Tag Archives: Creative class

Transience and Fresh Blood, Two Sides of the Same Coin

fresh_blood

Every community needs fresh blood — newcomers who bring  different perspectives and creative ideas. But it’s possible to have too much of a good thing. If everyone is a newcomer, communities lose social cohesion. Transients don’t have the same stake in a community that the old-timers do and they’re less likely, all other things being equal, to participate in the political process, engage civically and contribute to local causes.

I thought it would be interesting to see which localities in Virginia are most dominated by newcomers. Working with Internal Revenue Service migration data, which tracks the movement of tax filers between 2010 and 2011, I calculated the percentage of in-migrant tax filers for that year as a percentage of all tax filers, and then ranked Virginia’s localities. (Click here to view a spreadsheet of all Virginia localities.)

Though not especially surprising, the findings are interesting. The most transient localities in Virginia, as seen in the chart above, are cities and the state’s most urbanized county, Arlington. Prince George County, southeast of the Richmond-Petersburg region, is the only anomaly.

fresh_blood_low

The localities with the least fresh blood tend to be rural, poor and geographically isolated, predominantly in the mountain regions of Virginia, but some from the red clay country of the Southern Piedmont.

There is an extraordinary difference in the degree of transience. Fredericksburg had almost nine times the number of newcomers expressed as a percentage of all tax filers in 2011 that Dickenson County did.

By itself, this data is little more than a curiosity. It becomes useful when correlated with transience/fresh blood with economic indicators such as job growth, income growth, housing prices and other cost of living indicators, education, voting participation and various indices of social engagement.

– JAB

Redefining Richmond: Arts! Culture! Food!

ICTby James A. Bacon

Richmonders berate themselves (and outsiders mock them) for their inability to decide where and how to build a baseball stadium for a AA baseball team. If the region’s political and civic leadership can’t pull off this most basic of regional tasks, one might legitimately wonder if they can accomplish anything useful at all. But it turns out that Richmonders can mobilize behind civic projects — it just has to be the right kind.

A case in point is Virginia Commonwealth University’s Institute for Contemporary Art, which has raised $33 million of its $37 million funding goal. Construction of the facility, designed by an award-winning New York architect, is located at Belvidere and Broad, one of the region’s busiest intersections and a gateway to downtown. This project, which will showcase art from VCU, one of the nation’s leading art schools, has not been controversial at all. Funds were raised through contributions by local philanthropists. With help from a construction loan from the VCU Foundation, construction began in June.

A city and region define themselves by the long-term investments they make in civic infrastructure. To pick a very different example: Buffalo, N.Y., a region of comparable size to Richmond, has poured money into a pro football complex downtown more magnificent than anything than Richmonders could conceive of erecting in their own city — and locals still aren’t satisfied. Buffalo groups are exploring an even more grandiose facility. Richmond has nothing to compare. But it does have arts and culture out the wazoo. And we locals like it that way.

Speaking to the Richmond chapter of Commercial Real Estate Women, Institute Director Lisa Freiman outlined the vision. As reported by Virginia Business, the institute will  showcase a changing array of exhibitions not only by VCU artists “but the best of contemporary art from around the world.” Freiman predicts that the facility “will create opportunities for cultural tourism and community revitalization.”

The tie-in between contemporary art and economic development is stronger in Richmond than it would be in many other regions. The advertising industry is remarkably vibrant for a region Richmond’s size. Local companies serve national clients, and they employ artists, graphic artists, videographers and the like. There is a easy, natural cross-over between the art world and the advertising world. Supporting one supports the other.

rappahannock

Travis Croxton (left) and Ryan Croxton, owners of the Rappahannock restaurant. Photo credit: Times-Dispatch.

Meanwhile Richmond — and Virginia as a whole — is developing the reputation as an up-and-coming foodie region. Esquire Magazine has just named Virginia “The Food Region of 2014” in its 2014 Food and Drink Awards. “The Old Dominion has seemingly overnight exploded into one of the country’s greatest gastro regions,” writes the magazine, as reported in the Times-Dispatch. While the recognition goes to Virginia as a whole, Richmond is a vibrant part of the state’s foodie scene. Rappahannock restaurant won recognition as one of the 12 “Best New Restaurants” in the country.

The article cited Virginia’s diverse geography and the ability to source fresh, locally grown produce and artisinal food products from the mountains to the Chesapeake Bay as a big plus for restaurants aspiring to national quality. I’m sure that’s a factor, but I think the story is bigger than that. Richmond and Virginia produce great restaurants because the local marketplace supports them. People are willing to pay premium prices that restaurants must charge in order to recruit and pay chefs of national caliber.

New Yorkers and Washingtonians may laugh at Richmond’s pretensions in the worlds of art and cuisine — to many we’re still a hicksville backwater still fighting the Civil War. What they don’t see is how the region is steadily reinventing itself. Once the city prided itself on being a regional center of corporate headquarters. That prop to the economy suffered heavy damage during the recession of 2007-2008 and has been slow to recover. But there has been tremendous activity beneath the surface. Redevelopment along the downtown canal. The Richmond Folk Festival. Converting the James River into the region’s “Central Park.” The boom in downtown living. The French Film Festival. The gentrification of Church Hill and Scotts Addition. The creation of a fantastic network of mountain biking trails. The rise of the foodie movement and the renaissance of locally grown food.

