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  • For Millennials, It’s the Economy Stupid

    This month’s off year elections sent one message to Washington that has been heard loud and clear. Voters expect Congress to focus on the economy, especially employment, and take decisive and affirmative steps to deal with both the causes and ravages of the greatest economic downturn in the U.S. since the Great Depression. As the Obama administration considers a variety of new proposals to help bring down the unemployment rate, one key constituency is raising its voice and asking for a return on the investment it made in his presidency.

    Members of the Millennial generation, born between 1982-2003, who were eligible to vote in 2008 went for Barack Obama over John McCain by a 2:1 margin and made up over 80% of the President’s winning margin. They continue to support his presidency and identify as Democrats by similar margins. A late October Pew survey indicates that Millennials identify as Democrats over Republicans by almost 20 percentage points (52% vs. 34%), well above the 8-point Democratic advantage among older generations. In the latest Research 2000 weekly tracking survey conducted for Daily Kos, 80% of Millennials had a favorable opinion of the president; only 14% of everyone in this generation viewed him unfavorably. This compares with a 55% vs. 39% favorable/unfavorable ratio among the entire electorate in both the Research 2000 survey and in a series of November surveys conducted by organizations ranging from ABC News and the Washington Post to Fox, although some other polls put the President’s job performance ratings closer to 50%.

    But despite the clearly stronger support the President has among their generation, Millennials are increasingly restive about the lack of action in Congress to address the economic problems they face – both now and in the future.

    Recent Pew research studies underline the major impact that the recession has had on individual Americans and their families. Thirteen percent of parents with grown children told Pew researchers that one of their adult sons or daughters had moved back home in the past year. Pew found that of all grown children living with their parents, 2 in 10 were full-time students, one-quarter were unemployed and about one-third had lived on their own before returning home. According to the census, 56 percent of men 18 to 24 years old and 48 percent of women were either still under the same roof as their parents or had moved back home.

    The lack of jobs was particularly acute among adult members of the Millennial Generation (18-27 year olds), 61% of whom said that they or someone close to them was jobless recently. A clear plurality (46%) says that the “job situation” rather than rising prices (27%), problems in the financial markets (14%) and declining real estate values (7%) is their major economic worry.

    As a result, the number one concern among Millennials is the state of the economy and the need for jobs, but they have a unique perspective on how to deal with this issue.

    Millennials believe there is a clear link between education and employment and are increasingly concerned that the pathway through the educational system into the world of work is becoming increasingly more difficult and expensive to navigate. Last week, about one hundred of the nation’s top private sector and government leaders gathered for the Wall Street Journal’s CEO Council also identified education as the nation’s top economic priority.

    For Millennials, the problem is personal. A smaller share of 16-to-24-year-olds – 46 percent – is currently employed than at any time since the government began collecting that data in 1948. A job market with Depression-level youth unemployment (18.5%) and a wrenching transformation in the types of jobs America needs and produces makes the implicit bargain of education in return for future economic success harder for Millennials to believe in every day.

    Recently Matt Segal, Executive Director of the Student Association for Voter Empowerment (SAVE) and Founder and National Co-Chair of the “80 Million Strong for Young Americans Job Coalition” presented some ideas to the House Education and Labor Committee on what Congress could do to address this challenge. He advocated increased entrepreneurial resources be made available to youth; more access to public service careers through internships and loan forgiveness programs; and the creation of “mission critical” jobs in such fields as health care, cyber-security and the environment that would tap the unique talents of this generation. Since two-thirds of Millennials who graduate from a four-year college do so with over $20,000 in debt, debt, his testimony also urged immediate Senate approval of the student debt reform bill recently passed by the House.

    There is more that can be done beyond these excellent recommendations. This summer, the President’s Council of Economic Advisors released a report outlining the importance of community colleges in making America’s workforce more competitive in the global economy. “We believe it’s time to reform our community colleges so that they provide Americans of all ages a chance to learn the skills and knowledge necessary to compete for the jobs of the future.” The report urged Congress to pass House Democratic Caucus Chairman John Larsen’s bill, The Community College Technology Access Act of 2009, in order to help meet President Obama’s goal of graduating five million more Americans from community colleges by 2020.

