The Changing Dynamics of Urban America

MetroBusinessNet Annual Convening

February 17, 2005

by: James Davitt Rooney, CEOs for Cities Riccardo Bodini, RW Ventures, LLC

The Changing Dynamics of The Changing Dynamics of Urban AmericaUrban America

AgendaAgenda

Context and HighlightsContext and Highlights

The Changing Dynamics of Urban AmericaThe Changing Dynamics of Urban America

Local SolutionsLocal Solutions

Comments and DiscussionComments and Discussion

The Importance of Being StrategicThe Importance of Being Strategic

New Breed of Civic LeadershipNew Breed of Civic Leadership

– Colleges and universities

– Community foundations

– Think tanks

• Convergence of Business and Development Interests

– Business leadership groups

– Colleges and universities

– Community foundations

– Think tanks

• Convergence of Business and Development Interests

– Business leadership groups

ContextContextContextContext

• Increasing leadership from the non-profit sector

Regional ApproachRegional Approach

– Emergence of city-states

– Regional and inter-regional strategies

– New approach of academics and practitioners

– New understanding that economies are regional

– Emergence of city-states

– Regional and inter-regional strategies

– New approach of academics and practitioners

– New understanding that economies are regional

ContextContextContextContext

• Increased tendency to examine urban issues through a regional lens

The Economy is Regional:The Economy is Regional:City-Suburban CorrelationsCity-Suburban CorrelationsThe Economy is Regional:The Economy is Regional:City-Suburban CorrelationsCity-Suburban Correlations

Performance Linked, but Nature of Linkages ChangingPerformance Linked, but Nature of Linkages Changing

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

1970 1980 1990 2000

Income LevelsHousing Values

Sp

earm

an R

ank

Co

rre

lati

on

HighlightsHighlightsHighlightsHighlights

One Economy: LinkagesOne Economy: Linkages

CITY

REGIONAL ECONOMY

ENVIRONMENT

AMENITIES

UTILITIES

TRANSPORTATION

HOSPITALS

AIRPORTS

HOUSING

JOBS

CITYCITY

CORPORATE SERVICES

SUPPLY CHAINS

MUSEUMS

CONSUMER MARKETS


Importance of Collegesand UniversitiesImportance of Collegesand Universities

– Nurture research and enabling technologies of knowledge economy

– Develop sectors and attract capital

– Major corporations in own right

– Mint new college graduates

– Nurture research and enabling technologies of knowledge economy

– Develop sectors and attract capital

– Major corporations in own right

– Mint new college graduates


• Higher education institutions increasingly leveraged for economic growth

Grow Smart, Not BigGrow Smart, Not Big

• Education, not size, is key to success

– “Changing Dynamics of Urban America” study

– B.A. attainment key driver of growth

– High school degree no longer sufficient

– Population growth no longer driver (divergence theory)

• Education, not size, is key to success

– “Changing Dynamics of Urban America” study

– B.A. attainment key driver of growth

– High school degree no longer sufficient

– Population growth no longer driver (divergence theory)


The Importance of EducationThe Importance of Education

College Education is the Biggest Driver of Economic GrowthCollege Education is the Biggest Driver of Economic Growth(and High School Alone is Barely Significant Anymore)(and High School Alone is Barely Significant Anymore)

Wag

e G

row

th 1

990-

2000

(L

og

, M

SA

)

% Adults with BA or Higher 1990

-.2

0.2

.4.6

.1 .2 .3 .4 .5


Miami, FL

Washington D.C.

San Francisco, CA

Twin Cities, MN

Portland, OR

Chicago, IL

Philadelphia, PA

Indianapolis, IN

No Silver Bullet: Many Factors MatterNo Silver Bullet: Many Factors Matter

-0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0

High School Degree

Age 35-44

Business Services

Sprawl Index

Professional Jobs

College Degree

Exports

Immigration (1980s)

Estimated Effect on Income Growth(Standardized Regression Coefficient: with 95% Confidence Interval)

Hispanic Segregation

Drivers of City Income Growth


AgendaAgenda







What’s Changing? What Matters?What’s Changing? What Matters?

