Are Biggest Tech Cities Killing the Smaller Ones?

A small handful of U.S. cities are attracting the lion’s share of technology investment (and jobs), according to a new paper by The Brookings Institution.

“Just five top innovation metro areas—Boston, San Francisco, San Jose, Seattle, and San Diego—accounted for more than 90 percent of the nation’s innovation-sector growth during the years 2005 to 2017,” read the paper. “As such, they have increased their share of the nation’s total innovation employment from 17.6 percent to 22.8 percent.”

According to the paper’s data, indexed annual average wage and indexed employment level in those upper-echelon metro areas has accelerated in the past twenty years, outpacing all other cities. Those dynamic hubs, in turn, continue to draw in more and more companies and technologists; companies move to the area in order to access local funding and talent, and technologists arrive because they want jobs at marquee companies that pay high wages.

That growth apparently comes at substantial expense to other cities. “The bottom 90 percent of metro areas (343 of them) lost share,” the paper continued. “As a result, fully one-third of the nation’s innovation jobs now reside in just 16 counties, and more than half are concentrated in 41 counties.”

While that concentration of job activity might be good for technologists in those markets, it’s obviously not good for folks in other parts of the country. The Brookings Institution argues that the federal government needs to step in and actively cultivate tech hubs in up-and-coming cities away from the coasts. Such cultivation would require hundreds of millions of dollars, and include everything from business financing to workforce development funding and tax cuts.

In addition, the organization believes that the Feds can tip the scales in a more direct way: “Establish a competitive, fair, and rigorous process for selecting the most promising potential growth centers to receive the federal investment. A new growth center program would select for awards the eight to 10 metropolitan areas that had best demonstrated their readiness to become a new heartland growth center.”

Of course, critics of such an experiment would argue that the free market should ultimately determine which tech hubs thrive. But it stands to reason that, if tech hubs such as Boston or Silicon Valley bloomed because of a certain degree of federal investment, other cities should similarly prosper from taxpayer dollars. There’s also an argument to be made that tech hubs can become too dynamic: San Francisco, for example, suffers from stratospheric rents, massive social issues, and dozens of startups competing for the same limited pools of talent, office space, and funding. The rise of other tech hubs might take some of that pressure off. 

For the moment, though, the pressure is only increasing. In the hottest tech hubs, companies with open jobs are scrambling to find the talent they need. When we recently analyzed New York, San Francisco, Boston, Seattle, and Austin, we found that the hardest-to-fill job was software developer/engineer, followed by IT project manager, with computer support specialist coming in third—suggesting that, in those cities, there’s fierce competition even for relatively commonplace roles (don’t get us started on A.I. and machine learning specialists):

For companies in the biggest tech hubs, engaging remote workers—or opening up an office in an up-and-coming tech city, such as Raleigh, NC—is one possible way to sidestep this thorny time-to-fill issue. And for technologists in those big hubs, the corporate desperation to fill certain roles can offer more leverage in salary negotiations.

Growth is great, but it comes with its own issues. Do smaller cities truly have a chance of becoming the next San Francisco or New York, at least in terms of fostering a dynamic tech industry?

One Response to “Are Biggest Tech Cities Killing the Smaller Ones?”

  1. I certainly hope the tech giants don’t come here. All that would do is cause everything to skyrocket in price, but only those working for the tech companies would be making the wages required to keep up. No thanks… stay where you are.