The author Enrico Moretti presents this description of job geography into several chapters: The “American Rust,” which discusses how American manufacturing industry grew into prosperity and later declined into desperate; “Smart Labor,” an introduction to the innovation sector; “Great Divergence,” an account of how a border between innovating-hub cities and traditional industry cities has been developing and reinforcing; “Forces of Attraction,” the factors that create the innovative cities; “The Inequality of Mobility and Cost of Living,” the implication of mobility and costs of living has on the inequality within labor groups and labor market; “Poverty Traps and Sexy Cities,” which examines the several possible drivers of economic growth; Eventually, “The New ‘Human Capital Century’,” discussing the importance of human capital and how can Americans prepare for a new era.
The first chapter, American Rust, explains the development and decline of American traditional manufacturing, while suggests the potential survival of some innovative way of producing. Although the US manufacturing industry culminated in the 1970s and created great wealth and productivity, it abruptly crashed in the face of competition of globalization and technical progress. The huge demand for low-skilled labor and sector inside the country is fading, with jobs outsourcing to other countries. However, this is not the end of the story of manufacturing. America has the advantage of having great research and development. Moretti indicates the future of American prosperity: innovation sector. He also points out that regardless of whether it is traditional manufacturing or innovation, local service sector is essential. Thus, the America is polarizing-concentrating on either high-skilled or low-skilled sector and
eliminating medium-skilled jobs. Moretti reminds us that this is the tide of history, and we need to flow along with it instead of going against it.
The second chapter, Smart Labor, introduce us to our future, innovation sector. The growth of innovative hubs in the past decades creates enormous number of jobs not just for itself but also local service sector. Having multiplier effect, the new sector attracts both high educated people who specialize in advertising, legal support, venture capital, etc., and low-skilled labor who works in restaurants, grocery stores, hair salons, etc. Knowledge spillover is a crucial factor in the development of this sector, and innovative companies always develop with the clustering of human capital. Innovative sector is not necessarily about new jobs but about replacing existing human jobs with automation and technology. At the end of the chapter, Moretti demonstrates that globalization and technical progress are drivers of innovative sector, as they minimize costs of the sector and allow it to make great profit.
After introducing the hero of this book, Moretti in The Great Divergence chapter illustrates to us the power of innovation and the divergence forming between highly innovative areas and impoverished regions. The innovative regions possesses great number of college-educated labor and inventors as well as many patents granted and essential traded sector. These elements makes it has the power to grant even low-skilled labor higher salaries than other regions do. The inequality of wage and educational level is not the only discrepancies between innovative cities and non-innovative regions. They also differs in health status (life expectancy), family stability (divorce rate), and political involvement (107).
In the chapter forces of attraction, the book talks about three forces or advantages of these hubs: “thick labor market,” “the presence of specialized service providers,” and “knowledge spillover” (124).A thick market is defined as the abundance of both supply and demand in a
region. With thick market, cities have greater capacity of matching up employers and employees and reduces probability of unemployment or labor shortage (127). Specialized service providers are local services, especially high-skilled ones, that offer strong support for high-tech firms such as venture capital, advertising, legal support, consulting, and etc. Knowledge spillover is the most consequential one: talented people who gather together can exchange knowledge and come up with revolutionary ideas. The importance of knowledge spillovers dictates the crucial role of proximity in innovation, as creativity is maximized when talented people cluster together. The three forces together creates what is called the “localized economies of scale,” the productivity achieved when cluster of companies in a certain area gather and reinforce their talent and efficiency. In this scenario, the multiplier effect occur and strengthen itself over and over again in this process. However, the market is never static. The ever-changing technology dictates innovation sectors to be adaptive and capable of reinventing so that it could survive the flow.
The fifth chapter starts with an intriguing correlation between mobility and educational level: the more educated people are, the more mobile they are. The reason for that less educated people may be less informed about opportunities. Their economic status may also discourage them from relocating. However, relocating labor to another region implies greater opportunities and higher wages, and it could potentially reduce unemployment. As a result, there are policies that encourage relocation of workers such as insurance systems or “relocation voucher,” economic support that people receive when they relocate (158). The inequality among different regions is also reflected in real estate price and cost of living, and there is a positive correlation between cost of living and labor market prosperity. The development of labor market consequently lead to higher cost of living and the problem of gentrification. Policies tends to ameliorate gentrification by either limit inflow of innovative employers or inflow or new
residents. However, this is inefficient or even counterproductive, as it prevents both the multiplier effect and spillover, and eventually prevent job growth. The solution proposed by Moretti is to encourage establishment of greater labor market, the innovation hubs, while consciously manage the process along the way: minimize the cost and maximize the benefits.
The sixth chapter discusses how the government can learn from the existing innovative centers to pull declining cities out of the pit. Even though top universities and colleges are helpful, but they do not guarantee. The decisive factor is the presence of “academic stars,” persons eminent in their fields who are themselves entrepreneurs or magnets that can attract professionals and create clusters (181). Besides the influence of scholars, we have to build up market that is able to attract either employers or employees.
In this last chapter, Moretti reiterate the importance of human capital, and calls this era the “Human Capital Century” (215). He states that “good jobs and salaries increasingly come from the production of new ideas, new knowledge, and new technologies” instead of manufactured goods. He uses this chapter to discuss what should Americans do to prepare for this new era.
First, more investment has to be plunged into academic research, because huge economic value can be created with innovative discoveries. Then he propose two ways to enrich human capital in the US, either by education or immigration. Lastly, Moretti emphasize the weight of a decision that has to be made right now, a choice to either embrace the new trend of innovation, or to go against the flow and drag the past splendor with us.
Moretti has great insights in terms of the geographical inequality of the nations and the importance of innovation sector. What I appreciate the most about The New Geography of Jobs is that its guidance to this current society. Today, the declining of manufacturing sector and the associated job loss is constantly bringing up the voice of protectionism and blaming the practice
of outsourcing manufacturing jobs. In this book, Moretti manages to warn us that the magnificent manufacturing sector that used to lift up America to a level of economic climax is long gone. He first persuade us that globalization has benefits for both poor and rich people, then he turns out heads and pushes us to embrace the nascent innovation sector, which will thrive in the trend of globalization and create great wealth and transform our lives.
Besides his emphasis on the merit of globalization, I also appreciate his numerous discussions of education. The innovation sector inevitably requires highly educated people, but in fact, in this era of technology, every occupations require education. However, the education we need is more than traditional knowledge of literature and science but education that nurture a mind of innovation, a mind that desire for discoveries and changes. We need education that encourage us to embrace the technology and transform our lives. This is the education that this era requires.
The idea I love the most about this book is its emphasis on human capital. Human capital is the most valuable asset in this century, because however efficient automation is, and however productive machines are, everything starts with human mind. The development of this century lies on the efficient use of the creativity, the productivity, and innovation of the human brains.
This is also another reason education is crucial in human development: it nurtures and develop the potentials that human brains are capable of. Without education, people can only practice low- skill occupations. With sufficient education, people may research on the cutting edge of science. Research done by humans enables scientific development. Advance in science enables improvement and development of technology. Advancement of technology enables people to enhance their standard of living, and consequently the economic growth. To conclude, development and growth depends on humans, and the greater use of human capacity.
Work Cited
Moretti, Enrico. The New Geography of Jobs. Mariner Books/Houghton Mifflin Harcourt, 2013.