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  • New Central Business District Employment and Transit Commuting Data

    Photographs of downtown skylines are often the "signature" of major metropolitan areas, as my former Amtrak Reform Council colleague and then Mayor of Milwaukee (later President and CEO of the Congress of New Urbanism) John Norquist has rightly said. The cluster of high rise office towers in the central business district (CBD) is often so spectacular – certainly compared with an edge city development or suburban strip center – as to give the impression of virtual dominance. I have often asked audiences to guess how much of a metropolitan area’s employment is in the CBD. Answers of 50 percent to 80 percent are not unusual. In fact, the average is 7 percent in the major metropolitan areas (over 1,000,000) and reaches its peak at only 22 percent in New York (Figure 1), which sports the second largest business district in the world (after Tokyo).

    Only seven of the 52 major metropolitan areas have CBDs with 10 percent or more of employment. Some are much lower. For example, Los Angeles and Dallas have had some of the nation’s tallest skyscrapers outside New York or Chicago for decades, yet these downtowns have only 2.4 percent and 2.3 percent of their metropolitan area employment respectively (Figure 2).

    This and similar information has been summarized in the third edition of Demographia Central Business Districts, which is based on the 2006-2010 Census Transportation Planning Package, a joint venture of the Census Bureau and the American Association of State Highway and Transportation Officials (AASHTO). The two previous editions of the report summarized data from the 1990 and 2000 censuses.

    The Declining Role of Downtown

    Downtowns have become far less important than before World War II, when a large share of American households did not have access to automobiles and when employment was far more concentrated than today. Indeed, the highly concentrated American downtown area is "unique," as Robert Fogelson indicates in Downtown: Its Rise and Fall: 1880-1950, and could be easily located as the destination of the "street railways." Downtown was a product of transit and remains transit’s principal destination today. The concentrated US style CBD form is really quite rare outside other new world nations, such as Canada, Australia, South Africa and New Zealand. Some, but only a few Asian cities have also followed the example, most notably Shanghai, Hong Kong, Nanjing, Chongqing, Singapore, and Seoul.

    The US, however, for all its role as originator of the downtown paradigm has also led the world in employment dispersion. This reflects the dominance in the US of automobiles. Dispersion is more amenable to mobility by the car, which dominates motorized mobility in virtually all major metropolitan areas of North America and Western Europe. This has led in the US to generally shorter work trip travel times and less traffic congestion, according to Tom Tom and Inrix. The continuing expansion of working at home could improve the situation even more.

    New York has the largest CBD in the nation by far, with nearly 2,000,000 jobs. Chicago’s CBD (the Loop and North Michigan Avenue) has about one-quarter as many jobs (500,000) and Washington approximately 375,000. San Francisco, Boston and Philadelphia, also ranked among the nation’s transit "legacy cities," have between 200,000 and 300,000 jobs. Automobile oriented Houston and Atlanta are the largest otherwise, with Houston’s downtown being much more compact than Atlanta’s. Atlanta’s downtown has expanded strongly (and less densely) to the north and includes "Midtown" (Figure 3)

    Transit is About Downtown

    Transit is about downtown. Approximately 55 percent of transit commuting in the United States is to jobs in just six municipalities (not to be confused with metropolitan areas), which I have called transit’s "legacy cities." Most of that commuting is to the six downtown areas. Of course, the city of New York is dominant, which alone accounts for 55 percent of the country’s CBD transit commuting (Figure 4), with much of the balance in the other five legacy cities (Figure 4). Only 14 percent of the CBD commuting is to the other 46 smaller downtowns.

    More than 1.5 million transit commuters converge on jobs in Manhattan every day. In the other five legacy cities, the figure ranges from 100,000 to 300,000 daily. All of the other central business districts draw fewer than 100,000 daily commuters. Seattle ranks 7th, at 60,000, and has double or more the CBD transit commuters of any of the other 44 CBDs (Figure 5). 

    New York has by far the highest transit commuting share of any downtown in the nation. Approximately 77 percent of people who work in the New York central business district commute by transit. The other legacy cities post impressive market shares as well, though well below those of New York. The CBDs in Chicago, Boston, and San Francisco draw between 50 percent and 60 percent of their commuters by transit. Downtown Philadelphia and Washington attract more than 40 percent of their commuters by transit (Figure 6).

    Transit is About Downtown II

    The importance of downtown to transit is also indicated by its predominance in transit commuting destinations. In the New York metropolitan area, with a transit market share of approximately 30 percent, 57 percent of all transit commuting is to downtown jobs. Chicago’s transit commuting is concentrated in downtown to a slightly greater degree than in New York. One half of all the transit commuting in the San Francisco metropolitan area is to downtown. The CBDs of Boston, Philadelphia, and Washington account for between 40 percent and 50 percent of all transit commuting in their downtown areas. Seattle and Pittsburgh also are in this range (Figure 7). Seven of the eight metropolitan areas with the largest transit market shares have a CBD commuting dominance of 40 percent or more (Pittsburgh is the exception).

    The 52 major metropolitan area CBDs combined have less than five percent of the nation’s jobs. Elsewhere, downtowns and otherwise, the other 95 percent of American commuters use transit at only a three percent rate.

    Other Employment Centers

    In a new feature, Demographia Central Business Districts also provides data for selected employment centers other than the principal central business districts. These also include some surprises. For example, downtown Brooklyn, long since engulfed by the expansion of New York, has the second highest transit market share of any employment center identified other than New York, at 60 percent. Across the river, the Jersey City Waterfront area achieves a transit market share of more than 50 percent, greater than the downtowns of legacy cities Philadelphia and Washington.

    Data on supplemental employment center and corridor data is selected and therefore not representative. It is notable that some employment corridors and centers have employment totals that dwarf those of the principal downtown areas in their respective metropolitan areas, such as Los Angeles, Portland, Dallas, and Kansas City.

    With a few exceptions, the transit commuting shares for most of these selected centers and corridors is modest. Many are served by new rail systems, which are simply not up to the task of providing mobility to these dispersed centers. Nor can they provide the radial, high quality service that makes transit such a success in the six legacy city downtowns. For example, the Dallas light rail system provides service along virtually the entire US-75 corridor from north of downtown to Plano. Transit’s share of commutes in this corridor is only 2 percent, far below the downtown Dallas share of 14 percent and the legacy city downtown average of 65 percent.

    Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He was appointed to the Amtrak Reform Council to fill the unexpired term of Governor Christine Todd Whitman and has served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

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  • The Part-Time, Freelance, Collaborative Economy

    Are we becoming a part-time economy? Maybe. A collaborative economy? Possibly. A freelance economy? Definitely. Here’s the evidence:

    The Part-Time Economy- Involuntary part-time work is at a historic high, and the workforce participation rate is at a near-historic low. The number of unemployed people is higher, and the number of jobs in the economy is lower, than five years ago. During this weak recovery, more people have left the workforce than have started a new job, and a high percentage of the jobs that are being created are low-wage and part-time.

    This is a catastrophic situation, both in personal and in national terms. On the personal level, people need work to pay the bills, save some money for their non-working years (if they ever arrive) and, I would argue, to stay connected to society by being and feeling useful. It has long been noted that Americans are prone to defining themselves in terms of their work, through which they find a sense of identity, purpose and self-worth.

    On the national level, the country needs more citizens working more hours to pay taxes and to start to alleviate our unsustainable debt and unfunded liabilities.

    For this miserable state of affairs, some blame the Affordable Care Act. Others say it is a temporary phenomenon, due to the lousy economy and low economic growth. Still others blame technology and/or globalization for displacing jobs, or the rising share of profits that go to capital instead of to labor. And finally, some say the shift to part-time is a myth.

    According to a report from the Federal Reserve Bank of San Francisco, recessions always drive up part-time work, but what is different this time is that the part-time employment rate has remained higher for many more months than in past recessions. Also, states the report, the US labor market has recovered only about three-fourths of the jobs lost during the recession and its aftermath. In other words, general labor market slack is the key factor keeping part-time employment high.

    My conclusion? Many more people would be working, and working more hours, if not for the four horsemen of recession/depression: high taxes, overregulation, a weak currency and political (policy) uncertainty. When things crashed some five years ago, I wrote that the effects would be with us for years: slow growth at best, high unemployment and underemployment, underinvestment by businesses, and an overhang of debt. Sorry to say I was right, and that what I most feared has come to pass: a “recovery” that leaves tens of millions behind.

    How are millions coping?

    The Collaborative Economy- A modern version of the “pooled resources” strategy practiced through the ages by affinity groups — families, tribes, etc. — has been updated for the 21st century through the use of technology. Those outside of traditional economies once banded together to survive, and then thrived, becoming part of new mainstreams. This is happening again today. We are seeing peer-to-peer sharing not only of content, but of goods and services, transportation, space and money.

    Platforms that are hallmarks of this new economy include well known sites like Etsy, eBay, Craigslist, Kiva, and Kickstarter, as well as Rent the Runway, Lyft, Uber, and Airbnb. Apps and the internet are the new middle men of collaboration, connecting individuals. This economy also empowers entrepreneurs and hobbyists.

    Sharing is the New Buying, a report by CrowdCompanies.com and VisionCritical.com, breaks individuals down into three categories, based on their level of participation in the collaborative economy. A shrinking majority of us (61% of Americans) are still in a category the report calls “non-sharers,” not yet having dipped into this realm. A smaller portion (23%) are “re-sharers,” using some of the more popular and more established services like eBay and Craigslist. But then there is a smaller, rapidly emerging group (16%) known as “neo-sharers.” These are the people who are early adopters of sites like Etsy, Lyft, and Kickstarter, engaging in more niche forms of collaboration.

    The poor employment environment is one of the engines driving this trend, but once people become engaged in it, they may never go back to the traditional ways of doing things.

    The Freelance Economy- One in three Americans, roughly 42 million, are estimated to be freelancers. By 2020, freelancers are expected to make up 50% of the full time workforce. Independent work is becoming more common across all generations.

    As Jeff Wald writes in Forbes, the freelance economy is exploding at exactly the same moment that businesses are undergoing a major shift. Talent is moving from a fixed cost (and one that’s historically been one of the largest of a business) to a variable cost, with companies staffing up and down as needed.

    The booming online staffing industry is also accelerating the growth of the freelance economy. This $1 billion industry grew 60% last year.

    The online work marketplace oDesk recently announced that it hit $1 billion in work brokered between businesses — many of them small — and solopreneurs, freelancers who moonlight, and in many cases earn their entire living, online.

    While it’s unlikely the majority of businesses will ever become completely freelance or remote — core staff need to work in proximity at any company of a certain size; local service-based businesses need people on site, though those can be freelancers — it’s entirely plausible that more than half of the American workforce will one day log in or show up every day as independent contractors.

    A surprisingly large percentage of working freelancers have day jobs to supplement their incomes. And for many, it’s soon going to be the only option. By 2020, more than 40% of the US workforce will be so-called contingent workers, according to a study conducted by software company Intuit.

    ***

    Following the recent economic downturn, the employment rate has recovered at a frustratingly slow pace, except in one area: temporary, contingent, and independent workers. Between 2009 and 2012, according the Bureau of Labor Statistics, the number of temporary employees rose by 29%. A survey of the 200 largest companies found that temporary workers represented, on average, 22% of their workforce. Workers from all different industries, not just tech, are discovering that they’re able to be productive outside of the corporate office and without a long-term employer.

    Even with the economy and hiring improving, freelancing is likely to become a much bigger part of the employment landscape, regardless of what workers prefer. Employers like having the flexibility to expand and contract their workforce, and the supply of available workers currently exceeds demand in many fields. Elance, one of many online freelance hubs that matches freelancers with clients, recently announced that hiring by businesses through its site increased by 60% last year.

    Keep all this in mind every month when employment numbers are released by the Bureau of Labor Statistics; they’re missing the big story — the part-time, collaborative and freelance economy. This is what explains how the workforce can shrink while the unemployment rate also declines. Sure, a lot of people are retiring or collecting some sort of disability, but the big trend is that there is tremendous growth in freelance and independent contracting work, part-time work, and collaborative types of work that fly under the radar.

