When It Comes To Economic Recovery, Location Is A Factor

Census Bureau data show a wider gap between rich and poor. Kelly McEvers explores this with economist Enrico Moretti of the University of California-Berkeley, author of The New Geography of Jobs.

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DAVID GREENE, HOST:

It's been such a pleasure having Kelly McEvers hosting with us here at MORNING EDITION all week. Kelly, when you are not hosting for NPR, you are covering inequality and economic diversity - a really interesting beat. What have you been working on?

KELLY MCEVERS, HOST:

Well, this month I was interested in some reports showing that the gap between rich and poor is still getting wider. And one report by a major ratings agency that says this gap will only slow down our already sluggish economic recovery. So one question I had was whether place had anything to do with it - if where you live affects where you stand on this inequality scale. So I started off by talking to economist Enrico Moretti of the University of California-Berkeley. He wrote a book called "The New Geography Of Jobs." And he told me in some U.S. cities, the economic picture is actually pretty great.

ENRICO MORETTI: These are cities like San Francisco or Seattle, Boston or Raleigh-Durham.

MCEVERS: Cities that are what he calls innovation hubs - places where IT, software, science research, finance and marketing companies drive economic growth. In other cities, like former manufacturing hubs, the picture is not so good.

MORETTI: Detroit, Flint, Cleveland - where wages are falling and populations are shrinking.

MCEVERS: Moretti says the differences between the winning cities and the losing cities are pretty startling.

MORETTI: If you are a waiter, you can make twice as much in Austin relative to Flint. And the same is true if you are an architect, a real estate agent or pretty much any other job. Salaries are different.

MCEVERS: It's a difference that's only getting worse, he says. One we simply didn't have a half a century ago when there were thriving industries, like steel, that supported a big middle class across the country. And when it seemed like wages would always be rising.

It was in this period, the 60s, when David Breedlove graduated from Stanford University with a degree in industrial engineering. He got a job at a company that made business forms with carbon paper inside and moved to a nice little town next to Stanford.

DAVID BREEDLOVE: We owned a house in the premium good area of Menlo Park in a little two-bedroom house that we put a $8,000 down on a $28,000 house.

MCEVERS: That's $180,000 house in today's dollars. One day, in 1969, David's boss came to him and said...

BREEDLOVE: We've got a plant down in Visalia that needs a plant industrial engineer.

MCEVERS: ...About 200 miles south and east of Menlo Park.

BREEDLOVE: Do want to take a ride down there? And I said yes.

MCEVERS: At the time, Visalia wasn't a whole lot different from Menlo Park and the other towns near Stanford.

BREEDLOVE: It was a law-and-order town, very well-run city - still is - low crime. We congratulated ourselves for a number of years that we had done a good thing.

MCEVERS: David and his wife sold the house in Menlo Park, bought a slightly bigger one in Visalia and had two kids. But then in 1977, the paper company wasn't doing all that well.

BREEDLOVE: And my job sort of dissolved out from under me.

MCEVERS: After that, David did all kinds of different jobs. He did some computer programming, and he ran an outfitting service in the mountains. As the years went on, the economy in Visalia got worse. It's a big agriculture town where farm owners do well, but their workers make low wages. David's daughter saw these growing disparities at school.

BREEDLOVE: When she came home and told me about her teammates in junior high track and soccer, she was aware of the fact that more than half of them were from homes that barely had enough to eat.

MCEVERS: By the time the kids went to college, David and his wife split. It was the 90s. And David realized that, in some ways, he regretted moving to Visalia. Back near Menlo Park, a thing called Silicon Valley was taking off.

BREEDLOVE: I still think of Menlo Park and Palo Alto - that's the center of the universe.

MCEVERS: After talked to David, I went to see that house in Menlo Park.

(SOUNDBITE OF GPS)

UNIDENTIFIED FEMALE #1: The destination is on your left.

MCEVERS: ...The one he bought for $180,000 in today's dollars but then sold in 1969.

So here it is. It's a double car garage, wooden front door - pretty standard two-story house - three bedrooms, one bathroom, 1200 square feet. According to the Internet real estate website Trulia, it's worth 2.3 million dollars.

Here's the thing about David's story. He didn't know it at the time, but when he sold that house and moved away from Menlo Park, he was leaving a place that would become one of the biggest economic success stories in the country. And to a place - the San Joaquin Valley of California - that now has one of the highest rates of unemployment in the country. And the problem is, it's not like there's a magic formula to turn your city into an innovation hub, says economist Enrico Moretti. He says a lot of these successful cities just got lucky.

MORETTI: When you look at the history of the big innovation clusters of America, you never see one that was deliberately created by a local government or a state government policy that said, hey, let's create, here, the next Silicon Valley.

MCEVERS: What governments can do, Moretti says, is encourage people to move more - perhaps with incentives in their unemployment benefits. And to invest in the one thing that we know is a factor in why places succeed - education.

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