Unconsciously, Richmond has been building the foundations of the “creative class” economy. It’s becoming the kind of place where creatives want to live, work and play. When creatives settle here, they start new businesses. In time, some of those businesses become success stories and economic dynamos that will propel regional growth. VCU’s Institute for Contemporary Art symbolizes how Richmond is redefining itself as something very different and very new.

More Awesomeness in Richmond

Another reason I love my home town: Richmond has 40 miles of world-class single-track bicycle trails. I’ve been on a few of them, although, I do confess, I don’t ride nearly as fast as the two guys in this short video! (Nor can I do the neat wheelie tricks up and down stairs.)

What I find especially cool is that the biking enthusiasts — trail gnomes, in their own parlance — help maintain the trails for everyone’s benefit. They clear routes of fallen trees and debris (as shown in the clip), prune vegetation and repair sections worn away by run-off. It’s an all-volunteer effort.

Biking trails in wild public spaces in the center of the city are a rarity and a gem.

— JAB

Live Art

SONY DSC

It was a gorgeous day in Richmond yesterday, temperature in the high 60s and the most perfect blue sky I have ever seen — the ideal setting for street artists to ply their craft. In the second annual RVA Street Art Festival, nearly 30 painters gathered at the old GRTC bus garages this week and used brick walls as their canvas. Thousands of people came to watch. 

See more pictures of the RVA Street Art Festival.

Kudos to Ed Trask and Jon Baliles for organizing another great event.

— JAB

SONY DSC

Let’s Jump on the Peer-to-Peer Bandwagon

Vested interests in cities around the country are mobilizing to thwart a new generation of peer-to-peer technologies threatening to disrupt the lodging and transportation industries.

I have documented the difficulties of Uber, the e-hailing service (tap on your smart phone app and an Uber limo comes to pick you up), in Washington, D.C., where it has run afoul of the taxicab cartel. There must be at least a dozen more start-ups coming out of Silicon Valley or Europe — I’ve included YouTube shorts for RelayCars, Airbnb and Flightcar — that allow people to catch rides, share rides, rent someone else’s car or rent someone a room in someone else’s house.

As start-ups, these companies focus their efforts first on major markets like San Francisco, Chicago, New York and Washington. But they often run into regulatory barriers, as described here and here. Not surprisingly, the stakes are really big in those markets and the special interests are really entrenched.

So, here’s the idea. Why don’t second-tier cities (or regions) like Richmond and Hampton Roads make themselves hospitable to the peer-to-peers? Sure, there are local taxi services in each region but they have very small travel-share and they lack the political clout of their big-city counterparts. Why don’t we go out and promise to help work through any regulatory obstacles if these guys commit to establishing a serious presence in our regions.

We could end up with a greater variety of transportation and travel choices, which benefits everyone (except the entrenched competitors). And having more of these Internet-based services active in the region adds a coolness factor that the younger generation might find attractive. Yeah, I know, half or more of these companies will be out of business in two years. So what? The other half might transform their industries. And, as regions, we could send out a signal to the world: We’re open to competition, open to innovation. Check us out.

Another idea from the fertile (some might say febrile) brain of Jim Bacon…

Misunderstanding the Link between Taxes and Economic Development

Tax Foundation graphic reproduced in the Atlantic Cities blog.

Tax Foundation graphic reproduced in the Atlantic Cities blog.

by James A. Bacon

In his latest post at the Atlantic Cities blog, Richard Florida asserts that a “lower state income tax does not spur economic development.” In support of his proposition, he argues that states with higher tax burdens are more affluent; they have higher concentrations of talent and workers in the so-called “creative” occupations. Writes Florida:

States with tax [income tax] burdens that range from $1,205 to $1,864 per person average $10,000 more in income than states with zero state income taxes — $81,594 versus $69,612. The same pattern is true of wages — states with high collections average $50,610 in wages versus $43,638 for states with low collections.

That’s pretty much his whole argument, although he does cite a two-year-old study from Nevada finding that states with Republican governors are associated with somewhat lower rates of growth and another study that criticizes “business climate” indexes as designed with political ends in mind.

There’s really no excuse for such superficial analysis. Yes, it’s true that high taxes and high incomes are correlated. But which way does the causality run? Do high taxes lead to high incomes, or do high incomes lead to high taxes? I would argue that the high incomes came first and the high taxes followed.

The evidence will show that some high-income states can trace much of their good fortune to historical factors, such as their 19th-century and early 20th-century leadership in the industrial revolution that created the vast wealth that seeded key institutions (universities, especially) necessary for the transition to the late-20th century transition to the knowledge economy. Thus, to pick an obvious example, Massachusetts prospers today because it is home to Harvard, MIT and a host of other highly ranked universities with billion-dollar endowments — not because of the splendiferous benefits conferred by its high taxes. Other states retain pockets of prosperity because they are home to world-class industry clusters that emerged decades ago and that seemingly no amount of mal-governance can dislodge. Think California, Silicon Valley and Hollywood.