    Millennials, like their GI Generation great grandparents in the 1930s, are facing economic challenges that caught them by surprise and for which no one prepared them. But Millennials aren’t looking for a handout or sympathy. Instead, in the “can do” spirit of their generation, they are organizing to overcome the challenges created for them by their elders. It’s time for the Democrats who control Congress to recognize these concerns and to act decisively on their behalf.

    Morley Winograd and Michael D. Hais are fellows of the New Democrat Network and the New Policy Institute and co-authors of Millennial Makeover: MySpace, YouTube, and the Future of American Politics (Rutgers University Press: 2008), named one of the 10 favorite books by the New York Times in 2008.

  • The Cycles of Industrial and Post-Industrial in Silicon Valley

    For many locals, Silicon Valley surrendered to the tyranny of development when it lost its last major fruit orchard in 1996. Olson’s family cherry orchards, a 100-year player in the valley’s agricultural history, shut down its main operations, and Deborah Olson mournfully told a local reporter then, “We’re down to 15 acres at this point.” There is a happy ending. With community support, the Olson family continues to sell its famous cherries at its fruit stand in Sunnyvale, Calif.

    Ultimately, Silicon Valley’s history is predicated on a continual progression from industrial to post-industrial. Adding to the chaotic ferment and success, multiple sectors co-exist at different stages of maturity at any given moment.

    Before its industrial period, the region was an agrarian economy. At the height of the farming boom in the 1920s and 1930s, over 100,000 acres of orchards blanketed the valley. In 2006, farming continued to thrive across the broader San Francisco Bay Area in resilient specialty pockets, which included organic farms, gourmet cheese producers, and wine vineyards. Stett Holbrook reported that roughly 20,000 acres of agriculture remained, most of it clustered in southern Santa Clara County around Morgan Hill, Gilroy, and the Coyote Valley. New technologies and tools modernized local farming practices, so that what exists today is a far cry from efforts a century ago. Now the region produces 1.3 million tons of food annually, according to the Greenbelt Alliance.

    By the 1920s, as farms began to industrialize, a big push occurred next in manufacturing, namely in automobile production, shipbuilding, and food canning.

    The local auto industry shows a constant rise and fall. In the 1920s, Oakland became known as the “Detroit of the West” with factories operated by General Motors, Chrysler, Fageol Motor Company, and Durant Motors. All closed over the next 30 years or so, as the auto industry first consolidated to the Great Lakes and later shifted overseas, as well as the southeast.

    The Bay Area saw a resurgent interest in car manufacturing in the 1980s when Toyota – a complete unknown in the earlier era – teamed up with GM to open the New United Motor Manufacturing Inc. (NUMMI) plant in Fremont, Calif. Now 25 years later, Toyota announced that all NUMMI operations will close by March in response to recent economic pressures.

    NUMMI’s closing is emblematic of the nature of employment change that accompanies broader industrial change. Currently, 4,700 people work at the auto factory, and another 50,000 people work for suppliers and other businesses that depend on NUMMI’s ongoing operations.

    Local and state leaders are concerned about the larger regional impact. Over the last 12 months, the East Bay has lost 4,400 manufacturing jobs, a decline of 5 percent in that industry, according to the U.S. Bureau of Labor Statistics. In comparison, Silicon Valley lost 13,800 manufacturing jobs, an 8 percent decline. Bruce Kern, executive director of the East Bay Economic Development Alliance, told the press, “You have the jobs from suppliers and other vendors that provide goods and services to NUMMI.” Most of these workers are stranded with skills only suitable for the industrial Silicon Valley, so Gov. Arnold Schwarzenegger announced that California state will focus on retraining them, as well as finding alternative uses for the roughly 5 million-square-foot NUMMI factory.

    On the other side of the Bay, Tesla Motors today is making the transition from a cottage to a production industry, and it has also shifted gears in its manufacturing plans. The highly subsidized company had originally planned to build an electric car factory in San Jose earlier this year, but Tesla is now close to a deal to build an electric car factory at the site of a former N.A.S.A. manufacturing plant in Downey, Calif., a blue-collar city south of Los Angeles.

