Dive Brief:
- Five metro areas — Boston; San Francisco; San Jose, CA; Seattle; and San Diego — accounted for 90% of the growth in the innovation sector between 2005 and 2017, according to a new report from the Brookings Institution and the Information Technology and Innovation Foundation. Those same five regions held about 23% of those jobs in 2017, up from 18% in 2005, while 343 metro areas lost jobs in that sector.
- The report authors warn that regional concentration creates rising home prices, congestion, and regional and political divisions. Further concentration leaves millions of Americans "seriously disadvantaged" when it comes to income growth, job opportunities and economic inclusion, according to the report.
- Addressing the concentration requires a large-scale federal intervention, including tax breaks, direct R&D spending and regulatory changes, according to the report.
Dive Insight:
The innovation sector — defined in the report as the 13 industries with the most R&D spending and STEM workforce, including pharmaceuticals, software and computer engineering — may be booming, but the hyper-concentration poses risks across the country. Commercial rent and home prices have shot up in several of the tech cities, leading to an affordability crisis that has forced out some middle-class residents.
The concentration of workers and support industries in those handful of cities also makes it hard for other metro regions to attract tech giants. Even some high-profile moves, like Apple's expansion to Austin, TX or Amazon's decision to place a second headquarters in Virginia, have not stymied the trend.
Cities and states can do a lot to foster their own startup sectors or attract existing companies, report co-author and Brookings Metropolitan Policy Program Policy Director Mark Muro told Smart Cities Dive, but reversing the concentration will require the federal government to step in.
"The last 15 years have really been a glorious period for city development and bottom-up tech development, but our data show that some sort of lock-in is still occurring," Muro said.
The report calls for a massive package of federal innovation support, including a direct R&D funding increase worth up to $700 million a year for metro areas over 10 years, plus workforce development funding, tax benefits, urban placemaking and land and infrastructure support.
All told, fostering 10 new metro areas would cost the government some $100 billion over 10 years. Those benefits could be concentrated in cities that have the early indicators of a good tech economy, like a strong research university or a concentration of STEM workers.
The federal support, combined with state and local incentives, could shift the workforce trends and bring jobs outside of major coastal cities, Muro said.
"Time is of the essence, and technologically, this is a fluid time," he said. "The emergence of new tech, especially [artificial intelligence] may be creating new opportunities. There's probably no good time to propose the kind of spending we are, but this is a reflection of the seriousness of the problem and the importance of solving it."