What small-government conservatives argue is that lower-tax regimes stimulate more economic growth than high-tax regimes. Lower taxes may have little effect on an entrepreneur’s proclivity to launch a new business, but they do allow entrepreneurs to retain more of their earnings, which they can reinvest in growth. (With the wealth of online tax calculators and estimators available, it’s much easier for businesses to get a better idea of their tax situation in order to grow in one state or another.)

The evidence is indisputable that high-tax states, on average, experience less job creation and significant out-migration to low-tax states. It’s pretty intuitive that people don’t move from New York to, say, Florida, North Carolina or Georgia for the better restaurants and high-brow culture. They move in search of superior job opportunities and lower cost of living. As a result, over a time span measured in decades, the income and wealth gap between Southern states and Northern states has narrowed considerably, even more so if you adjust for the differences in cost of living.

Where the debate gets interesting is when you ask the question, do higher taxes allow some states and local governments to support a higher level of infrastructure, amenity and service that people value more than the taxes they’re paying? Essentially, that is the argument that Florida makes. Insofar as states and regions use higher taxes to pay for better public schools and higher education, there may be some truth to that counter-argument. But when higher taxes go to pork-barrel spending, outrageous retirement packages for public employees and a more generous safety net for the poor, the argument falls apart.

To summarize, taxes are only one variable among many affecting economic growth and they explain only a modest fraction of the variability in growth rates between states. While lower taxes are (to my mind) clearly preferable to higher taxes, it would be unwise to overstate the case and tout them as an economic-development panacea. On the other hand, it is foolish, as Florida has done, to insist they have no significance.

For what it’s worth, Virginia’s income tax burden is 8th highest in the country, according to Tax Foundation data. Maybe that explains why economic growth here is relatively sluggish given the otherwise favorable business climate we have.

The Limits of the Creative Class

Joel Kotkin

In a blog post on “New Geography,” Joel Kotkin unloads with both barrels on Richard Florida and the ailing cities that paid him big consulting fees to help reinvent themselves — for the most part unsuccessfully — as “hip and cool” places appealing to the creative class.

Kotkin’s riff was inspired, apparently, by a recent concession by Florida that building amenities that appeal to creative-class professionals does little to help less affluent sectors of the population. Hip places like San Francisco, Manhattan and Washington, D.C., have among the most extreme disparities of income in the country, Kotkin says. And, while creatives supposedly worship ethnic diversity, hip cities like San Francisco, Portland and Seattle are getting whiter, not more diverse.

Writes Kotkin: “To be sure, the leading “creative class” cities have much to recommend them, and some of them, such as Portland and Boston, have registered impressive rises in their per capita income in recent years. But over the past decade, most “cool cities” have not been enjoying particularly strong employment or population growth; in the last decade, the populations of cities like Charlotte, Houston, Atlanta, and Nashville grew by 20 percent or more, at least four times as rapidly as New York, Los Angeles, San Francisco, or Chicago. This trend toward less dense, more affordable cities is as evident in the most recent census numbers than a decade.”

Kotkin scores some hits but leaves Florida’s core tenets standing: Creative-class professions accounting for roughly 30% of the workforce account for a disproportionately large share of scientific, artistic and entrepreneurial innovation. Regions that attract these creatives tend to create more wealth and have higher incomes than those that don’t. (Wealth disparities are the inevitable byproduct of the fact that wealth creation is an uneven process. Florida has long acknowledged that fact, unlike many liberals who see wealth disparities as a social injustice.)

Appropriating (or misappropriating) Florida’s ideas, many cities have tried and failed to reinvent themselves as creative-class magnets through public investment in urban redevelopment, building bike paths, subsidizing the arts — following a politically liberal template. The question that Kotkin doesn’t address is whether many of these cities were doomed to failure anyway. Profligate spending on public programs for the creative class, I would argue, is closely correlated with profligate spending on other things. The spending, and the higher taxes, unfunded pension liabilities and other ills associated with the Blue State model, may have been the underlying problem.

If a city or region wants to become “hip and cool,” government is not the best vehicle for making that happen. Hipness is a cultural phenomenon, a state of mind. Some regions have it, others don’t. In either case, what government needs to do is get out of the way — create the conditions for individuals, companies and not-for-profits to experiment and innovate. Politicians and bureaucrats are the antithesis of cool. Coolness, if it is to be achieved at all, bubbles from the bottom up.

Update: Florida has responded. He concedes nothing. “I’ve argued that a key to urban prosperity is not investments in convention centers, stadiums, casinos or arts complexes, or even coffee shops for that matter, but being open to diversity and different—having low barriers to entry to people of every sort, young and old, American and foreign born, gay and straight, married and single, families with kids and without.”

Florida wins the exchange. Kotkin seems unable to distinguish between Florida’s thinking and that of others who have misapplied his thinking (usually as a justification for activist, interventionist government). While Florida is undeniably a cultural liberal arguing for openness and inclusivity, I have seen no evidence in his writing that he is a proponent of big spending government activism. My sense is that Kotkin has read Florida superficially and with a hostile mind-set.