    Shipbuilding offers a counter example. While efforts have largely vanished from the area, a few notable examples have survived in new form. For instance, Kaiser Shipyards in Richmond, Calif., developed a new medical system for its shipyard workers in WWII that eventually became the basis for Kaiser Permanente, a highly successful modern health care organization. Here is an early example of a company converting its business model from hardware to service.

    But the high point of the industrial era dates from the 1950s when U.S. defense contracts spurred the area’s growth, building aerospace and other military equipment largely through Lockheed Martin. Then, as magnetic core memories were replaced by semiconductor memory chips in computers, semiconductor and chip manufacturing soared in the 1960s and 1970s, dominating the Valley with industrial fervor.

    By the late 1970s, however, Silicon Valley had lost its lead in memory chips, thanks to several revolutionary measurement tools from Hewlett-Packard’s Japanese partnership. The Japanese soon took over the memory chip business, going from less than 10% to over 80% of worldwide chips in six short years. Today, the memory chip market is an $18 billion worldwide market with virtually no U.S. manufacturers. In order to thrive against this fierce competition, Silicon Valley companies had to re-invent themselves, such as Intel’s adoption of the microcomputer chipsets now known as Pentium.

    Other areas of the information technology (IT) industry have also undergone reinvention. Charles House, in The HP Phenomenon, points out that Hewlett-Packard has re-invented itself six times in seven decades. Apple has also done so in spectacular fashion, first with computers, then with music, and now smartphones. Since 1976, Apple has gradually evolved from a computer hardware manufacturer into a consumer electronics company. The company originally handled most manufacturing locally, but by 1992, Apple had closed its plant in Fremont, Calif., and moved all operations out to Colorado, Ireland, and East Asia. For a time, Apple elevated its role in the industrial process, noting on its products: “Designed in California, assembled in China.”

    Apple’s decision reflects a larger trend in Silicon Valley to shift more to post-industrialized work, marked by higher value technology services within a knowledge economy.

    Another example is VIA Technologies, a chip manufacturer founded in Fremont in 1987, which moved its headquarters in 1992 to Taiwan. Richard Brown, vice president of international marketing at VIA, explained, “The main reason was that we saw that Taiwan would replace Silicon Valley as the global hub for PC, notebook, and motherboard design and manufacturing.” He added, “It enabled us to get closer with key manufacturing partners in Taiwan.”

    Now expanded as a fabless semiconductor design company, VIA has kept a strong presence in Silicon Valley these last two decades. About 250 employees work locally. Brown said, “We conduct advanced R&D work on chipsets and graphics in our Fremont office, and we also have extensive customer support and sales operations covering the U.S. and Latin America.”

    Beyond IT, where is new industrial growth occurring in the Bay Area?

    One economic indicator is demand in office and warehouse space. The U.S. industrial vacancy rate hit a decade high last quarter, marking the eighth consecutive quarter of increasing vacancy, according to real estate services firm Colliers International. Nationally, warehouses under construction declined to the lowest number Colliers has on record, and both bulk warehouse space and tech/R&D space showed larger decreases in rental rates than prior years.

    The Silicon Valley market was the third largest contributor to the national drop after Chicago and the Los Angeles basin. Jeff Fredericks, senior managing partner out of Colliers’ San Jose office, has observed that no sector has been left unscathed locally.

    He noted, “Very little manufacturing or industrial space has been built in Silicon Valley in the last 10 years, and that trend is likely to continue.” Fredericks believes, however, that some light manufacturing will continue to exist within the region, either to support local technology companies or simply because the business owners choose to live here.

    He added, “Certainly, green tech is a market favorite right now, but that really only forms a small percentage of Silicon Valley’s total market. Nonetheless, it is a sector that is experiencing better growth than others.”

    Richard Ogawa has seen a similar regional boom in the clean tech industry. As an intellectual property attorney with Townsend and Townsend and Crew LLP, Ogawa currently advises several clean tech start-up companies that are funded by Khosla Ventures, among others. Several companies, such as Stion Corporation and Solaria Corporation, have built pilot production lines. Part of the clean tech growth can be attributed to stricter state regulations, which push for greater reliance on renewable energy sources. He said, “It’s very geographic-centric.”