    Of the many repeating patterns I have discerned from decades of social and economic trend analysis, these are two of the most powerful: 1) what is outside the mainstream, if necessary or desirable, becomes mainstream, and 2) what is past is prologue.

    Dr. Roger Selbert is a trend analyst, researcher, writer and speaker. Growth Strategies is his newsletter on economic, social and demographic trends. Roger is economic analyst, North American representative and Principal for the US Consumer Demand Index, a monthly survey of American households’ buying intentions.

    Flickr photo by Antony Mayfield, Working in Intelligensia: Settled down to work in a coffee shop in Venice, California.

  • Freedom and its Fruits: Fertility Over Time in Estonia

    Estonians and Latvians are the only independent nations in Europe with fewer people now than at the beginning of the 20th century. It is written in The White Book, 2004, about losses inflicted on the Estonian nation by occupation regimes. During the whole period (1940-1991) nearly 90,000 citizens of the Republic of Estonia perished, and about the same number of people left their homeland forever. It happened in a nation with a population number of about one million. Another nation, through centuries, gradually perished and disappeared from this territory: the Livonians. Their leader, Caupo, in 1203 was received with honor by Roman Pope Innocent III. Interestingly, at least three regions in America are named after Livonians. They are Livonia in New York State, Livonia in Pennsylvania, and Livonia in the Michigan. Do the inhabitants of these Livonias have any connection to the Livonians at the Baltic Sea?!

    The growth of the number of Estonians in 45 postwar years till 1990 was about 100 thousand. This was caused by natural increase, decrease of mortality, return of ethnic Estonians from Russia. The fertility rate of Estonians was below the replacement level for 40 years, but from 1970 to 1990 was at or above the replacement level. At the same time, the foreign-born population experienced a rate of fertility beneath the replacement level: 1.64 – 1.72.

    The time between 1983 and 1988 was a positive period, with a crude birth rate (the number of births per 1000 people per year) of about 16.0. It is interesting that this situation arose during the so-called “stagnation era”. The stagnation period – life without radical changes – was probably fruitful for fertility growth. The same trend was noted for Russia. Perhaps this increase was caused by the decision of the Soviet government in 1981 to increase the birth rate “About Measures of Public Support to Families Having Children”. In 1989, the peak of fertility was over.

    The French demographer Adolphe Landry (1874-1956) defined genuine demographic revolution as the situation in which use of contraceptives and abortions by women becomes universal. This revolution detaches fertility from social control and transfers it to the interests of individuals. For Estonia, this period arrived at the beginning of nineties, when plenty of contraceptives became available, in addition to abortions continuing to be permitted.

    In 1991, the crude birth rate fell to 12.4, and the total fertility rate (number of children per woman during her lifetime, which characterize the necessary replacement level of 2.1) to 1.80. The year of 1991 was the first year of two decades of continuing decrease. Remarkably, fall of the birth rate at the beginning of nineties was much worse than it was during WW II. The population of about one million had 19.5 and 19.2 thousand births respectively in 1941 and 1942 during the war, but in 1993, when conditions were clearly better, only 15.3 thousand children were born to a population of one and a half million. The genuine demographic revolution had truly arrived!

    The reasons, in addition to the availability of contraceptives and abortions, were the decline of religion, economic uncertainty regarding the future, the opening of the world with a variety of lifestyle choices and career paths. Almost thirty decrees regarding the family benefits of the Soviet period that had been made by that government were cancelled in 1992. In the liberal market economy of the nineties, population policy was left largely to chance. Public attention to the issue was narrowly limited to family benefits and integration programs.

    The Parental Benefit Act passed in 2003 tried to attain the birth rate. According to the Act, persons have the right to receive parental benefits for 435 days from the day following the final day of maternity leave. The amount of the parental benefit received is calculated on the basis of the Social Tax paid during the previous year. If the parent didn’t work, the parental benefit is paid at the designated benefit base rate, which is 290 euros in 2013. The upper limit of the amount of the parental benefit is three times the average salary earned during the year before last, which – in 2013 – is 2,234 euros.

    If we take the birth rate of the years 2002 and 2003 – 13,000 births – as the plateau (base rate) and eliminate all other factors pertaining to reproductive behavior, then natality during the 2004-2012 period resulted in about 18 thousand additional births. This speaks to the effectiveness of the parental benefit. However, even this was insufficient for attaining positive natural increase. The total maximum fertility rate obtained was 1.65, but later, in 2011, it decreased to 1.52. In 28 countries of European Union the mean value of the total fertility rate was 1.58 in 2012, for euro area it was 1.56. However in France, which has perhaps the oldest experience in field of demography and demographic research, this indicator was 2.01. In contrast, Singapore’s total fertility rate steadily dropped from 1.6 in 2000 to a record low of 1.16 in 2010. It bounced back to 1.2 in 2011, and further to 1.29 in 2012, but last year slipped again to 1.19. 

    The government aims, by 2015, to achieve a birth rate that is higher than the death rate, meaning an increase of the total birth rate to 1.70. (Action Program of the Government of the Republic 2011-2015). This seems unattainable. Poverty and migration worsen the situation. The at-risk-of-poverty rate in Estonia in 2011 was 17.6% on the average. The parent benefit and family benefits together constituted 1,7% of GDP in 2011 ( the same figure in Sweden and Finland was 3%).  

    One key cause, ironically, is freedom to move that came with the fall of the Soviet Union. Handling the population decrease we described first of all the birth rate, but last years has been intensified external migration. Migration that took place in 2011 decreased the population of Estonia in 2012 by 6,600 inhabitants. The trend continued. In external migration, there was an increase in both immigration and emigration in 2012. Over 4,000 persons immigrated to and almost 11,000 persons emigrated from Estonia. The main destination countries for emigrants are Finland and the United Kingdom. Most of the immigrants are in fact returnees, mostly from Finland. The second place is held by Russia, but the immigrants from Russia are mainly new immigrants.

    Despite numerous attempts to boost birth rate, the years from 1991 to 2013 are characterized by a birth rate under the replacement level. The lowest point arrived in 1998, with a total fertility rate of 1.28. After that it began to rise, reaching 1.65 in the year of 2008, only to decrease again later. At the same time, the population figure decreased by 14%. Problems caused by decreasing population entail a threat to the survival of the Estonian national culture, issues with sustainable economic development and difficulties with the sustainability of the social infrastructure. 

