Author: Dwight Steward, Ph.D.

Dr. Steward regularly writes and speaks on topics involving business and individual economic damages, employment audits, and the analysis of payroll and time data in wage and hour investigations. Dr. Steward has also held teaching positions at The University of Texas-Austin in the Department of Economics and in the Red McCombs School of Business, The College of Business at Sam Houston State University, and at The University of Iowa. He has taught numerous courses in statistics, corporate finance, labor economics, business policies, managerial economics, and microeconomics.

What attracts people and employers to some cities but not others ?

Economies of agglomeration

agglomerationeconomiesA:Economies of agglomeration

Prof. Moretti in his book ‘Geography of Jobs’  identifies three things,  that economists collectively refer to as the forces of agglomeration, as driving factors.

One is the size and thickness of the specific labor markets. Thick markets allow workers and employers to make better and better informed and longer lasting employer matches.

Two is the ecosystem. Effectively, Moretti shows how the soil that we are planted with our employers is a huge contributor to our individual success. For instance he resents several interesting examples that show how both smart and not-so smart people benefit from being around smart people.

The number of cited patents example is particularly interesting and telling. He also makes it clear that having access to funding is made easier when the cities’ ecosystem is better developed.

Three are knowledge spilling overs.

 

Texas job openings by major occupational group

Texas June 2014

Total number of job openings and median searcher-to-job ratio across all MSAs (metropolitan statistical areas) for each major occupational group in Texas in May 2014.

Occupation openings s2jratio
Management, business, and financial occupations 54098 0.7
Professional and related occupations 77613 1.19
Office and administrative support occupations 52093 1.2
Installation, maintenance, and repair occupations 16796 1.42
Service occupations 61409 1.65
Sales and related occupations 26907 1.76
Farming, fishing, and forestry occupations 888 2.24
Transportation and material moving occupations 17950 2.28
Production occupations 20146 2.7
Construction and extraction occupations 15616 5.01

Just move already…geographic mobility and economic opportunity

In Chapter 6get-over-it-and-move-on of Moretti’s book ‘Geography of Jobs’,  he argues that geographic mobility is a key to economic prosperity.  The ability and willingness to move from an economically depressed area to a more robust one benefits not only the individual who moves but also the individuals and businesses in both areass.

Prof. Moretti points out that a number of countries that have low geographic mobility rates also have low economic activity measures. He uses his home country Italy as an example of a country where people do not move. Most interesting he makes the case for national mobility voucher program in the U.S.. The idea is that subsidizing a person’s move will help equalize economic opportunities across the nation. He closes the chapter discussing gentrification which he views as a good thing given all the pluses that arise from it.

Medical Care Commodities Inflate at a Higher Rate than General Inflation from May 2014 to June 2014

cpigeneral_inflation_2014_06The consumer price index (CPI) went up from 37.083 in May 2014 to 237.693 in June 2014, an annualized rate of 3.09%.

medical_commodities_2014_06medical_services_2014_06

The price index for medical care commodities went up at an annualized rate of 8.36% from May 2014 to June 2014. During the same period, the price index for medical care services and professional services went down at an annualized rate of 0.16% and 1.31%, respectively, whereas hospital and related services went up at 2.06%.

Image source: http://www.shutterstock.com/pic-54762670/stock-photo-background-concept-illustration-consumer-price-index.html

Texas Nurses, Therapists, and Physician Assistants See Increase in both Job Openings and Searchers per Job Opening from April 2014 to May 2014

nursing_symbolnurse_2014_05

The number of job openings and searcher-to-job opening ratio in Texas for nurses, therapists, and physician assistants increased from 9,292 and 0.95, respectively, in April 2014 to 9,612 and 1.09, respectively, in May 2014.

Image Source: http://www.carrollhs.org/s/1253/index.aspx?pgid=877

Moretti’s economic tale of two cites: where Microsoft is now and Albuquerque

In Moretti’s book, he provides a detail study of how innovation jobs can be economic driver and dictate the economic future of a town, city or region.
Moretti discusses where Microsoft (MSFT) is now , Seattle, and Albuquerque, NM.  These two cities embody the natural experiment that he suggest shows the impact of innovation jobs.  In short he shows how one town has grown and blossomed and the other has not.
 He points to three factors that have lead to the drastic divergence.
1 Job Creation.  The sheer number of innovation jobs created by Microsoft both directly and the tradition jobs that were created indirectly.
2. The MSFT millionaires. These millionairies changed the landscape of Seattle as they started their own companies in around the city (and the industry).
3. The Hubs.  According to Moretti cities like Seattle have become ‘Hubs’ that attract other businesses.  Many businesses find that the existence of other companies both in their industry (competitors) and related companies attracts other companies and makes it easier for them to do business

What is the innovation sector? Thoughts on Moretti’s book ‘The New Geography of Jobs’

Enrico Moretti’s book “‘The New Geography of Jobs” discusses how certain jobs, which he refers to innovation jobs, and where they are located are important factors for economic development.  Using data and economic research as support, he provides numerous arguments that suggest that these types of jobs are big economic drivers and dictate the economic fate of many communities.

So what are innovation jobs?  Moretti defines innovation jobs as jobs that make intensive use of human capital and human ingenuity. These jobs includes the obvious like high tech software jobs but also less obvious like jobs in the movie industry that make use of high tech and personal creativity.

Throughout the book Moretti argues that the typical innovation job is worth more substantially more than traditional jobs. That is one reason why he believes we should not be concerned about the loss in the traditional types of jobs.