    Ogawa has also seen a rise in small-scale manufacturing in other industries. For example, within the local apparel business, Levi Strauss & Co. shuttered its last operating factory in 2002, which had been operating since 1906. Many locals were discouraged to see the longtime factory close. Today, retail manufacturers like Golden Bear Sportswear and Timbuk2 actively operate in San Francisco, but of course with far smaller workforces.

    Personally, Ogawa is a wonderful embodiment of industrial and post-industrial Silicon Valley. As a third generation Northern Californian, whose father owned a farm in the Central Valley, Ogawa specializes in post-industrial work. His clients in semiconductors, software, networking, and lately clean tech mix industrial and post-industrial work, either shifting manufacturing abroad or undertaking light production locally.

    Reflecting on the changes he has witnessed over time, Ogawa said, “I’m not aware of any industry that’s left the area, at least in my lifetime.” In Silicon Valley, most industries simply take on new form as part of the constant evolution from industrial to post-industrial.

    Tamara Carleton is a doctoral student at Stanford University, studying innovation culture and technology visions. She is also a Fellow of the Foundation for Enterprise Development and the Bay Area Science and Innovation Consortium.

  • So Much for Evidence-Based Planning

    Has evidence-based planning fallen from grace in favour of catchy slogans and untested assumptions? In the case of urban planning, arguably that is just what’s happened. The evidence, in Australia at least, is worrying.

    “We must get people out of cars and onto public transport.” “We must stop urban sprawl and the consumption of valuable land.” “We must build higher density communities to achieve sustainable environmental outcomes.” Phrases like this are now de rigueur across many discussions about urban planning in the media, in politics and in regulatory circles in Australia. They are rarely challenged on the basis of what the actual social, economic or scientific evidence is really saying. It’s produced an Animal Farm like dogma: ‘Four legs good, two legs bad.’ Or ‘Napoleon is always right.’ Denial, followed by ‘pass the buck’ and ultimately ‘shoot the messenger’ are responses to legitimate questions.

    But given the far reaching social and economic changes which will invariably flow from some of the regulatory planning schemes now being legislated, we should at least ask whether the various policies will actually achieve their stated goals. After all, these regulatory planning schemes are intended to govern our urban growth over the next 20 years. It would be a shame to get it badly wrong, simply because assumptions weren’t tested.

    The rise of the big plan

    Since the late 1990s, there has been a raft of Australian regional planning schemes dealing with urban growth in our major centres. The common theme has been the creation of urban growth boundaries and increased density in established urban areas, with an emphasis on public transport as opposed to the private vehicle.

    Typical of these schemes is the recently released ‘South East Queensland Regional Plan 2009-2031’ (SEQRP) which aims to ‘manage growth and protect the region’s lifestyle and environment.’ The plan, like others of its type, is influenced by a desire to contain urban growth and implicitly assumes that we are at risk of reckless growth if we don’t. But Australia’s total population is currently around 24 million people, in a land mass roughly the size of continental USA. This puts us below Nepal and Uzbekistan but ahead of Madagascar in population rankings. Reports that Australia’s population may reach 35 million in another 40 years (the current population of Canada) have raised domestic fears that we might become over populated. (See my blog post ‘Australia Explodes’ for more on this).

    The State of Queensland is the second largest state by area, but contains only 4.4 million people in total. Its population growth rates have in the past been amongst the highest of any region in Australia, growing at up to 1500 people per week (close to 80,000 per annum). Much of this growth has occurred in the south east corner of the state, surrounding the capital city – Brisbane. While modest by global standards, this rate of growth has thrown governments and some sections of the community into apoplexy. How will we ever cope? The region of southeast Queensland (population 3 million) has even been compared to California (population 38 million) in terms of its growth rates and population pressures.

    Against this context, the SEQRP identifies the need to provide a further 750,000 dwellings in the period to 2031, with roughly 50% to be developed in established urban areas via infill, and the balance through new detached housing development on land within an urban growth boundary. The challenge for infill is greater in Brisbane, where 138,000 new dwellings are expected to be developed in established urban areas, especially around transit centres (typically rail).