Business CompositionBusiness Composition Sector Specializations (e.g. manufacturing, financial Sector Specializations (e.g. manufacturing, financial services); Occupational Concentrations; Industry services); Occupational Concentrations; Industry DiversificationDiversification

Business CompositionBusiness Composition Sector Specializations (e.g. manufacturing, financial Sector Specializations (e.g. manufacturing, financial services); Occupational Concentrations; Industry services); Occupational Concentrations; Industry DiversificationDiversification

Knowledge EconomyKnowledge Economy Educational Levels; Information Sector Jobs; Internet Educational Levels; Information Sector Jobs; Internet Access; Patents; Educational Institutions; High Tech JobsAccess; Patents; Educational Institutions; High Tech Jobs

Knowledge EconomyKnowledge Economy Educational Levels; Information Sector Jobs; Internet Educational Levels; Information Sector Jobs; Internet Access; Patents; Educational Institutions; High Tech JobsAccess; Patents; Educational Institutions; High Tech Jobs

DemographicsDemographics Immigration; Age Structure; Ethnic Composition;Immigration; Age Structure; Ethnic Composition;Income Inequality; Racial SegregationIncome Inequality; Racial Segregation

DemographicsDemographics Immigration; Age Structure; Ethnic Composition;Immigration; Age Structure; Ethnic Composition;Income Inequality; Racial SegregationIncome Inequality; Racial Segregation

Urban Growth FormUrban Growth Form Commuting Times; Population Density; Land Use;Commuting Times; Population Density; Land Use;Use of Public Transit; Sprawl IndicesUse of Public Transit; Sprawl Indices

Urban Growth FormUrban Growth Form Commuting Times; Population Density; Land Use;Commuting Times; Population Density; Land Use;Use of Public Transit; Sprawl IndicesUse of Public Transit; Sprawl Indices

RegionalismRegionalism City/Suburb Income & Property Value Ratios; Poverty City/Suburb Income & Property Value Ratios; Poverty Disparities; Government FragmentationDisparities; Government Fragmentation

RegionalismRegionalism City/Suburb Income & Property Value Ratios; Poverty City/Suburb Income & Property Value Ratios; Poverty Disparities; Government FragmentationDisparities; Government Fragmentation

Increasing Role of Knowledge Factors Across SectorsIncreasing Role of Knowledge Factors Across Sectors

1

.8

.4

.2

0 5-5

Wag

e G

row

th19

90-

2000

(P

MS

A)

Presence of Digital Economy Factors

.6

Wage Growth Increases with Digital EconomyWage Growth Increases with Digital Economy

Grand Rapids, MI

Rochester, NY

San Diego, CA

Austin, TX

-.1

0.1

.2.3

Inco

me

Gro

wth

19

90-2

000

(Lo

g,

Cit

y)

0 1 2 3

The Importance of Industry Specialization?The Importance of Industry Specialization?

Diversification Strategies are as Effective as SpecializationDiversification Strategies are as Effective as Specialization

Number of Specializations (Drennan)

Functional and Occupational ConcentrationsFunctional and Occupational Concentrations

Estimated Effect on Income Growth (MSA)

Professional

Managerial

Sales

Clerical

Precision Production

Machine Operator

Transportation Equipment*

Material Handler & Laborer

Farming*

Services (Non HHD)

0.0

If Specializing, Look Beyond SectorsIf Specializing, Look Beyond Sectors

*Not Statistically Significant

How to Improve College Attainment Levels?How to Improve College Attainment Levels?

It’s the Economy: The Effect of UnemploymentIt’s the Economy: The Effect of Unemployment

05

10

Att

ain

me

nt

Gro

wth

19

90

-20

00

0 .05 .1 .15Civilian Unemployment Rate, 1990 [2000 Boundary]

College Graduates Move Away from Places without JobsCollege Graduates Move Away from Places without Jobs

It’s the Knowledge Economy: Knowledge Industries Attract BAs It’s the Knowledge Economy: Knowledge Industries Attract BAs

05

10A

ttain

men

t Gro

wth

(19

90-2

000)

.02 .03 .04 .05 .06 .07% Employed In Business and Repair Services

Finance, Insurance, and Real EstateFinance, Insurance, and Real Estate Information SectorInformation Sector

Business ServicesBusiness Services ManufacturingManufacturing

05

10

Atta

inm

ent G

row

th (

199

0-2

000

)

.1 .2 .3 .4 .5Information Sector as % Total Earnings

05

10

Atta

inm

ent G

row

th

(19

90-2

000

)

0 .05 .1 .15Share workers in Finance, Insurance, and Real Estate

05

10A

ttain

men

t Gro

wth

(19

90-2

000)

0 .05 .1 .15 .2 .25% Employment In Manufacturing

High Human Capital Occupations Attract BAsHigh Human Capital Occupations Attract BAs

-0.01 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80

Exec, adm in, andm anagerial

Professional Specialty

Transportation andMaterial Moving*

Handlers and Laborers*

Standardized Regression Coefficients: 1990 Occupation and 1990-2000 Attainment GrowthRegression includes unemployment, wages, amenity index, and regional dummies as controls.