— JAB

The New Geography of Jobs

by James A. Bacon

The New Geography of Jobs” is arguably the most important book about urban economics published in 2012. Author Enrico Moretti, an Italian-born economics professor at Berkeley, analyzes the great divergence occurring between metropolitan regions in the United States. While much of his narrative about the “innovation” sector as the key driver in regional growth will be familiar to readers of Richard Florida, Moretti provides a valuable counter-balance to Florida’s theories about the creative class.

Just as Florida ascribes remarkable wealth-creating properties to the “creative class,” Moretti puts the innovation sector — referring primarily to high-tech industry clusters — at the center of his analysis. While Florida suggests that members of the creative class gravitate to metropolitan areas that offer a particular set of attitudes (openness, tolerance) and amenities (urban cafe lifestyle, street arts scene), Moretti argues that the economic logic of labor markets are the driving factor.

To Moretti, metropolitan regions are labor pools. The labor that really matters in a knowledge economy is college-educated labor. And what matters even more than generic college-educated labor is labor with technology-related competencies in demand by the corporations that create innovative products and services. “In the world of innovation,” Moretti writes, “productivity and creativity can outweigh labor and real estate costs.”

Thus, a region like San Francisco/San Jose can have outrageous costs of living and doing business yet tech businesses migrate there because that’s where the talent is. And talent moves there because that’s where the jobs are. By doing a better job of matching employers with workers, the productivity-enhancing advantages of “thick” labor markets like Silicon Valley’s more than compensate for the region’s higher costs.

There are two other critical benefits to industry clustering, Moretti writes. Innovation clusters attract investment capital, which funds and nurtures  business start-ups. And clusters have what he calls almost “magical” spillover effects. “New ideas are rarely born in a vacuum. Research shows that social interactions among creative workers tend to generate learning opportunities that enhance innovation and productivity. This flow and diffusion of knowledge represents a crucial third advantage for workers and firms that locate within an innovation cluster.”

Thus, regions with strong knowledge clusters tend to grow, attracting both corporations and employees. Regions with weak knowledge clusters tend to remain weak. A third class of cities, which are caught in between, have uncertain futures.

The great public policy question for wanna-be growth centers is how to jump-start an innovation cluster. Broadly speaking, regions have followed two types of approaches. One is a demand-side approach, attracting employers with the hope that workers will follow. The other is the supply-side approach, improving a city’s amenities to lure talented workers in the hope that corporations will come. Following (and often misinterpreting) the theories of Richard Florida, many regions have invested public resources in a futile effort to make themselves “cool” and attract the creative class.

Moretti demolishes that reasoning: “It is certainly true that cities that have built a solid economic base in the innovation sector are often lively, interesting, and culturally open-minded. However, it is important to distinguish cause from effect. The history of successful innovation clusters suggests that in many cases, cities became attractive because they succeeded in building a solid economic base, not vice versa.”

Seattle, for instance, was a dump before Microsoft landed there and created a thick labor market for Amazon.com and a swarm of technology start-ups. Now the region is the epitome of cool. Conversely, Berlin may be the coolest city in Europe from the perspective of artistic creativity, Moretti argues. But technologically, it ranks low on the innovation index, and its income is lower than many other German cities.

What, then, can regions do? Building world-class universities is no panacea. For every Stanford/Silicon Valley, there’s a Johns Hopkins/Baltimore. How about a “big push” industrial policy — targeting a growth industry with public investment? Such approaches might be successful, he contends, but they are very expensive and very risky. Governments chase fads; they are not good at picking winners and losers. How about investing in schools and universities to create home-grown human capital? Great idea, except in the absence of local innovation clusters, the talent will move away. Regions subsidize the development of someone else’s workforce.

At times, Moretti sounds as if the rise of innovation clusters is a matter of serendipity, beyond the ken of government policy wonks to manipulate. Who could have predicted the rise of Microsoft? Who could have predicted its transformative effect on Seattle? One of the few tangible policy proposals he advances is to reform immigration policy to encourage well-educated foreigners (not unlike himself) to settle in the United States. They contribute disproportionately to wealth creation. Of course, they, too, tend to migrate to the nation’s main innovation centers.

Bacon’s bottom line: Other than to replicate Seattle by giving rise to a Microsoft-scale success story — in other words, by getting lucky — there is no simple answer. I distrust industrial policy of picking industries, whether conducted at the national level or the regional level. And the pseudo-Creative Class approach of investing scarce public resources in urban amenities that attract young, educated workers is equally problematic unless corporations can be recruited or businesses launched to hire them.

My inclination is to stick with the basics. Government should focus on a few things and do them well. Here in Virginia, and throughout American, that means reforming key broken institutions — K-12, higher ed, health care, transportation and land use — while keeping taxes as low as practicable and the business climate as hospitable as possible. I do think there is a role for making regions attractive to the creative class but those initiatives are best left to the civic realm. In sum, regional success is like personal success — the harder you work, the luckier you get.

Solid Thinking about Richmond’s Future

by James A. Bacon

Richmond’s Future, a regional think tank founded by former Virginia Commonwealth University President Eugene Trani, is spear-heading the most interesting conversations taking place today about the future path of the region’s economic development. It’s a welcome change from the regional leadership’s old habit of touring other cities in the search of ideas worth copying or bringing in outside consultants to do our thinking for us.

