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Your City Will Never Be as High-Tech as San Jose, So Aim to Be the Next Philadelphia Instead

As the 238 bids to become to be home to Amazon.com’s next headquarters show, cities love the high-paying jobs and supercharged economic growth promised by big tech companies.

But having an economy oriented toward tech jobs may be more complicated than that. Yes, the more computerized a workforce is, the better the wages it can command. And the earlier a city got its start in becoming “digitalized,” the tighter its stranglehold on the tech industry now and in the foreseeable future.

But it’s still possible for cities that aren’t tech superstars to try to catch up. And evidence from real life suggests that no matter the state of affairs now, fortunes can change dramatically for cities and regions.

A new report from Brookings Institution’s Metropolitan Policy Program analyzes the “digital scores” of 100 metropolitan areas. The scores are based on the percentages of workers in “low,” “medium,” or “high” digital jobs. In general, the more-digital cities boast higher average wages.

For example, the average 2016 wage of the top 10 most-digital cities was $73,981, nearly 40% higher than the average of the next 10, at $53,173.

“All things equal, the more digital a person, a firm, an industry or a place are, the better they do economically,” Mark Muro, the Metropolitan Policy Program’s director, told MarketWatch. The degree of digital skill available in the labor force in any given metropolitan area, Muro said, is “not just one measure, but a powerful driver of economic outcomes.”

For Muro, the big takeaway is that the “digitalization” of a given metro area doesn’t just affect its own economy, but also drives what he calls “divergence” between cities. “I think it speaks to this discussion we’re having about the vast chasms between superstar cities and places that have been left behind,” he said.

Many of the same metros were also in the top 10 in a 2002 analysis, though there were some big outliers: Colorado Springs, for example, now ranks 55th. The big shift in the past 14 years has been that places with “high digital” concentrations has pulled away from the others. As the report puts it, “no longer are the incomes of college-educated tech and other workers converging across cities. They are diverging, as workers in digitally oriented metropolitan areas reap the benefits of working there while others do not.”

MarketWatch reproduced the top 10 metros for our table, above, with the share of each category of jobs for each metro. Brookings published the entire series, along with explanations of the occupations within each, rolled up into a “digital score,” here.

At the top is San Jose, home to eBay Inc., Cisco Systems Inc., and many more. It has far and away the largest share of “high digital” jobs as well as the biggest share of high and medium. Every other metro in the top 100 has a big gap between its share of medium and high, however.

For anyone who remembers the rise of the internet being hailed as “the death of distance,” it may seem counterintuitive that metropolitan areas — and the most expensive, densely-packed ones at that — would be the hubs of technological prosperity that they have become. The rise of high-tech was going to enable every worker to live comfortably in big houses in small towns, working on the couch with a laptop.

But Muro says that it’s become clear that digital economies actually thrive in big, dense places. They’re “oriented toward refined, particular skills, so they like big job markets,” Muro said. “They flourish on information-sharing. Their workers seem to be oriented toward big-city amenities.”

But while “superstar” cities like Seattle, San Francisco, and San Jose were all early hubs for technology, Muro believes the biggest transformations in workplaces, industries, and economies will come from computer illiterate people adopting basic skills. Basic certifications and understandings of programs like Microsoft Office and Salesforce programs, not coding, are the best way to improve outcomes, he said.

But nothing is permanent. Just look at the metro area that clocks in at 13th on Brookings’ list: Philadelphia, up from 26 in 2002.

Not long ago, Philly’s economy was oriented around manufacturing. When factories left and many residents fled to the suburbs, the city struggled. But now the nation’s fifth-largest city, with a population of more than 1.5 million, is booming. The city has an historic core, lots of top colleges and universities, and the same kinds of professional opportunities of New York and Washington with much lower housing costs.

The region, home to 6 million people, has a higher share of business and professional services firms than the national average, and is home to big firms like Comcast, Vanguard, and Lockheed Martin, noted Ryotaro Tashiro, a Philadelphia Fed economist. Meanwhile, nearby Wilmington (also part of the broader metro area) is headquarters for the credit-card processing business.

Another surprise may be the city at No. 4 on the list — Hartford, Conn. The state capital, with a population of 124,000, is known as home to the insurance industry as well as headquarters for many financial services companies. Aetna is its largest employer.

For all that, Hartford is teetering near bankruptcy.

“There’s a divergence between the quality of the workforce and the poorly run state government,” said John Mousseau, a Connecticut native who manages fixed income for asset manager Cumberland Advisors, with a focus on municipal bonds. Neither Hartford nor nearby Stamford is “a big megalopolis city that attracts young people and that Baby Boomers want to move back to,” he said.

As if to prove that point, Aetna last month said it would leave Connecticut to move to New York, in search of “a diverse talent pool and vibrant workforce,” leaving Hartford with no single employer that employs more than 1,000 workers.

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