* Not Statistically Significant

High HC Occupation

s

Productive Industries

Knowledge Functions

It’s not the Chicken or the Egg – It’s the IncubatorIt’s not the Chicken or the Egg – It’s the Incubator

Deployed Human Capital

IT’S ABOUT PRODUCTIVITY

To Attract Knowledge Workers, Build an To Attract Knowledge Workers, Build an Economy Characterized by High-Human Capital Economy Characterized by High-Human Capital

Occupations and FunctionsOccupations and Functions

IndustryKnowledge Workers

AgendaAgenda






-0.15

-0.10

-0.05

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

10-Year Periods

Inco

me-

Pop

. Cor

rela

tion

(Spe

arm

an R

ank)

Population Growth Not Connected to ProsperityPopulation Growth Not Connected to Prosperity

Correlation Between MSA Income Growth and Population Growth10-Year Moving Windows, 1969-2000

Yellow = Not Statistically Significant

Cities Do Not Need to Grow Big to Grow WealthyCities Do Not Need to Grow Big to Grow Wealthy

Many Paths to SuccessMany Paths to SuccessIncome Growth vs. Population Growth 1990-2000

Top 110 CitiesFastest

Slowest Fastest

Growth in Population (Rank)

Gro

wth

in

In

co

me

per

Cap

ita

(Ran

k)

Washington D.C.Washington D.C.

San Francisco, CASan Francisco, CA

Chicago, ILChicago, IL

Indianapolis, INIndianapolis, INMinneapolis, MNMinneapolis, MN

St. Paul, MNSt. Paul, MN

Miami, FLMiami, FL

Portland, ORPortland, OR

Philadelphia, PAPhiladelphia, PA

Great Variation in City Economic Types, Paths, OutcomesGreat Variation in City Economic Types, Paths, Outcomes

But More Important to Get it RightBut More Important to Get it Right

Success Breeds SuccessSuccess Breeds Success

4020C

han

ge

in W

ages

Initial Wages (1990, thousands)

Divergence (1990s)

2

1.5

1

.5

4020

Ch

ang

e in

Wag

es

Initial Wages (1970, thousands)

Convergence (1970s)

AgendaAgenda






Towards Local SolutionsTowards Local Solutions

In depth assessment of the local economy - original data collection on all relevant dimensions of economic performance.

In depth assessment of the local economy - original data collection on all relevant dimensions of economic performance.

Metropolitan AuditMetropolitan Audit

Cluster analysis to determine where you fit in, who your peer cities are, on a variety of

possible dimensions

Cluster analysis to determine where you fit in, who your peer cities are, on a variety of

possible dimensionsCity TaxonomyCity Taxonomy

New tool to assess the concentration of knowledge functions and industries in each

metropolitan area

New tool to assess the concentration of knowledge functions and industries in each

metropolitan area

Occupation by IndustryOccupation by IndustryAnalysisAnalysis

City TaxonomyCity Taxonomy

DNA Clustering MapDNA Clustering Map

Where Is Your City Today? Who Are Your Comparables?Where Is Your City Today? Who Are Your Comparables?

Variables used to Variables used to define Clustersdefine Clusters

MSA PopulationCity PopulationBusiness Services (Info. Sect.), MSAEducation ScoreArt ScoreAge 25-34Financial Services (Info. Sect.), MSAClerical OccupationBusiness DiversityDistribution SectorNumber of Specializations, MSAExportsCity/Suburb Density RatioAdults w/o HS DegreeLatinoImmigrationIncome InequalityIncome GrowthGovernment SectorAdults w/BA or HigherManagement/Production RatioProfessional OccupationAge 18-24Income (2000)Managerial OccupationAge 35-44Population GrowthNative Pop. GrowthImmigrant Pop. GrowthSales OccupationCity/Sub. Housing Value RatioCity/Sub. Income RatioCity/Sub. White Ratio2000 Pop. as % Max Pop. City Pop. as % MSA Pop.Manufacturing Sector, MSAMachine Operator OccupationPrecision Prod. OccupationService (non HHD) OccupationCity/Sub. Poverty RatioAge of Housing StockBlackConsumer Services (Info. Sect.), MSAAge 45-54Age over 65Age 55-64 Governments per capita MSA

The Clustering MethodologyThe Clustering Methodology

Washington, DCWashington, DC

Cluster 15: “Beautiful Minds?”Cluster 15: “Beautiful Minds?”