    How to avoid the fate of Livonians? Is there a force majeure against the small nation? Or it is a problem of insufficient national steering without any specialized institution responsible on population?

    Jaak Uibu, a Phd. in human micro ecology, was former Deputy Minister of Health of Estonia and advisor to Minister of Population. 

    Oleviste photo by E. Kanash.

  • Era of the Migrant Moguls

    Southern California, once the center of one of the world’s most vibrant business communities, has seen its economic leadership become largely rudderless. Business interests have been losing power for decades, as organized labor, ethnic politicians, green activists, intrusive planners, crony developers and local NIMBYs have slowly supplanted the leaders of major corporations and industries, whose postures have become, at best, defensive.

    Increasingly, a search for inspiration about the region’s future must focus, first and foremost, on immigrants. As major companies disappear, merge or shift more of their operations elsewhere, the foreign-born represent a significant asset for our grass-roots economy. With many of the region’s legacy industries – from oil and gas to aerospace and entertainment – stagnating or declining, the area desperately needs new blood to avoid ending up like the older cities of the slow-growth Northeast or Midwest, albeit with much better weather.

    Amid a graying and, increasingly, marginal generation of regional business leaders, there have emerged new foreign-born dynamic figures. Some great examples: South African native and Tesla founder Elon Musk, who lives in Los Angeles and runs SpaceX, headquartered in Hawthorne and with more than 2,000 employees, and John Tu and David Sun, owners of Fountain Valley’s Kingston Technology, a leading independent memory-chip manufacturer founded in 1987 and now employing 4,000 people worldwide.

    Our new moguls increasingly are minted abroad. Pharmaceutical entrepreneur Patrick Soon-Shiong, the son of Chinese immigrants from South Africa, is now widely considered the richest man in Los Angeles, according to the Los Angeles Business Journal. But he’s not alone; five of the 13 richest people in the City of Angels are immigrants; in 1997 there was one, Australia’s Rupert Murdoch.

    Why are these immigrants so bright when much of our business leadership is dark grey? Part of it has to do with the nature of people who risk everything to migrate to another country. Overall they account for one out of every five U.S. business owners. They are three times as likely to start a new business than non-immigrants; in 2010 they accounted for almost one-in-three new firms, twice their share in 1995. Roughly 40 percent of the engineering-based firms started in Silicon Valley, notes the Kauffman Foundation, had at least one immigrant founder.

    Whether in high-tech, pharmaceuticals or running the local coffee shop, immigrants tend both to innovate and take risks. That’s because, as Kingston’s John Tu explained to me, they don’t have a choice. “The key thing about being an immigrant makes you flexible,” he said. “IBM, Apple and Compaq were inflexible. They told the memory customers to take it or leave it. We thought about the customer and the relationship with the employees. I guess we didn’t know any better.”

    Rise of the ethnoburb

    Most of the growth being generated by Southern California’s immigrants is taking place in suburban communities – what geographer Wei Li describes as ethnoburbs. Despite the hopes that more Southlanders can be lured into high-density, high-rise rental housing, immigrants, particularly Asians, here and elsewhere, continue to move further from the city core to areas where they can live with a degree of privacy and quiet virtually impossible in their homelands.

    This can be seen in the migration numbers. As foreign-born numbers have dropped in expensive and crowded Los Angeles and Orange County, the big growth has taken place in other areas, notably in fast-growing Texas cities such as Dallas and Houston, as well as numerous low-cost, pro-business states in the Southeast. The one Southland area that has continued to see a boom in foreign-born residents – the Inland Empire – has the lowest population density and house prices in the region.

    According to demographer Wendell Cox, the Inland Empire’s immigrant population has swelled by more than 50 percent, or more than 300,000 people, since 2000, roughly three times the increase in actual numbers seen in Los Angeles and Orange counties. Much of this growth is taking place not in the older cities such as Riverside and San Bernardino, as might be expected, but in generally more affluent, newer suburbs such as Rancho Cucamonga, whose foreign-born population soared a remarkable 61.6 percent over the past decade. Even Moreno Valley, on the edge of the urbanization, has more foreign-born residents than does San Bernardino.

    Even within the coastal counties, much of the growth in the Asian population, now the largest source of immigrants to the U.S., has been outside the densest, more-urbanized parts of the region. As the immigrant share of the population has declined in traditional immigrant strongholds such as the city of Los Angeles (down 5 percent) and Santa Ana (more than 11 percent), Cox notes, the immigrant population is shifting to more upscale suburbs. In Glendale, a major destination for both Armenian and Asian immigrants, more than 56 percent of the population is foreign-born, up 4 percent since 2000.

    Other popular immigrant destinations include once-heavily white suburban communities, such as Irvine, which is now more than 38 percent foreign-born, up almost 19 percent since 2000. Fullerton, like Irvine, favored largely by Asian migrants, saw its foreign-born population increase by 21 percent since 2000, now accounting for more than one-third of the city’s total.

    Other places that seem to be attracting immigrants include Santa Clarita, Palmdale and Lancaster, all communities further out on the periphery of the region.

    Harnessing entrepreneurial energy

    If Southern California’s future lies largely in the hands of newcomers and their offspring, how can we best respond to their needs? One way is by maintaining a large supply of single-family houses or townhomes. Today’s immigrants, particularly Asians, favor settling in ethnoburbs more than the dense Chinatowns, Little Indias and barrios that may strike many other Americans as somehow more colorful. Now, the best place to encounter immigrant food and culture is frequently at the strip malls of Monterey Park, the Hispanicized shopping complexes like Plaza Mexico, Irvine’s Diamond Jamboree Center or the amazing 626 Night Market at Santa Anita Park in Arcadia.

    Of course, immigrants are less interested in providing neighbohoods with local color than in moving to places with good schools, safe streets and parks – as most middle-class families prefer. This preference runs afoul of the kind of extreme land-use regimen being imposed on the region, including the Inland Empire, planning that seeks to promote the construction of high-density housing that, to be honest, many immigrants, particularly Asians, could enjoy at home, with far more amenities.