    One of the many assumptions that underpin the core strategy of the SEQRP have to do with
    the risk of sprawl. This suggests that modest and manageable growth rates of 1500 people per week are somehow tipping the big end of the global scale. The region’s current population of 3 million shows obvious signs of urban expansion as a result of growth to date, yet, with some notable exceptions in recent years, infrastructure has generally kept pace with the growth. Even at the urban fringe, new housing development has been at higher rates of dwelling density than in years past (lot sizes are shrinking).

    There is also an assumption that we are running out of land. But South east Queensland has vast tracts of land suitable for urban expansion and has several established regional centres readily capable of servicing new expansion with infrastructure and town centres already in place and capable of upscaling. The urban growth boundary imposed by the SEQRP is approximately 300 kilometres in length as it curtains the urban area. An expansion of this boundary by as little as a kilometer (under a mile) would create a notional land supply suitable for an additional 500,000 detached homes at 15 to the hectare (or six to the acre).

    Behind the plan lies an accepted wisdom that demand for ‘the quarter acre block’ is driving excessive expansion. The evidence, however, suggests this is now ancient history: lot sizes have not been anywhere near a quarter acre since the 1960s. The typical lot size now is 400 square metres, or around one tenth of an acre, hardly an irresponsible over-consumption of land for housing.

    It is also assumed that all this growth imperils quality farm land. This assumption can only come from those with a vague understanding of farming practices. In the south east corner of Queensland, typically two types of land have been conserved for this reason. The first is land devoted to growing sugar cane which is no longer economically efficient. This agriculture produces a biodiversity desert and is far better suited to the more tropical north.

    The second type of land conserved under this rationale is land historically devoted to cattle grazing. This was always marginal grazing land in the main – dry, shallow soils that struggle to hold moisture or grow pasture. As technology improved and transport economics developed, more efficient grazing country has been opened up further from city markets. But as farmers are prevented from selling their land for housing, despite its logical location for that purpose, herds of bony cattle continue to roam the urban fringes of the metropolis.

    This assumption also seems to hold dear the notion that, for sustainability reasons, regions should source their food needs from within a nearby catchment, minimizing transport costs. Were this true, Queenslanders would not enjoy apples (grown in southern temperate zones) and neither would Tasmanians (our cool climate southern state residents) ever enjoy bananas (two thirds of Australia’s crop of which are grown in Queensland). It would also mean our agricultural industries, which rely heavily on export, would fail.

    The cost of infrastructure provision is a subject that preoccupies governments in growth regions. Perhaps for this reason, the suggestion that infrastructure is more economically deployed in established urban areas, as opposed to newly provided in outer growth areas, found much support in treasury corridors. However, the evidence suggests otherwise: established urban areas‘ essential services (electricity, water, sewerage, stormwater) are ageing and incapable of serving significantly higher demand loads. The replacement and upgrade cost of retrofitting these services is demonstrably higher than the cost of installing new services in new growth areas.

    It is also assumed outer suburban growth will mean worsening urban congestion. Yet relatively few residents of new outer suburban growth areas are employed in inner city areas: according to the Census and other official government data, most jobs are in suburban locations – 90% of all jobs in fact. The CBD (our downtown) is a high density focus area for many headquarter operations, but at 2 million square metres of office space, it cannot by any stretch of the imagination provide sufficient space for the majority of the region’s workers.

    There is the assumption that infill and higher density will get more people using public transport. Current public transport usage represents under 15% of all trips. With higher density housing in established areas, especially in and around transit nodes (TODs), that figure could theoretically increase. But even the most heroic of assumptions would put the future rate at little more than 30%. Meaning 70% of new residents will still be auto dependent. There is also an unanswered question on the capacity of existing rail and bus services to cope with additional demand (frequent reports mention chronic overcrowding) combined with the high level of public transit subsidies per passenger, which will somehow have to be funded.