MS

A P

op

ula

tion

City

Po

pu

latio

nB

us

ine

ss S

erv

ice

s (Info

. Se

ct.), MS

AE

du

ca

tion

Sco

reA

rt Sc

ore

Ag

e 2

5-3

4F

ina

nc

ial Se

rvic

es

(Info

. Se

ct.), M

SA

Cleric

al O

cc

up

atio

nB

us

ine

ss D

ivers

ityD

istribu

tion

Se

cto

rN

um

be

r of S

pe

cializa

tion

s, M

SA

Exp

orts

City

/Su

bu

rb D

en

sity

Ra

tioA

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/o H

S D

eg

reeL

atin

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mig

ration

Inco

me

Ine

qu

ality

Inco

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Gro

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Go

ve

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en

t Se

cto

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du

lts w

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or H

igh

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Ma

na

gem

en

t/Pro

du

ctio

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atio

Pro

fes

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al O

cc

up

atio

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ge

18

-24

Inco

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(20

00

)M

an

ag

erial O

cc

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35

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Po

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op

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Sale

s O

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ity/S

ub

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Va

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Ratio

City

/Su

b. In

com

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atio

City

/Su

b. W

hite

Ra

tio2

000

Po

p. a

s %

Max

Po

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City

Po

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MS

A P

op

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an

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ec

tor, M

SA

Ma

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patio

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rec

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(no

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ity/S

ub

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on

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Ag

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-64

G

ov

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me

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pe

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MS

A

Washington DC:Young Professionals, Culture and EducationWashington DC:Young Professionals, Culture and Education

050100150200250

Age 25-34

Art Score

Adults with BAor Higher

Professional Occupations

Manufacturing Sector

ME

DIA

N

1

Occupation by Industry AnalysisOccupation by Industry Analysis

-.1

-.05

0.0

5.1

Res

idu

als

.1 .2 .3 .4 .5Predicted Values Based on Industry Composition

It’s not Just Where You Work…It’s not Just Where You Work…

Indianapolis, INIndianapolis, INIndianapolis, INIndianapolis, IN

Portland, ORPortland, ORPortland, ORPortland, OR

Twin Cities, MNTwin Cities, MNTwin Cities, MNTwin Cities, MN

Chicago, ILChicago, ILChicago, ILChicago, ILSan Francisco, CASan Francisco, CASan Francisco, CASan Francisco, CA

Philadelphia, PAPhiladelphia, PAPhiladelphia, PAPhiladelphia, PAWashington, DCWashington, DCWashington, DCWashington, DC

Miami, FLMiami, FLMiami, FLMiami, FL

San Jose, CASan Jose, CASan Jose, CASan Jose, CA

High HC Occupations

Productive Industries

Knowledge Functions

… It’s What You Do… It’s What You Do

0%

5%

10%

15%

20%

25%

30%

Information Professional andScientific Services

San Jose - Industries

San Jose National Average

0%

5%

10%

15%

20%

25%

30%

Management Professional Computer andMathematical

San Jose - Occupations

San Jose National Average

Example: Kansas City (Brookings Institution Report)Example: Kansas City (Brookings Institution Report)

Industries

• Administrative and Support Services• Management, Technical, and Scientific

Services• Professional Services

Industries

• Administrative and Support Services• Management, Technical, and Scientific

Services• Professional Services

Functions

• Business Services• Headquarters• Conventions and business organizations• Market research and advertising

Functions

• Business Services• Headquarters• Conventions and business organizations• Market research and advertising

Occupations

• Accountants, Analysts, HR Professionals• Computer, Engineering and Mathematical• Management• Office and Administrative Support

Occupations

• Accountants, Analysts, HR Professionals• Computer, Engineering and Mathematical• Management• Office and Administrative Support

Broad Policy ImplicationsBroad Policy Implications

1.1. Take Care of the BasicsTake Care of the Basics • Education (including workforce training)• Inclusion (racial, ethnic, immigrant, income equity)• Innovation (e.g. R&D tax credits)• Infrastructure (including knowledge infrastructure)

• Quality of Life

2.2. Leverage Unique Strengths in the Local EconomyLeverage Unique Strengths in the Local Economy• Identify occupational, knowledge, functional concentrations• Strengthen economic relationships, business networks, commercialization of

knowledge (within and between concentrations)• Support complementary, diverse specializations building on areas of concentration

3.3. Make it a Regional StrategyMake it a Regional Strategy• Develop targeted programs and City-Suburb partnerships around particular linkages:

shared business relationships, workforce issues, common amenities ...

AgendaAgenda






MetroBusinessNet Annual Convening

February 17, 2005

by: James Davitt Rooney, CEOs for Cities Riccardo Bodini, RW Ventures, LLC

The Changing Dynamics of The Changing Dynamics of Urban AmericaUrban America

Quality of Life does Not Matter as Much as Economic FactorsQuality of Life does Not Matter as Much as Economic Factors

-0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3

Bars andRestaurants*

FIRE Industry

Unemploym ent

Standardized Regression Coefficients: 1990 Factors and 1990-2000 Attainment GrowthRegressions Include unemployment, wages, amenity index, and regional dummies as controls

* Not Statistically Significant

Good Weather and Night Life are Not Nearly Good Weather and Night Life are Not Nearly as Important to College Graduates as Employmentas Important to College Graduates as Employment

The Changing Dynamics of Urban America

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