Even better, these ideas are getting serious play in the op-ed pages of the Richmond Times-Dispatch, which has repositioned itself as a purveyor of opinion on national and international affairs, to which it had little to contribute, into a forum for the discussion of regional issues, for which it is well suited.

The highest praise I can offer Richmond’s Future is that it is asking exactly the same kinds of questions that I have been highlighting on Bacon’s Rebellion for the past 10 years. I take no credit for their insight, for I have little evidence that the principals behind Richmond’s Future read Bacon’s Rebellion. More likely, it’s a matter of the principals behind Virginia’s Future acquainting themselves, as I have endeavored to do, with cutting-edge thinking about regional development.

First, the brains behind Richmond’s Future understand that Virginia can do a far better job of recruiting corporate investment and supporting entrepreneurial start-ups by building upon regional strengths rather than chasing national fads. Thus, the organization has championed the idea of a Commonwealth Center for Advanced Logistics Systems based upon stand-out attributes of the region, such as the presence of the U.S. Army’s logistics university at Fort Lee. Rather than push for corporate subsidies to entice investment, they make the case for building institutions of specialized knowledge creation and skill building that will complement existing industry clusters. Logistics aren’t remotely as sexy as microchips or genetic engineering. But the goal of becoming a world-class logistical center is far more achievable.

Likewise, the think tank is pushing for Virginia to become a center of advanced manufacturing, building on the model of the Commonwealth Center for Advanced Manufacturing. “Central Virginia has a unique opportunity to position itself as a top 10 manufacturing cluster in the United States and to attract the companies and jobs that come along with such a status,” wrote Barry W. Johnson, associate dean at the University of Virginia engineering school and board member of CCAM, in a Times-Dispatch op-ed. That goal is ambitious, to be sure, but realistic in that it builds on real local strengths.

Secondly, Richmond’s Future is invigorating the discussion about how to make Richmond a regional center of creativity and innovation. One important initiative is to probe the psyche of college students and young professionals — the innovators and wealth creators of tomorrow — about their values and priorities in selecting a community in which to live. The 60-something white-guy business establishment is not exactly in touch with the latest trends in youth culture, so an online survey underwritten by Virginia’s Future should make an important contribution.

The survey, which was prepared by my former colleagues at the Southeastern Institute of Research (SRI), asks young people what they look for in a community — and how Richmond stacks up. What constitutes a good art scene, music scene and food scene? Are young people looking for more than a symphony, orchestra and ballet? What kind of outdoor recreational opportunities do they value? How important are walkable/bikable communities, public transportation and affordable housing? How important is diversity? Innovation?

The responses will be biased by the fact that the young people filling out the questionnaire will consist of those who have chosen, for whatever reason, to reside in the region. They may not be typical of the broader universe of college-educated professionals. But the survey a good start. The most important thing is that at last, someone is asking the right questions.

Tourism and the Creative Class

Monticello: Old style tourism destination

by James A. Bacon

A draft plan written by PriceWaterhouseCoopers LLP makes a valuable contribution to thinking realistically and creatively about Virginia tourism. The “Virginia State Tourism Plan” comes tantalizingly close to integrating the development of tourism initiatives with economic development in the Knowledge Economy… but never quite completes the loop.

Virginians have long touted the beauty of their beaches and mountains, but as PriceWaterhouseCoopers diplomatically observes, “Virginia is somewhat challenged in differentiating its experiences for nature and outdoor recreation from neighboring states with similar offerings, some of which may be well known, competitively marketed, and offered in a concentrated area.”

Virginians also pride themselves for the wealth of their historical heritage. However, the study notes tersely, history has a limited draw. “These experiences may be perceived as more passive and not necessarily exciting to potential visitors.” The historical city of Charleston, S.C., by contrast, has won recognition as one of America’s Great Adventure Towns by National Geographic.

Folk festival: new style tourism attraction

The study makes the case for a very different kind of tourism — one not based upon giant, Disney-like destinations, which the state doesn’t have in any case, but rooted in the state’s artistic roots and modern culture.

Virginia … possesses a growing creative economy built on musical and artistic roots and combined with modern culture. From the mountain, folk, and bluegrass music to the world class art museums, galleries, and theatres, there are many opportunities to experience the cultural arts. Additionally, the 25 designated Main Street communities and other towns and cities throughout rural and urban areas, offer genuine downtown charm and unique shops, galleries, restaurants, events, and festivals that help define the artistic culture present throughout the Commonwealth.

The beauty of this focus, although PriceWaterhouseCoopers doesn’t come right out and say so, is that these types of destinations are not only potentially attractive to visitors from New York or Canada but to Virginians. Tourism can support a rich mosaic of events, venues and experiences that enhance Virginians’ quality of life — thus making the Old Dominion more competitive in recruiting and retaining the educated, affluent and innovative individuals who comprise the wealth-creating creative class.

What kind of attractions does PriceWaterhouseCoopers have in mind? The study mentions the following: town/city centers, nature & outdoor recreation, facilities for participant and spectator sports, culinary visitor experiences, and music & arts, among others

For example, Virginia has emerged as a significant wine destination, ranked as one of the top ten wine destinations worldwide in 2012 by Wine Enthusiast Magazine. With more than 200 wineries, 50 breweries and distilleries and a notable wine-to-table movement, Virginia can position itself as a serious destination for high-income foodies. If Virginia became a true foody heaven, it could  draw visitors not only from outside the state — as Lousiana has done marketing its Cajun culinary tradition — it could enrich the everyday experience of Virginians in a way, say, that Disney World cannot for Floridians.