    Planners and some developers seem keen on this shift, thinking it will appeal to young childless couples and empty-nesters. What they ignore is that, without plentiful, and at least somewhat affordable, single-family houses, immigrants will continue to shift to other parts of the country, notably, the Southeast and Texas, where they can afford them.

    Perhaps even more important may be the economy. Immigrants are the ultimate canaries in the coalmine – they tend to gravitate toward opportunity. When Southern California’s economy was burgeoning in the 1970s and 1980s, immigrants also flocked here, buying homes and starting businesses. Few immigrant entrepreneurs reached the level of a John Tu or an Elon Musk, but many have launched small manufacturing firms that supported larger firms, engaged in international trade and started small service businesses.

    Unfortunately, the business climate in Southern California increasingly makes such enterprise ever more difficult, and may lead these entrepreneurs to relocate or expand where their efforts may be more appreciated. Not helping these businesses is an L.A. political climate dominated by a crony capitalist regime – not at all friendly to plucky startups of any kind – or by a Republican Party that still seems unable to make peace with the demographic realities of our region.

    The good news is, however, that these immigrants, and their kids, are still here. They have many reasons to stay, including the presence of ethnic media, churches, schools and shops not likely to be remotely as well-developed in places like Las Vegas, Phoenix, Atlanta or Nashville. But this does not mean they can be taken for granted. We need to recognize that they are our greatest asset, and, if we can appeal to their aspirations, they could help fashion a resurgence in this region.

    This story originally appeared at The Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    Photo by LHOON

  • More Criticism of the Mythical Shift to Transit

    There has been additional attention to the exaggeration of transit ridership trends claimed by the American Public Transit Association. Writing in The Washington Post, David King of Columbia University. Michael Manville of Cornell University and Michael Smart of Rutgers University said that the "association’s numbers are deceptive" and that the "interpretation is wrong.” Noting their strong support of public transportation, King, Manville and Smart said that "misguided optimism about transit’s resurgence helps neither transit users nor the larger traveling public." They further say that "there is no national transit boom."

    They examine the data by metropolitan area and find that "transit use outside New York declined in absolute terms last year, and conclude that this "fact shows how crucial public transportation is to our largest city and how small a role it plays in most other Americans’ lives.

    Also see: No Fundamental Shift, Not Even a Shift.

  • Where Inequality Is Worst In The United States

    Perhaps no issue looms over American politics more than worsening  inequality and the stunting of the road to upward mobility. However, inequality varies widely across America.

    Scholars of the geography of American inequality have different theses but on certain issues there seems to be broad agreement. An extensive examination by University of Washington geographer Richard Morrill found that the worst economic inequality is largely in the country’s biggest cities, as well as in isolated rural stretches in places like Appalachia, the Rio Grande Valley and parts of the desert Southwest.

    Morrill’s findings puncture the mythology espoused by some urban boosters that packing people together makes for a more productive and “creative” economy, as well as a better environment for upward mobility. A much-discussed report on social mobility in 2013 by Harvard researchers was cited by the New York Times, among others, as evidence of the superiority of the densest metropolitan areas, but it actually found the highest rates of upward mobility in more sprawling, transit-oriented metropolitan areas like Salt Lake City, small cities of the Great Plains such as Bismarck, N.D.; Yankton, S.D.; Pecos, Texas; and even Bakersfield, Calif., a place Columbia University urban planning professor David King  wryly labeled “a poster child for sprawl.”

    Demographer Wendell Cox pointed out that the Harvard research found that commuting zones (similar to metropolitan areas) with less than 100,000 population average have the highest average upward income mobility.

    The Luxury City

    Most studies agree that large urban centers, which were once meccas of upward mobility, consistently have the highest level of inequality. The modern “back to the city” movement is increasingly less about creating opportunity rather than what former New York Mayor Michael Bloomberg called “a luxury product” focused on tapping the trickle down from the very wealthy. Increasingly our most “successful cities” have become as journalist Simon Kuper puts it, “the vast gated communities where the one percent reproduces itself.”

    The most profound level of inequality and bifurcated class structure can be found in the densest and most influential urban environment in North America — Manhattan. In 1980 Manhattan ranked 17th among the nation’s counties in income inequality; it now ranks the worst among the country’s largest counties, something that some urbanists such as Ed Glaeser suggests Gothamites should actually celebrate.

    Maybe not. The most commonly used measure of inequality is the Gini index, which ranges between 0, which would be complete equality (everyone in a community has the same income), and 1, which is complete inequality (one person has all the income, all others none).  Manhattan’s Gini index stood at 0.596 in 2012, higher than that of South Africa before the Apartheid-ending 1994 election. (The U.S. average is 0.471.) If Manhattan were a country, it would rank sixth highest in income inequality in the world out of more than 130 for which the World Bank reports data. In 2009 New York’s wealthiest one percent earned a third of the entire municipality’s personal income — almost twice the proportion for the rest of the country.

    The same patterns can be seen, albeit to a lesser extent, in other major cities. A 2006 analysis by the Brookings Institution showed the percentage of middle income families declined precipitously in the 100 largest metro areas from 1970 to 2000.

    The role of costs is critical here. A 2014 Brookings study showed that the big cities with the most pronounced levels of inequality also have the highest costs: San Francisco, Miami, Boston, Washington, D.C., New York, Oakland, Chicago and Los Angeles. The one notable exception to this correlation is Atlanta. The lowest degree of inequality was found generally in smaller, less expensive cities like Ft. Worth, Texas; Oklahoma City; Raleigh, N.C.; and Mesa, Ariz. Income inequality has risen most rapidly in the bastion of luxury progressivism, San Francisco, where the wages of the 20th percentile of all households declined by $4,300 a year to $21,300 from 2007-12. Indeed when average urban incomes are adjusted for the higher rent and costs, the middle classes in metropolitan areas such as New York, Los Angeles, Portland, Miami and San Francisco have among the lowest real earnings of any metropolitan area.

    Rural Poverty

    But cities are not the only places suffering extreme inequality. Some of the nation’s worst poverty and inequality, notes Morrill, exist in rural areas. This is particularly true in places like Texas’ Rio Grande Valley, Appalachia and large parts of the Southwest.