    Finally, it’s assumed that high density housing is more ‘sustainable.’ But according to several Australian University studies, unit and townhouse dwellings actually consume more energy than equivalent detached dwellings. Common area lighting, lifts, clothes driers and airconditioning are all more commonplace in high density dwellings than detached (where natural light, cross flow ventilation and solar power for drying clothes are the norm). Factor in the higher number of persons per dwelling in detached housing, and the per person energy consumption of inner city, high density housing looks ordinary. No less an authority than the Australian Conservation Foundation actually proved this in their Consumption Atlas which revealed that inner city high density residents had much larger carbon footprints than their suburban cousins.

    On balance, many of the assumptions that underpin the central strategic intent of regulatory planning schemes such as The South East Queensland Regional Plan, just don’t stand the test of evidence. Indeed in many cases, the evidence suggests the opposite of what is assumed. But evidence, it seems, is out of favour and slogans are in.

    Four legs good, two legs bad. Napoleon is always right. Why consult the facts when the mantra will do?

    About the author: Ross Elliott has 20 years experience in the property and development field, including stints in research, advocacy and urban economics. He writes an occasional blog, which you can find here and works as a consultant in marketing, strategy and business development, specializing in the property sector.

  • Contributing Editor AARON RENN on The Pasture Gate regarding Detroit

    “‘Detroit has become ground zero for North America’s local food movement. Last year there were roughly 550 gardens in the city’s urban farming network. This year there are more than 850. Driving around the city, you can see everything that will make up your dinner—chickens, goats, mushrooms, plum trees, honeybee hives…. Here, a locavore doesn’t eat food that’s traveled 100 kilometres. She eats food that’s travelled 10.’”

    Aaron on The Pasture Gate

  • Contributing Editor MICHAEL LIND on The Hollywood Liberal regarding populism

    Is a Jackson revival under way? I’m referring not to the late King of Pop but to the 19th century populist president whom his opponents called “King Andrew.” According to Michael Barone, in the 2010 elections Republicans have a chance to knock Democrats out of as many as three dozen insecure congressional seats in “Jacksonian districts.”By itself, this would merely reinforce the identification of the Party Formerly Known as Lincoln’s with the white South.

    Michale on The Hollywood Liberal

  • Contributing Editor SUSANNE TRIMBATH on Ea O Ka Aina regarding Black Friday

    “A conservative estimate is that $9 worth of CDS “insurance” has been sold for every $1 in mortgage bond. Therefore, someone stands to gain $9 if the homeowner defaults, but only $1 if they pay. The economic incentives favor foreclosure, not mortgage work-outs or Main Street bailouts.”

    Susanne on Ea O Ka Aina

  • Contributing Editor MICHAEL LIND on Far Outliers regarding populism

    “Old-style Democrat Michael Lind asks a timely question in a Salon essay entitled Can populism be liberal?”

    Michael on Far Outliers

  • Contributing Editor AARON RENN on The Huffington Post regarding Indianapolis

    That was certainly one of the strongest messages to emerge from the residents of Indianapolis’s Smart Growth Redevelopment District. They know better than anyone whether their community is safe enough to flourish. And then on Friday I ran across a thoughtful but troubling blog post from Indianapolis resident and Urbanophile Aaron Renn, about all sorts of things, but concluding with some notes about a shooting in a revitalized section of his city (not the redevelopment district I visited).

    Aaron on The Huffington Post

  • Executive Editor JOEL KOTKIN on The Providence Journal regarding Vegas

    Less than two years ago, Sunbelt-and-sprawl advocate Joel Kotkin wrote in The Wall Street Journal that the future of American urbanism wasn’t in the “elite cities,” such as New York, Boston and San Francisco, but in “younger, more affordable and less self-regarding places.” His examples included Las Vegas.

    Joel on The Providence Journal

  • Executive Editor JOEL KOTKIN on The Times Daily regarding new localism

    In an Oct. 19 Newsweek article, Joel Kotkin refers to the concept as “new localism”. Kotkin, a presidential fellow in urban futures at Chapman University in Orange, Calif., wrote “The Next Hundred Million: America in 2050,” which will be published in 2010. Kotkin said “an aging population, suburbanization,” the Internet and an increased focus on family life contribute to new localism.

    Joel on The Times Daily