Similarly, Virginia offers an abundance of waterfront along its rivers, lakes and coastlines. While taking care to protect the environment, the state and its communities should increase access to recreation activities such as fishing, boating, rafting, paddling, hiking, and shoreline biking — as well as events and festivals. By way of comparison, the study offers Governor’s Island in New York, a 172-acre island located a half mile from Manhattan and accessible by a free ferry that hosts cultural events, food festivals, concerts and performances. Such recreational assets would appeal not only to out-of-state visitors but to Virginians themselves.

A region’s competitive advantage in the Knowledge Economy comes from its ability to recruit and retain the creative class. Building assets around activities that educated, creative people like to pursue — dining, hiking, kayaking, biking, listening to music, engaging in amateur athletics — builds the base for a tourism industry and growth of the creative class.

If the state tourism plan explicitly made that connection, I believe, it would greatly strengthen the case for investing in tourism.

Hi-ho, Heyo, It’s Off to Blacksburg We Go!

Heyo's three co-founders. Photo credit: TheBurgs

Yesterday I argued that the economic odds were stacked against Virginia’s smaller metropolitan areas when it came to stimulating the start-up and growth of technology businesses. Economies of scale in the knowledge economy, I suggested, favor large regions with larger, more diverse labor pools. Could I have been wrong? (What, me wrong? Never!)

This morning, Governor Bob McDonnell announced that Heyo, a fast-growing social media company formerly known as Lujure Media Inc., will expand its operation in the Town of Blacksburg. The company, which creates dashboards for managing Facebook fan pages, mobile apps and websites, aims to create 50 jobs over the next two years.

Said Jim Cheng, Secretary for Commerce and Trade: “Heyo’s innovative services and accelerated growth are further evidence that Virginia is an incubator for good ideas. … The company is dedicated to Blacksburg and Montgomery County, and has found a pool of local talent to thrive. ”

Added Heyo CEO Nathan Latka: “The close knit community makes it easy to build culture and hire top tier talent from top ranked local universities like Virginia Tech and Radford University. This has enabled us to create 16 full-time jobs with aggressive hiring plans for the coming months. As we continue to grow rapidly, it’ll be hard for Blacksburg to remain the country’s biggest secret.”

A big high-five to Heyo and Blacksburg! I would love to believe that Blacksburg, Charlottesville and other smaller Virginia metros can buck the mega-trends arrayed against them. I hate the idea of a Virginia defined by a sprawling urban crescent and a withering hinterland. But a few positive anecdotes don’t change the big picture. It will be instructive to see if Heyo can grow a large technology  enterprise in Blacksburg.

— JAB

Innovation and Business-Establishment Density

by James A. Bacon

In previous posts, I have postulated that some human settlement patterns do more than others to promote creativity and innovation. Following the lead of such thinkers as urbanist Jane Adams, architect Leon Krier and economic geographer Richard Florida, I have suggested that certain urban forms — cul de sac subdivisions, massive skyscrapers — dampen physical mobility and access, thus, the ability of businesses to interact with one another. The ideal urban form would reduce the travel and time cost for people to leave their offices, meet, confer, grab coffee or lunch, meet after hours and have serendipitous encounters. The underlying assumption is that creativity and innovation arise from such interactions.

Drawing upon the work of  Jose Lobo with Arizona State University, Florida has mapped the “establishment density” — the number of business establishments per square mile — of the nation’s metropolitan statistical areas. (Read his blog post here.)

Not surprisingly, New York has the highest number of business establishments per square mile (79) among the country’s 20 largest MSAs, with San Francisco coming in third (47.9) and Boston fourth (34.9). Counter-intuitively — think of all those freeways — Los Angeles has the second highest density (68.7).

In Virginia, the Washington and Hampton Roads MSAs are of medium business density, while Richmond is below average.

This is all well and good, but is business-establishment density truly correlated with creativity and innovation? While I believe there is a link, I would hypothesize that it is a weak one, and I would readily concede that the case is far from proven. Someone should run a regression analysis to see if there is a correlation between business-establishment density and various proxies for business innovation.

Here’s the problem: Metropolitan-wide averages don’t mean much. To what extent are business establishments clustered within an MSA? For example, the Washington MSA is a large one, but IT/systems integration companies in the region are packed into a geographic sliver, the Tysons-Dulles corridor. If you measured the business-establishment density of that particular industry, it would be pretty darn high. To take another example, the advertising/marketing industry in Richmond is heavily concentrated within a couple of square miles in Shockoe Slip and Shockoe Bottom.

Here’s another critical issue: What is the quality of micro-level transportation connections within a region? How easy is it to walk, drive or take mass transit from one location to another? While the Dulles corridor may be compact geographically, how easy is it to travel from Point A to Point B within the corridor? Does anyone ever walk anywhere? Are the roads perennially congested? Will the construction of the Silver Line make a material improvement to interactivity within the corridor?