    Perhaps no place is inequality more evident than in the rural reaches of California, the nation’s richest agricultural state. The Golden State is now home to 111 billionaires, by far the most of any state; California billionaires personally hold assets worth $485 billion, more than the entire GDP of all but 24 countries in the world. Yet the state also suffers the highest poverty rate in the country (adjusted for housing costs), above 23%, and a leviathan welfare state. As of 2012, with roughly 12% of the population, California accounted for roughly one-third of the nation’s welfare recipients.

    With the farm economy increasingly mechanized and industrial growth stifled largely by regulation, many rural Californians particularly Latinos, are downwardly mobile, and doing worse than their parents; native-born Latinos actually have shorter lifespans than their parents, according to a2011 report. Although unemployment remains high in many of the state’s largest urban counties, the highest unemployment is concentrated in the rural counties of the interior. Fresno was found in one study to have the least well-off Congressional district.

    The vast expanse of economic decline in the midst of unprecedented, but very narrow urban luxury has been characterized as “liberal apartheid. ” The well-heeled, largely white and Asian coastal denizens live in an economically inaccessible bubble insulated from the largely poor, working-class, heavily Latino communities in the eastern interior of the state.

    Another example of this dichotomy — perhaps best described as the dilemma of being a “red state” economy in a blue state — can be seen in upstate New York, where by virtually all the measurements of upward mobility — job growth, median income, income growth — the region ranked below long-impoverished southern Appalachia as of the mid-2000s. The prospect of developing the area’s considerable natural gas resources was welcomed by many impoverished small landowners, but it has been stymied by a coalition of environmentalists in local university towns and plutocrats and celebrities who have retired to the area or have second homes there, including many New York City-based “progressives.”

    Where Inequality Is Least Pronounced

    According to the progressive urbanist gospel, suburbs are doomed to be populated by poor families crowding into dilapidated, bargain-priced former McMansions in the new “suburban wastelands.” Suburbs, not inner cities, suggests such urban boosters as Brookings Chris Leinberger, will be the new epicenter of inequality, even though the percentage of poor people, as shown above, remained far higher in the urban core.

    Yet , according to geographer Morrill, in comparison with urban cores, suburban areas remain heavily middle class, with a high proportion of homeowners, something rare inside the ranks of core cities.The average poverty rate in the historical core municipalities in the 52 largest U.S. metro areas was 24.1% in 2012, more than double the 11.7% rate in suburban areas. Between 2000 and 2010, more than 80% of the new population.

    in America’s urban core communities lived below the poverty line compared with a third of the new population in suburban areas, although the majority of poor people lived there, in large part because they are also the home to the vast majority of metropolitan area residents.

    An analysis by demographer Wendell Cox of American Community Survey Data for 2012 indicates that suburban areas suffer considerably less household income inequality than the core cities. Among the 51 metropolitan areas with populations over 1 million, suburban areas were less unequal (measured by the Gini coefficient) than the core cities in 46 cases.

    The Racial Dynamic

    There is also a very clear correlation between high numbers of certain groups — notably African Americans but also Hispanics — and extreme inequality. Morrill’s analysis shows a huge confluence between states with the largest income gaps, largely in the South and Southwest, with the highest concentrations of these historically disadvantaged ethnic groups.

    In contrast, Morrill suggests, areas that are heavily homogeneous, notably the “Nordic belt” that cuts across the northern Great Lakes all the way to the Seattle area, have the least degree of poverty and inequality. Morrill suggests that those areas dominated by certain ethnic backgrounds — German, Scandinavian, Asian — may enjoy far more upward mobility and less poverty than others.

    Some, such as UC Davis’ Gregory Clark even suggest that parentage determines success more than anyone suspects — what the Economist has labeled “genetic determinism.” None of this is particularly pleasant but we need to understand the geography of inequality if we want to understand the root causes of why so many Americans remain stuck at the lower ends of the economic order.

    This story originally appeared at Forbes.com.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

  • The Great Skills Gap Myth

    One of the great memes out there in trying to diagnose persistently high unemployment and anemic job growth during what is still, I argue, the Great Recession is the so-called “skills gap”. The idea here is that the fact that there are millions of unfilled job openings at the same time millions of people can’t find work can be chalked up to a lack of a skills match between unemployed workers an open positions. To pick one random example out of many, here’s the way US News and World Report put it last year:

    Some 82 percent of manufacturers say they can’t find workers with the right skills. Even with so many people looking for jobs, we’re struggling to attract the next generation of workers. The message about the opportunities in manufacturing doesn’t seem to be reaching parents and counselors who help guide young people’s career ambitions.

    We face two major problems – a skills gap and a perception gap. Today’s modern, technology-driven manufacturing is not your grandparents’ manufacturing, yet for many, talk of the sector evokes images from the Industrial Revolution.

    What’s interesting about this is that the “skills gap” continues to have tremendous resonance in public policy discussions I come across although it’s very easy to find many mainstream press articles that challenge it. So I want to take my shot at the problem.

    Is there a skill gap? In select cases I’m sure there’s a mismatch in skill, but for the most part I don’t think so. I believe the purported inability of firms to find qualified workers is due largely to three factors: employer behaviors, limited geographic scope, and unemployability.

    Employer Behaviors

    Let’s be honest, it’s in the best interest of employers to claim there’s a skills gap. The existence of such a gap can be used as leverage to obtain public policy considerations or subsidies. So there’s a self-serving element.

    But beyond that, several behaviors of present day employers contribute to their inability to hire.

    1. Insufficient pay. If you can’t find qualified workers, that’s a powerful market signal that your salary on offer is too low. Higher wages will not only find you workers, they also send a signal that attracts newcomers into the industry. Richard Longworth covered this in 2012. He explains that companies have refused to adjust their wages due to competitive pressures:

    In other words, Davidson said, employers want high-tech skills but are only willing to pay low-tech wages. No wonder no one wants to work for them….So why doesn’t GenMet pay more? In other words, why doesn’t it respond to the law of supply and demand by offering starting wages above the burger-flipping level? Because GenMet is competing in the global economy. It can pay more than Chinese-level wages, but not that much more.

