Are university educations paying off? The knowledge wave turns to knowledge dumper for clever US cities – same for NZ?

Former Business Week writer Michael Mandel has spotted an inverse relationship between growth and education in the US during most of the last decade.

You can’t tell if the same thing is going on New Zealand because we don’t collect income per capita stats for cities (or regularly for our regions), though for the latter there may be a hint that same thing has been going on here.

Looking at which US cities did best between 2000-2008, Mandel found the fastest growing cities wealth-wise were:
• Hamou-Bayou Cane-Thibodaux, Louisiana
• Jacksonville, North Carolina
• Manhattan, Kansas (yep, you are in Kansas now)
• Farmington, New Mexico
• Fayetteville, North Carolina
• Killen-Temple-Fort Hood, Texas
• Lawton, Oklahoma
• Odessa, Texas

All had 33% plus per capita gdp growth over the period.

Mandel says the common themes are guns (there’s three military bases in there) and oil. [BigCake would add that there are also all south of the Mason-Dixie Line – Yeah, The South is going to do it again].

The wealth slowcoaches (all had negative growth) were:
• San Jose-Sunnyvale- Santa Clara, California
• Greely, Colorado
• Ann Arbor, Michigan
• Flint, Michigan
• Atlanta-Sandy Springs-Marietta, Georgia
• Raleigh-Cary, North Carolina
• Austin-Round Rock-San Marcos, Texas

“Uh oh,” says Mandel. “This is not the list you might have expected, in a world where brains and innovation are supposed to be important. There’s Silicon Valley at the top (or the bottom) of the list, where incomes didn’t recover from the popping of the tech bubble that peaked in 2000. But other tech-type metro areas, such as Raleigh and Austin were hit hard as well.

“Is this inverse relationship between growth and education going to persist into the future?,” he asks. “Impossible to say. My personal view is that the lack of rewards for education–which show up in the individual income statistics as well–is correlated to the lack of commercially-successful breakthrough innovations, which would immediately sop up all the excess college graduates.

“To put it another way, innovative industries tend to locate where they can get a lot of college graduates. That means high education areas attract new companies, boosting growth.

“But without innovation, the whole economic development dynamic changes. You can’t attract growing innovative companies because they are few and far between. For their part, companies are more likely to view cost as a main consideration in deciding where to locate. Goodbye San Jose and Austin, hello China and India.”

BigCake couldn’t find comparable data for New Zealand, but did find some local evidence to support Mandel’s observation, for the first half of the decade at any rate.

Between 2000 and 2004, the fastest growing regions (not the same as cities I know) in New Zealand were Canterbury and Manawatu-Wanganui, neither really a knowledge economy. Wellington was the next fastest growing, but bunched up with Otago and Southland.

Auckland had a middling performance, sitting just below the national average for the period.

Not sure these numbers refute what people like Paul Callaghan say about the importance of knowledge-based companies in generating wealth.

I’d bet the average wage in Santa Clara is hugely higher than that of Bayou Cane.

Mandel notes in a subsequent blog that the 2000-2008 period is out of kilter with the long-term trend and “I’m paying big bucks to put my children through college…

“But we have to be alert to possible changes in the economics of college.”

Also as Mandel says there could just be a hiatus in innovation (waiting for the next knowledge wave). Also in New Zealand’s a knowledge and wealth transfer takes place between cities with universities and crown research institutes and the regions. The regions are wealthy because of this.

Anyone got other thoughts?

admin, 13th May 2010 | Filed under: Trends, Wealth Tags: , ,

Perhaps it has something to do with the type of education. e.g. you might say you have a high number of university graduates in your city/region population, but if most of them are lawyers or school teachers then I would suggest you have a problem relative to other areas with, say, an engineering or agricultural focus. Why, because lawyers and teachers work within an economy and tend to be inward looking, whereas engineers, ag people are the ones innovating to create new products and/or more efficient ways of producing stuff.

This problem is probably worse in the litigious US but any corporate focussed city is likely to be the same. Let’s face it an innovative lawyer is to be viewed with suspicion. And it’s hard to measure GDP-wise the productivity of marketing or PR people.

Of course, the measures one uses, e.g. GDP, are subject to argument as well.

Keith Mockett, May 13, 2010 at 10:00 am

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