This is a fascinating line of inquiry, and an important one. There are only a handful of things that state/local governments can do to foster a culture of creativity and innovation. Fostering optimal human settlements (or creating the conditions where market forces achieve the optimal level) may be a neglected tool. The idea is worth pursuing.

The Entertainment Economy — Double-Edged Sword

by James A. Bacon

As robots, artificial intelligence and other labor saving innovations penetrate the economy, traditional jobs that entail making things or providing routine services — Toro is testing a robotic lawn mower for golf courses, for Pete’s sake — could disappear. The only jobs that will be left, it seems, are those in which we humans entertain one another.

In apparent confirmation of this view, the American consumption of “entertainment” services — sports, music, theater, art — is one of the economy’s stronger growth sectors. Spending rose steadily over the 2000s until taking a hit in the 2007-2008 recession. The number of sports- and entertainment-related jobs also has grown — 30% over the past decade, reports Joshua Wright in New Geography.

The most entertainment-intensive metropolitan regions (measured by jobs as a percentage of the workforce) are, not surprisingly, Los Angeles (2.06 times the national average), Nashville (2.02 times), San Francisco (1.51 times), New York (1.43 times) and Las Vegas (1.29 times).

Also, no surprise, Virginia MSAs rank fairly low in sports/ entertainment intensity. The Washington metro ranks just above the national average — politics is a blood sport, after all — while Richmond ranks just under. Among the nation’s 50 metro areas, Hampton Roads ranks near the bottom.

Now, here’s what’s interesting for my ongoing analysis of the Richmond region’s creative class: Among the MSAs studied, Richmond ranked No. 2, behind Austin, in the growth in the number of sports/entertainment jobs between 2008 and 2012. Austin truly rocks. Ranking 6th in the country for sports/entertainment occupational intensity, the region grew the number of jobs in that category by 18.4%. But Richmond increased the number of jobs by 13.4%.

It’s not clear which specific occupational categories are leading the way in Richmond. Wright’s data does not drill that deep. But given the dearth of professional sports in the Richmond region, it’s difficult to imagine that the number of referees, umpires, coaches, scouts and professional athletes accounts for much of the increase — although the region does have exceptionally active amateur athletic programs. Based on my personal acquaintances, I’m guessing that musicians and singers predominate.

Be that as it may, the increasingly bohemian tint to the Richmond workforce augurs well for developing a culture of creativity and innovation, the traits needed to excel in a globally competitive knowledge economy. The downside is that these guys aren’t making much money. An average hourly wage of $15.50 an hour translates into annual income of about $31,000 a year.

Susan Greenbaum, ubiquitous Richmond-area performer. Check out her latest folk CD, "This Life."

Actually, the story is a bit more complicated than that. Wright makes the point that the big growth has been among the self-employed and free-lancers — “moms and dads coaching their kids (or serving as referees) in soccer, office workers moonlighting in a band that does local gigs, men and women working part-time for the local stage company as an actor or director.”

In other words, many people are working in the sports/entertainment occupations either because they got laid off from their regular jobs or they see the work as a supplementary source of income. Given my druthers, I’d like to see more scientists and entrepreneurs making fat salaries and creating massive wealth that trickles down to the rest of us. But, hey, you take what you can get. At least the town is a fun place to live.

Hat tip: FreeDem

Cool Richmond: Two Hours from the Beach… and One Minute from Itself

Kayaking on the James in the heart of downtown Richmond. (Photo credit: Outdoor magazine.)

by James A. Bacon

The denizens of River City are ecstatic about Outside magazine’s designation of Richmond as the “Best River Town in America.” The recognition is very cool, considering the competition. Better than Ashville, N.C., and Durango, Colo., cities known for their connection to the great outdoors? Yessss! (Fist pump!)

Cynics might observe that the selection was based partially upon votes tabulated on the magazine’s Facebook page, which makes it less an objective indicator of the region’s outdoor recreational attributes than the effectiveness with which Richmond’s civic boosters launched a get-out-the-vote drive. (Boosters did make a concerted effort to win the recognition; even Governor Bob McDonnell  weighed in.) Yet it says something significant that Richmonders felt strongly enough to make the effort. Richmonders see their region– and want it to be seen by others — as a great place to live.

Philip Morris USA may be headquartered here, but we’re not Tobacco Town anymore. We may have statues of Stonewall Jackson and Robert E. Lee, but we don’t define ourselves by the Civil War anymore. The James River is the perfect symbol for the new Richmond that is arising.

Most large cities are located on a river. But how many have rivers like the James where people can engage in hiking, mountain biking, kayaking, canoeing, rafting, inner tubing, crewing, open-water swimming, sun-bathing on rocks and, according to Jon Billman who profiled the city for Outdoor (this was a surprise to me), snorkeling — right in the center of the city? As Billman quoted Matt Perry, a partner in Riverside Outfitters:

“People say living in Richmond is good because it’s two hours from everything”—the mountains, the ocean, Washington, D.C. “That’s cool, but it’s also one minute from itself.”