    In other words, this company in question doesn’t have a skill gap problem, they have a business model problem. They aren’t profitable if they have to pay market prices for their production inputs (in this case labor). It’s no surprise firms in this position would be seeking help with their “skill gap” problem – it’s a backdoor bailout request.

    2. Extremely picky hiring practices enforced by computer screening. If you’ve looked at any job postings lately, you’ll note the laundry list of skills and experience required. The New York Times summed it up as “With Positions to Fill, Employers Wait for Perfection.” Also, companies have chopped HR to the bone in many cases, and heavily rely on computer screening of applicants or offshore resume review. The result of this automated process combined with excessive requirements is that many candidates who actually could do that job can’t even get an interview. What’s more, in some cases the entire idea is not to find a qualified worker to help legally justify bringing in someone from offshore who can be paid less.

    3. Unwillingess to invest in training. In line with the above, companies no loner want to spend time and money training people like they used to. I strongly suspect most of those over 50 machinists and such we keep hearing about learned on the job. Why can’t companies simply train people in the skills they need? When I started work at Andersen Consulting in 1992, we weren’t expected to have any specific skill. Instead, they were looking for general aptitude and spent big to train us in what we needed to know. In a sense, outside of some professional services fields, today’s companies, despite their endless talk about talent, don’t actually recruit talent at all. They are recruiting people with specific skills and experience. That’s a very different mindset.

    4. Aesthetic hiring. This one I think is specific to select industries, but in some fields if you don’t have the right “look”, you’re going to find it difficult. For example, the NYT Magazine just today has a major piece called “Silicon Valley’s Youth Problem” talking about this very issue. Hip, cool startups see their working environment and culture as critical to success. And that’s true, but those cultures aren’t very inclusive, which is why many Silicon Valley firms are continuously under fire for various forms of discrimination. When they’re trying to be the hot new thing, the last thing an app startup wants is some 55 year old dude with a pocket protector cramping their style, no matter how much of a tech guru he might be.

    Limited Geographic Scope

    You frequently see the skills gap phrased in terms of specific geographies. For example, a state. Rhode Island has X number of unemployed people and Y number of unfilled jobs. So what do we do to match them up?

    This type of thinking is too limited. I attended an hour brainstorming session on the Rhode Island skills gap a while back and not once did anyone suggest anything that crossed the state boundary. One person mentioned these technical high schools in Boston that produce grads with exactly the skills the market is needing. His idea was that Rhode Island needed to create these types of institutions. Not a bad idea, but I was struck that nobody thought about sending these Rhode Island employers who can’t find workers on the one hour drive to Boston to go hire some of those grads directly out of Boston’s high schools. Problem solved. And maybe while bringing some young, fresh blood into the state to boot.

    Similarly, no one ever suggested that an unemployed person in Rhode Island might seek work out of state. Realistically, America has often solved unemployment problems through migration. People need to be willing to move to where the job opportunities are. In fact, if you look at the highly educated people who might say telling people to move in order to find work is evil awful, they are actually the most mobile people there are. Clearly the highly skilled see the value in pursuing opportunity through migration. We need to extend the same opportunity to those who are currently stuck in place.

    Unemployability

    A third problem is that a significant number of adults in this country are simply unemployable. If you’re a high school dropout, a drug user, etc. you are going to find it tough slogging to find work anywhere, regardless of skills required.

    Watching the Chicagoland documentary and seeing what kids in these inner city neighborhoods face, a lack of machine tool or coding skills is far from the problem. Similar problems are now hitting rural and working class white communities where the economic tide has receded. Heroin, meth, etc. were things that just didn’t exist in my rural hometown growing up – but they sure do now.

    These aren’t skill problems, they are human problems. And the answer isn’t simply job training. These problems are much, most more complex and they are incredibly difficult to solve. They need to be tackled by very different means than a job skills problem.

    If you want more info that documents that there is no skills gap, google around and find plenty of economists crunching the numbers to show that’s the case. But I hope this gives you a sense of some of the trends that explain why there can be persistent unemployment with many job openings without recourse to a skills gap to explain it.

    Aaron M. Renn is an independent writer on urban affairs and the founder of Telestrian, a data analysis and mapping tool. He writes at The Urbanophile, where this piece originally appeared.

    Auto manufacturing photo by BigStockPhoto.com.

  • No Fundamental Shift to Transit: Not Even a Shift

    The American Public Transportation Association (APTA) is out with news of higher transit ridership. APTA President and CEO Michael Melaniphy characterizes the new figures as indicating "a fundamental shift going on in the way we move about our communities.” Others even characterized the results as indicating "shifting consumer preferences." The data shows either view to be an exaggeration.

    1935 and 2013

    This is hardly a reliable time for making judgments about fundamental shifts or shifts in consumer preferences. Economic performance has been more abysmally abnormal only once in the last century –during the Great Depression – than at present.

    The last year, 2013, is the sixth year in a row that total employment, as reported by the Bureau of Labor Statistics was below the peak year of 2007 (Figure 1). This run of dismal job creation was exceeded only between the Great Depression years of 1929 and 1936 in the last 100 years (Note 1). From World War II until the Great Recession, the maximum number of years that employment fell below a previous peak was two, following the 9/11 terrorist attacks (2001 to 2003). The Great Recession may have ended, according to the National Bureau of Economic Research, but the Great Malaise continues as the economy is performing well below historic levels. Judgments about fundamental shifts and consumer choice today are not more reliable than they would have been in the Great Depression year of 1935.

    Transit’s Market Share: Stuck in Neutral

    But more importantly, there is no shift to transit.  APTA is right to point out that transit ridership has grown faster than vehicle travel in the United States since 1995. Nonetheless, transit’s share of urban travel has barely budged, because its 1995 share of travel was so small. This is indicated by Figure 2, which compares the overall market share of transit to that of cars and light trucks from 1995 to 2013. Indeed, the top of Figure 2 (the 100 percent line) is virtually indistinguishable from the personal vehicle share over the entire period. The bottom of the chart (the zero percent line) is virtually indistinguishable from the transit share. This is not the stuff of fundamental shift.

    Commuting: The Story is Not Transit

    A similar pattern of little or no change is indicated by the commuting (work access) data from the Census Bureau’s American Community Survey.

