Urban Density and Economic Growth

9.8.11 | Can more growth in our already-big cities be a key to our country’s economic recovery? Journalist/author Ryan Avent certainly thinks so. With Labor Day just behind us and President Obama poised to make a big speech on jobs today, his proposition is worth considering.

In Sunday’s New York Times op-ed, Avent points to research that consistently shows that workers in denser places earn higher wages and are from 6% to 28% more productive after doubling density in a city.

Avent, who writes for The Economist, has a new book out called The Gated City. In it, he argues that the density of large metropolitan areas, such as in Boston and San Francisco, is an important driver of job growth. Like the great Jane Jacobs, Avent celebrates the mixed-use chaos of dense cities for fostering specialization and opportunity for connecting with one another and sharing networks and ideas  – all key drivers of innovation.

The problem, Avent says, is that these cities are becoming less, not more affordable for middle-class families who want to live there, often due to land use or housing regulations.  The result is that people are decamping to cheaper cities in the Sun Belt, places like Houston or Phoenix where housing is cheaper, but wages are also lower. Not to mention that, as he points out, residents of less-dense cities often have a much higher carbon footprint than residents of New York City or other compact cities, where people are much more likely to take public transportation or even (gasp) walk to work.

Recent census figures confirm this exodus. Older cities are growing at a slower rate than newer cities. New York City grew by 2.1% between 2000 and 2010. Raleigh-Durham, NC, on the other hand, grew by 42% during the same period. (For more see this blog post at Governing.)

Avent says that because larger cities are often resistant to building the kinds of housing necessary to increase the density of their neighborhoods, they are becoming more exclusive, and as a result, they have a harder time finding the variety of skilled workers they need to support innovation. This is particularly true in the sectors – like technology – that will be most important to our country’s future economic growth.

Real trouble occurs when the idea-generators in cities with that NIMBY approach become so protective of their pleasant streets that they turn away other idea-generators, undermining the city’s economic role. And that is happening. Entrepreneurship rates in Silicon Valley were below the national average during the tech boom because firms couldn’t attract enough skilled workers.

Productivity and wages are rising in these growing Sunbelt cities, but not as fast as in the denser cities that workers are leaving. The average wage per job in Phoenix rose $10,700 from 2000 to 2009, while in San Francisco the increase was $14,500. But, while wages are growing in San Francisco, they would be growing faster if the city allowed the construction of more housing. More workers would be able to take advantage of the good job opportunities in the Bay Area, and the metropolitan and national economies would function better.

Economist Edward Glaeser makes a similar point in his book Triumph of a City. You can keep prices affordable by building enough housing for everyone, simple supply and demand. And by limiting housing or limiting the number and height of skyscrapers, for example, policy makers are making cities less affordable.

As a resident of the Bay Area, I know first-hand how central affordability issues are for pretty much all of the working families I know, even those who’ve been very successful professionally. No matter how good the jobs are, it’s hard to stay in a place where affording a home big enough to house your family seems like a pipe dream.

And from this vantage point, his arguments about the benefits of such changes strike a chord, despite the concerns that come with the thought of even denser neighborhoods (crowded streets and schools).

Avent should not forget about the vulnerable, disenfranchised residents of these high growth cities either. And as BRR research has shown, working to integrate them into affordable, mixed-income neighborhoods can have benefits for all residents.

Cities, Avent argues, were meant to create opportunity and, as he says, “harness” their capabilities as “tools of growth and mobility.”  With more willingness to build in high-growth cities, maybe we can create real opportunity for families who are poised to take advantage of job growth in new high-value job sectors, jobs that offer real opportunity for economic mobility. After all, making cities more affordable to middle-class families will ensure we have enough skilled workers to meet demand. And the growth will benefit all of us.

Photo by Radcliffe Dacaday.

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