With only 12% of the U.S. land mass and just 65% of the population, the 100 largest metro areas in the country create 75% of the nation’s economic output and are responsible for nearly all of the country’s economic innovations. America’s ability to compete in the global economy depends upon the success of its cities. That is the central theme of the Brookings Institute’s “Blueprint for American Prosperity,” a multi-year research project focused on how to help U.S. major metropolitan areas prosper. Brookings’ initial findings help explain why San Diego has succeed over the past decade and areas where our region still needs to improve.
Brookings’ research underscores the high performance nature of the San Diego economy. On nearly every measure, San Diego continues to outperform the nation. In 2005, for example, San Diego had 60.7 patents per 100,000 people, a rate 2.5 times higher than the U.S. average. The region attracted 331% more per capita National Science Foundation and National Institute of Health funding, and nearly 500% more per capita venture capital funding than the national average.
Moreover, unlike many metropolitan areas, the San Diego metro region has a well developed labor pool able to take advantage of these investments. The region has an above average share of adults with bachelors and graduate degrees. 42% of those in-movers to the region had at least a 4-year degree.
The combination of robust inflows of investment capital and the region’s skilled workforce has been a major reason San Diego has prospered. In 2005 Brookings estimated that each job in the region contributed $97,837 to the regional gross domestic product (GDP), 116% of the national average.
That is the good news. There is in the data, however, a troubling sign. Between 2001 and 2005 regional productivity annually increased at just 2.9%. That lagged competitor regions like San Jose (5.0%); Portland (3.6%), the North Carolina Research Triangle (3.3%), Sacramento (3.7%) and even Los Angeles (3.2%). While we are doing well, we are losing pace compared to some of our most aggressive competitors.
Some of this is natural. Several sectors that have fueled San Diego’s success, such as high-technology, life sciences, and telecommunications are maturing and productivity gains are harder to achieve. Capital is starting to flow to other geographic regions able to offer the kind of cost advantages critical to more maturing industries. While cause for some concern and attention, those sorts of changes have been a natural part of the maturation process of most industries.
What is more troubling is that the San Diego economy continues to see a high percentage of lower wage jobs added to the regional economy. Between 2000 and 2007, the region saw a net increase of 150,000 jobs. More than a 1/5th of these were in the hospitality and tourism industries. Another 14,000 were added in the retail sector. Meanwhile the region lost almost 400,000 manufacturing jobs. Given the high percentage of new jobs that have been created in these two service sector industries, where productivity gains have been notoriously hard to achieve, it is not surprising that regional growth in GDP per job has lagged behind other regions that have been more successful in growing middle class jobs.
Addressing this issue calls for a renewed focus on additional sectors that are highly productive and pay good wages. The Brookings Institute’s report is one more piece of evidence arguing for a regional focus on creating green-collar jobs. One of the best ways to do this is to adopt local policies, such as changes to building codes, sales tax holidays, and energy rebate and incentive programs that fuel local demand for green technologies. Scores of cities throughout the United States are trying to spark economic development in this way and there is no good reason that San Diego should not redouble its own commitment.
The region should also continue to focus on trade and infrastructure. These jobs pay significantly higher than the regional average and are a sector posed for additional growth. With the ports of Los Angeles and Long Beach under significant strains and bumping up against capacity, San Diego is well positioned to grow the number of trade jobs. That is why proposals such as the one on the November ballot that would change the land uses at the 10th Avenue Terminal in ways that would severely hamper trade are so disconcerting. Taking scarce property along the working waterfront to build more hotels makes little sense when the region’s challenge is not the creation of simply more employment but, rather, is to foster the percentage of new jobs in the region that pay good wages.
Urban success in the 21st century promises to be hard. As Brookings reminds us, cities, in all their wonderful complexities, contradictions, and idiosyncrasies are vital to our country’s future. San Diego is doing well. For the region to perform even better requires a renewed commitment and focus on fostering high productivity jobs and the creation of top quality employment opportunities for our region’s citizens.
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