Do Innovation Hubs Accelerate Inequality?

Cities like San Francisco, San Jose, Seattle, Boulder, Boston/Cambridge, and Austin are frequently referred to as innovation hubs.  What is an innovation hub?  In his book, The New Geography of Jobs, economist Enrico Moretti characterizes innovation hubs as cities that have a highly-educated labor force, high levels of human capital, and a strong innovation sector.  A highly educated region attracts more highly educated workers leading to a rise in incomes, upward mobility, and quality of life.  Innovation hubs, for obvious reasons, are consistently celebrated for driving creativity, economic development, and aspirations for a better future.  But during our research we kept coming back to one perplexing question: do innovation hubs accelerate social and economic inequality?

A closer look at the most vibrant innovation hubs tells a complex story.  On the one hand, cities like San Francisco and Seattle are magnets for young, college educated talent.  As anyone who has visited Austin over the last decade or so can see, the city has become one of the top destinations for young people looking to make their mark and a better future.   On the other hand, our ethnographic research strongly suggests that a city like Austin is a magnet for some but not for others.  Innovation hubs are driving economic vitality but they are also driving extraordinary levels of social and economic inequality.  Moretti argues that our cities are divided not simply by race or class but also by geography and, more precisely, the making of well educated and poorly educated regions. This trend is symptomatic of what Moretti calls the “Great Divergence,” a situation in which the innovation hubs (think Silicon Valley) are rapidly pulling away from cities that were once industrial or manufacturing hubs (think Detroit).  Among the many factors driving cities apart is the presence or lack thereof of young college grads who are synonymous with economic opportunity, ingenuity, and future growth.

But this divergence is also evident inside innovation hubs.  A New York Times article this week comments, once again, on how the arrival of a young and tech elite is transforming San Francisco into a city that only the affluent and upwardly mobile can afford to live in.  San Francisco’s transformation is not unique.  Similar trends–affordability issues, the clustering of the highly educated, and widening economic inequality–are apparent in the research that we have conducted.

Austin is an interesting case study of the complexities of the “Great Divergence.”  The growth in Austin’s creative class (a diverse community of, for example, designers, artists, musicians, software engineers, college profs, filmmakers, and digital media talent) has also produced a lower-skilled service sector class that finds itself on the edges of the opportunities percolating throughout Austin’s economy.  According to the U.S. Census Austin has been the nation’s capital for population growth since 2000.  But far more people in Austin will be employed in lower-wage service-oriented jobs rather than the creative industry jobs that generate substantial attention from researchers, industry, and the press.

Two years ago, University of Texas professor, Eric Tang published a paper that made a stunning observation.  Not surprisingly, Tang notes that between 2000-2010 Austin was among the fastest growing cities in the U.S. Tang also found that among the fastest growing cities Austin was the only one that saw a decrease in its African American population.  While Austin’s population grew by 20 percent, the city’s African American population declined by 5 percent during the same period.  Notably the decline in African Americans, Tang adds, was comprised mostly of those under the age of eighteen.

Among the fastest growing cities between 2000-10, Austin was the only one to see a decline in its African American population.
Among the fastest growing cities between 2000-10, Austin was the only one to see a decline in its African American population.

Tang cites a few factors driving this change including poor schools and a lack of economic opportunity. Many African American parents simply believe that the schools in the Austin city limits were ineffective in preparing their children for the transition into a knowledge economy. Moreover,  African Americans are typically underrepresented in the two growth sectors driving Austin’s economy: technology and construction.

The demographic remaking of innovation hubs highlight the extent to which the challenges of diversity, inclusion, and equity are indicative of larger social transformations and economic inequalities that appear, unfortunately, to be elemental to a thriving innovation economy.



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