That’s right, the James River has become a major attraction to Richmonders — and it’s especially appealing to young, educated professionals who like to stay physically active. I spoke this morning to Jay Peluso, a Rhode Island native who attended the University of Richmond law school, settled in Richmond and now runs Peluso Open Swim on the James. In addition to a series of one-mile swimming competitions upstream from the city, he is organizing a five-mile swim, To the Bridge and Back, this October, which he aspires to build into an event as popular as the Great Chesapeake Bay Swim.

“I think people are starting to find the river again,” said Peluso. “They’re not just throwing out a fishing line or sitting on the rocks.” They’re kayaking, hiking and swimming. “Not many cities have a viable, accessible river where pollution is low. [The river] is our greatest asset.”

As more people use the river recreationally, political support will build to clean it and protect it. The cleaner it gets, the greater the number of people who will use it for healthy outdoor activity. The James River is a key to transforming Richmond from one of the fattest cities in the country to one of the healthiest. Six hundred acres of urban wilderness along the James River is literally unique — one of a kind — in the United States. No other city has anything like it. It is a natural treasure.

The Great Jobs-Skills Mismatch

Geek shortage? "Computer occupations" are the occupations in greatest demand in Washington, Richmond and Hampton Roads.

by James A. Bacon

Much of the unemployment in the United States is tied to cyclical economic factors like swings in housing starts and industrial production but some of it stems from a mismatch between the jobs available and the skills of unemployed workers, contends Brookings Institution scholar Jonathan Rothwell in a new article, “Education, Job Openings and Unemployment in Metropolitan America.”

On average, the jobs being created require more education than American workers possess. In an analysis of the nation’s 100 largest metropolitan statistical areas (MSAs), Rothwell also found that the mismatch was more acute in some MSAs than others. Indeed, the Richmond region ranked 72nd out of 100 in his “education gap” index (in which 1st represents the smallest mismatch). Virginia Beach (ranked 40th) and the Washington MSA (4th) fared considerably better.

The mismatch is of more than academic significance. “Metro areas with higher education gaps,” Rothwell writes, “have experienced lower rates of job creation and job openings over the past few years.”

Here is a closer look at the numbers. (Click on links to see regional profiles.)

Richmond MSA: 43.1% of all job openings in January/February 2012 required a bachelor’s degree or higher, compared to 21.8% of unemployed workers and 31.7% of all adults with B.A.s.

Hampton Roads MSA: 39.3% of all job openings required a bachelor’s degree or higher, compared to 15% of unemployed workers and 28.5% of all adults with B.A.s.

Washington MSA: 49.6% of all job openings required a bachelor’s degree or higher, compared to 30.3% of unemployed workers and 46.8% of all adults with B.A.s.

Bacon’s bottom line: To the extent that MSAs with high education gaps, like Richmond, tend to experience lower rates of job creation, Rothwell highlights a problem that needs to be solved. But I also see the gap as an opportunity.

The Richmond region has one of the highest education gaps in the country. But that’s not entirely a bad thing. It means that Richmond-area employers are creating jobs that require a high level of skills and, presumably, would command higher-than-average salaries. Turn the picture around. Would you rather live in a region where the jobs being created required less education? That would be an economy of proverbial hamburger flippers.

An education gap gives people a concrete reason to pursue higher education, even in the face of runaway tuition and fees. The message: The jobs are out there if you make the effort to acquire the skills.

From a public policy perspective, an education gap points the way to a different way of thinking about economic development. Economic development in Virginia is geared primarily to recruiting new businesses to the region, and secondarily to stimulating new business start-ups. Both of those approaches overlook the fact that existing businesses are creating lots of jobs that they can’t fill locally….

Which brings me back to a familiar theme: If the Richmond region (or Hampton Roads, Roanoke, Charlottesville or any other region) wants to stimulate economic development, it needs to create the kind of place where educated people want to move to and, once they get here, want to stay.

What attributes and amenities do educated people look for… other than a great paycheck? That depends significantly upon an individual’s (or family’s) stage of life. Young singles yearn for places where they can meet other young singles. Married couples with children look for good places to raise their kids. That’s basic. But what else?

Rothwell observes a tendency of college graduates to stay in the same state as their university. “Indeed, 70 percent of college graduates live in the same state at their college five years after graduation and 61 percent 10 years after.  The share is only slightly less for tech entrepreneurs; 45 percent of the founders of large companies created their business in the same state where they attended school.  This is one of the reasons why many of the metro areas with the highest college attainment rates also have large research universities, like Austin, Boulder, San Francisco, Boston, and Madison.”

Richard Florida, of creative class fame, says that educated Americans gravitate toward communities that are open to outsiders and have what he calls “authenticity” in its local culture. That’s all very good, but those concepts are hard to build public policy around. I have seen very little other research done on the subject, and what I have seen is several years old and probably outdated. The fact is, we really don’t know what people look for when they move to a new region. If we want our regions to become magnets for educated and talented workers, we need to find out.

Update: When I went back and re-read Rothwell’s piece, I saw that I missed a key point. America’s problem isn’t an inability to fill the jobs with higher educational requirements, as I suggested by focusing on the need to recruit communities that could recruit and retain educated members of the creative class. The problem is the lack of jobs for people with lower educational attainment. That calls for a different set of remedies than what I called for in my “bottom line” analysis.