A popular knock on high-profile Web 2.0 companies is that they employ relatively few workers compared to stalwarts of the older, manufacturing-based economy. As an example, critics point to Facebook, the poster child of today’s tech focused industry. Despite a customer base of 900 million, Facebook employs only 2,500 people globally. By comparison, GE, a veritable symbol of American manufacturing prowess, employs more than 300,000.
Politicians from both parties, acutely aware that voters are giving a critical eye to the unemployment rate, continue to tout a rebirth in American manufacturing as the key to job growth. However, not everyone agrees that more manufacturing equals more jobs.
In his book The New Geography of Jobs, University of California at Berkeley economics professor Enrico Moretti argues that, contrary to conventional wisdom, the information economy is a driver of job growth. The problem, according to Moretti, is that we often look at places like Palo Alto, Calif., with its office parks, Stanford University campus and ambitious entrepreneurs, and fail to recognize the ripples that tech companies send through the greater economy. Using reams of U.S. Census data, Moretti estimates that for every job created by the likes of Apple or Cisco Systems, another five jobs are added in the local service industry.
Specifically, for every designer or programmer Facebook hires, it also creates jobs for doctors, lawyers, FedEx couriers, carpenters and myriad other well-paid positions. “The presence of many college-educated residents changes the local economy in profound ways, affecting both the kinds of jobs available and the productivity of every worker who lives there, including the less skilled,” writes Moretti.
What does concern Moretti, though, is how these pools of jobs occur in geographic clusters – the Bay Area, Boston’s Route 128 or even Austin – instead of being more evenly spread across the country. That’s why Moretti believes it is no coincidence that places like the Bay Area thrive while cities like Detroit shrink.
Following the rise of the Internet in the late ‘90s, futurists and other pundits often argued that location no longer mattered. Thanks to the Internet, a skilled programmer could work from anywhere and no longer need to relocate to Northern California, the thinking went. It turns out the pundits were wrong and location is crucial. Moretti’s book maps out this reality and shows how the obvious rewards of our tech economy can be more evenly spread.