A recent McKinsey report paints a fairly optimistic picture of the future of work in America. Yes, automation is coming for our jobs. But the net number of jobs will probably rise as jobs we haven’t heard of yet replace old ones.
As a housing and urbanism nerd I focused on which parts of the country are likely to see the most job growth. If trends continue apace and most of the new jobs end up being located in high-cost cities like San Francisco it will exacerbate the negative impacts of building jobs but not housing.
First, the good news. While we’ll likely need fewer office admins, customer service reps, food service workers, transportation and logistics roles, demand will increase for workers in healthcare, STEM, and business services, and jobs that require personal interaction such as massage therapists, concierges, and fitness trainers.
That’s the what. Now for the where.
In America, 25 megacities and high-growth hubs have generated more than two thirds of the nation’s job growth since the Great Recession.
The nine counties that comprise the Bay Area have a GDP of $748 billion. That’s the highest in the nation, and larger than Switzerland’s or Saudi Arabia. This economy alone is growing at double the rate of the United States.
“These are the nation’s most dynamic places,” the authors write. They’re marked by having a high concentration of high-growth industries (software development vs mining or farming), high-wage jobs, and young, highly educated workers. They’re also beset by extremely high costs of living and income and wealth inequality. What up, SF?
McKinsey examined 315 cities and more than 3,000 counties to see whether those trends are likely to continue. The authors suggest that 60 percent of US job growth through 2030 could happen in these high-growth cities. Cities with modest economic growth since the recession are likely to experience more moderate growth. And the 54 cities and 2,000 rural counties marked by older and shrinking workforces, higher unemployment, and lower educational attainment are likely to shed more jobs.
This is because the highest paying jobs are going to the highest skilled workers and both tend to favor big cities, where they can easily find funding and other highly skilled workers to accelerate their productivity. Researchers call this “agglomeration effects.”
The first problem with this trend is that American geographic mobility is at historic lows. The jobs are moving, but the people aren’t.
In 1990, 6.1 percent of Americans moved between counties or states. By 2017 that number had shrunk to 3.6 percent. And instead of moving from low-growth to high-growth areas, most people are making lateral moves due to the high cost of living in cities.
The harms of the split between where the workers live and where the jobs are being created goes beyond economic growth. Demographically, automation is likely to hit those with low-educational attainment hardest. Having low education levels and living in a low-growth area is linked with lower rates of family formation, higher rates of opioid addiction, and a rise in so-called “deaths of despair.” Poverty is linked with higher rates of mental illness and is a known risk factor for divorce.
Not only that, but “Americans living in cities, particularly on the coasts, are not only living longer but also have lower incidences of diabetes, stroke, heart attacks, and high blood pressure,” writes Derek Thompson. “Where one lives shapes when one dies.”
“Under that body count there’s a lot of social dysfunction that we think ultimately we may be able to pin to poor job prospects over the life course,” Anne Case, co-author of a Brookings Study on the topic told NPR. In other words, being locked out of economic opportunity condemns people to miserable lives and early deaths.
The people in these towns are dying along with them.
From the McKinsey report:
Imagine a stock clerk in Omaha who loses her job. She could look for a similar position locally, hoping to match her former salary of just under $28,000. Another option would be moving to San Francisco, where the economy is booming and the median salary for the same position is $35,240—well above what she could make if she stays put. But the latter option may leave her in worse economic shape despite the higher salary. The average rent on a two-bedroom apartment is $1,025 in Omaha, but $4,542 in San Francisco. In April 2019, a gallon of gas cost $2.55 in Omaha and $3.83 in San Francisco. Furthermore, her partner has a steady job in Omaha that would be lost in any move, and her mother is nearby to help with childcare.
This brings us to our second problem. Cities’ refusal to build housing means even though people can make much more money in big cities, they often still end up poorer.
Let me say that another way. Leaders in high-growth cities have decided to lock a full quarter of the US population out of economic opportunity and resign them to die in their shrinking towns in order to preserve “neighborhood character” for their wealthy homeowner constituents.
Some have proposed solving this bifurcation problem by trying to spur job growth in dying towns through grants and tax incentives. But that ignores that conglomeration effects are real and powerful and likely to become moreso over time. It also ignores the market-distorting unintended consequences of what amounts to corporate welfare. And it ends up further subsidizing suburban sprawl, which is not only ruinous for the environment but extremely expensive to maintain.
Our refusal to build housing in cities has led to a nationwide rent crisis.
“Nearly 40 million households, including half of all renters, are now spending more than 30 percent of income on housing,” Brooks Rainwater writes. “Demand is outstripping supply, with not enough new housing being built and too few existing affordable units preserved. Add in a dollop of local zoning restrictions, a heaping generation’s worth of federal disinvestment in housing, and a splash of NIMBYism, and we have a recipe for coast-to-coast disaster.”
The McKinsey authors are clear that the right thing to do is to build more homes in major cities. This would not only ease income inequality and the high cost of living for current residents but draw in low- and middle-income earners from low-opportunity areas.
“Communities need to prepare for this wave of change, focusing in particular on affordable housing in major cities,” the authors write. Cities should “increase affordable housing near employment centers” and improve mass transit between job centers and surrounding areas.
Luckily, we already know how to do this. Upzoning all residential areas and reducing local control through by-right permitting would spur a flurry of multi-family housing construction and we know from Seattle that more homes equal lower rents. What we don’t have yet are enough elected representatives with enough integrity to say no to wealthy, older, white homeowners and yes to the people who desperately need a way in.