    Over the past five years, as with virtually all the years since such data has been collected, the overwhelming majority of new commuters have driven alone (Figure 3). Indeed, transit has not taken a single net automobile off the road since 1960, and not in the last five years. Between 2007 and 2012, 93 percent of the additional commuters drove alone (Note 2). The drive alone market, which might have been thought to be saturated, actually rose from 76.1 percent to a 76.3 percent market between 2007 and 2012.

    The biggest change has been the continuing loss in carpool use, which dropped from 10.4 percent to 9.7 percent from 2007 to 2012. It is estimated that nearly 450,000 passengers left carpools (excluding drivers), approximately 1.8 passengers for each additional commuter using transit (250,000).

    The largest gain from 2007 to 2012 was in working at home, including telecommuting. Working at home increased from 4.1 percent to 4.4 percent. In actual numbers, working at home added 1.9 times the increase in transit commuting. Its change in market share was greater than that of transit in 42 of the 52 major metropolitan areas. Surprisingly, this includes New York, with its incomparable transit system (by US standards).

    Transit’s share of commuting inched up only 0.1 percentage points between 2007 and 2012. This is so small that if this rate of annual increase were sustained for 50 years, transit’s commute market share would  edge up to only 6 percent (Figure 4), approximately transit’s 1980 market share (doubling to 10 percent would require 130 years). The latest data indicates both gains and losses for transit, with market shares up in 28 major metropolitan areas and down in 24.

    Transit Losses

    In Atlanta, with the nation’s second largest Metro (subway) system built since 1975, a declining overall employment base was accompanied by a loss of 13,000 transit commuters, at the same time that there was an increase in working at home of 19,000.

    In Portland, considered by many around the world to be an urban planning Utopia, the data is hardly favorable. Since 1980, the last year with data before the first of five light rail lines and one commuter rail line opened, transit’s market share has dropped from 8.4 percent to 6.0 percent. While spending billions of dollars on rail, working at home – which involves little or no public expenditure – increased by triple the number of people drawn to transit. And things have not changed materially, even during the claimed "fundamental shift." In the last five years, the working at home increase is more than double that of transit.

    In Los Angeles, ridership at the largest transit agency continues to languish below its 1985 peak, despite having opened 9 light rail, Metro, and rapid busway lines and adding more than 1.5 million residents. Even this decline may be under-stated because of how transit counts passengers. Each time someone steps on a transit vehicle, they are counted (as a boarding). A person who transfers between two or three buses to make a trip counts as two or three boardings, which is what the APTA data reports.

    When rail is added to a transit system, bus services are reconfigured to serve the rail system. This can mean many more boardings from transfers without more passenger trips. This potential inflation of ridership is likely to have occurred not only in Los Angeles, but in all metropolitan areas that added rail systems.

    Transit Gains

    At the same time, gains are being made in some metropolitan areas. Ridership has risen more strongly in transit’s six "legacy cities," the municipalities (not metropolitan areas) of New York, Chicago, Philadelphia, San Francisco, Boston, and Washington. Between 2007 and 2012, 68 percent of the additional transit commuting occurred to employment locations in these six municipalities. This is higher than the 55 percent of national transit commuting that these areas represented in 2012. The much larger share being attracted by these areas in the last 5 years is an indication that transit ridership, already highly concentrated in just a few places, is becoming even more concentrated.  Further, 50 percent to 75 percent of commuters to the corresponding six downtowns reach work by transit.

    Rational Consumer Behavior

    Even when the nation finally emerges from the Great Malaise, only vain hope will be able to conceive of a large scale consumer preference driven shift toward transit. The rational consumer will not choose transit that is slower or less convenient than the car. Where transit access is impractical or impossible, people will use cars. This is the case for most trips in all US metropolitan area, as the Brookings Institution research cited below indicates

    The Brookings Institution research indicated that the average employee in the nation’s major metropolitan areas are able to access fewer than 10 percent of jobs in 45 minutes. This is not only a small number of jobs, but it is a travel time that is approximately twice that of the average employee in the United States (most of whom travel by car).

    More funding for transit cannot solve this problem. The kind of automobile competitive transit system needed to provide rational consumer choice between cars and transit would require annual expenditures rivaling the total personal income in the metropolitan area, as Jean-Claude Ziv and I showed in our 2007 11th World Conference on Transport Research paper (2007). It is no wonder that not a single comprehensive automobile competitive transit system exists or has been seriously proposed in any major US or Western European metropolitan area (Note 3).  Transit is about the largest downtowns and the largest urban cores.

    Unbalanced Coverage

    All of this appears to have escaped many media outlets, which largely parroted the APTA press release. For example, The New York Times, CBS News, the Washington Post, and the Chicago Tribune were as parish newsletters commenting on a homily by the priest, for their failure to report both sides. A notable exception was USA Today, whose reporter consulted outsider Alan Pisarski (who has written for newgeography.com). Pisarski placed the APTA figures in historical context and expressed reservations about restoration of the transit commuting share numbers of 1980 or before. 

    Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He was appointed to the Amtrak Reform Council to fill the unexpired term of Governor Christine Todd Whitman and has served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

    Photograph: DART light rail train in downtown Dallas (by author)

    ———————

    Note 1: Current Employment Statistics Survey data, 1939 to 2013. 1913 to 1938 estimated from data in Historical Statistics of the United States: Bicentennial Edition.

    Note 2: The source for the commuting data is the American Community Survey of the Census Bureau, which indicates an employment level in 2012 that is higher than in 2007. The Current Employment Statistics Survey of the Bureau of Labor Statistics indicates a decline.

    Note 3: I would be pleased to be corrected on this. In 2004, we issued a challenge on this subject, and while there were some responses, none met the required criteria (see http://demographia.com/db-challenge-choice.htm). The criteria are repeated below:

    To identify an actual system or propose a system that provides the following in an urban area of more than 1,000,000 population:

    · Transit choice (automobile competitive public transport service) for at least 90 percent of trips and passenger kilometers in the particular urban area.

    · Automobile competitiveness is defined as door to door trip times no more than 1.5 times automobile travel time.

    The description of any system not already in operation should also include an estimate of its cost, capital and annual operating.