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Nov 8, 2017 in Informative
The New Geography of Jobs
The New Geography of Jobs is a new age economic concept, obviating the rising gap between geographically divergent locations with huge economic chasms. While economic experts, world over, have believed for a long time that with mounting economic growth, location disparities will fade out and societies will grow in a uniform manner; this eye-opener of a book by Enrico Moretti, brings to notice the glaring distance that the reality maintains from such assumptions. As the title of the book suggests, the new geography of jobs doesn’t merely expound on which jobs are prevalent in which geographic location, but goes on to explain how the quality of innovative jobs developing in a particular region leads to better paying non-innovative jobs in the same region as well. The major theme that will be discussed in this paper will be the Circular and Cumulative causation theory and the fact that societies with better education populations have generally higher standard of living, irrespective of the professions existent in the society. While the book briefly touches the logic behind the theory in initial chapters, it goes on to profoundly analyze its impact on the US demography in the succeeding chapters. This theory, very succinctly states that initial presence of industry in a region has a circular and later on cumulative effect on the economic growth of the region. It leads to attracting similar and related industries as well as human capital to support the growing needs of the region from surrounding regions. This in turn results in further economic growth and the whole process becomes a circular one, where initial economic growth attracts future upturn of economy. Ultimately an underlying concept is heralded that the salary and living standards of an individual may not only depend on her education and profession but also on the location where she is staying.
As mentioned in the introduction, the Circular and cumulative causation theory is experiencing the maximum emerging manifestations in the real world. While many regions in a developed country like the USA continue to stagnate or even shrivel up in terms of economic growth, some regions are experiencing upward movement of economies and attracting human capital from the regions falling behind. If we were to understand this circular concept in detail, it would be of the essence to understand the makings of these high growth regions and what leads to their cumulative and continual growth. A simple diagrammatic representation can well explain this phenomenon –
Author Moretti, very candidly claims that populations and economies are increasingly being defined by their level of education and individuals tend to accumulate in areas where like-minded and like-educated individuals reside, forming communities of similar educational backgrounds (p4-p5). Of course, such aggregation of highly educated individuals is bound to happen in regions where a hi-tech industry is present to provide jobs to these highly skilled individuals. Furthermore, such agglomeration leads to changed productivity of the entire community and attracts unskilled human capital from other regions to support the needs of the skilled workers. This in turn leads to the rise of some communities or regions which are markedly divergent than other communities in terms of level of education, job types, average salaries and standard of living (p4). It also explains the cumulative nature of economic growth in such communities, as with growing needs and productivity, more innovation is fueled and newer industries are attracted to these knowledge based communities leading to a new surge in economic growth.
There is further credit to this cumulative growth of knowledge communities given by the ‘multiplier effect’ (p13). Moretti describes this effect as the ratio at which every innovation or skill based job creates need for unskilled or non innovation jobs. The new geography of jobs dictates that wherever these is a scientist or engineer (or other high end technician), commanding a hefty salary for his services to an MNC, there will be a plethora of service providers who will be in a relatively less skilled profession but will command a higher salary for their services than their counterparts in the communities with no hi-tech workers. These additional supporting personnel who are attracted to these knowledge communities, by way of the multiplier effect, do not possess a special skill or boast of greater productivity. Just proximity to a highly skilled a well paid population entitles their services to a greater payment, thereby bringing up the average salary of these unskilled workers as well. Ultimately, the community as a whole grows at a rate which is way ahead of dumb communities (p2), lacking in any form of well educated and highly skilled populace.
In conclusion, it can be said that even developed countries with greater focus on innovation driven economies are experiencing a newly emerging geography, hugely dictated by the agglomeration of knowledge communities. Where it was hoped that innovation will lead to blurring of boundaries and make locations irrelevant, new boundaries have emerged which are dependent on proximity to skill and education rich communities. An individual’s salary no longer depends on her skills, profession or education alone but on the location as well. A growing multiplier effect is leading to more and more unskilled population migrating to serve the needs and demands of a highly paid skilled population, concentrated in hi-tech industrial regions. Despite the hopes of a trickle-down effect on the regions which are not as abundant in hi-tech jobs and knowledge communities; it is evident that cities failing to attract educated individuals and innovative industries will either stagnate or shrivel up in terms of economic growth.