the talent we needed and were able to bring.”