You know how I often write about how so much of the technology industry is clustered in just a handful of American cities and the rest of the country is being left out?
Yeah, that’s still true.
But here’s the news: That’s starting to change.
A report from the Brookings Institution released Tuesday documents how over the past two years – which, of course, happen to be pandemic years – there’s been a distinct uptick in the growth of tech jobs outside of “the usual suspects.” How much of this is related to remote workers in the new Zoom economy and how much of this would have happened anyway is hard to say. This report – by researchers Mark Muro and Yang You – says only that it’s “likely” that remote work had something to do with this. Nonetheless, whatever the reason, the data does show a new trend over the past two years: Tech job growth in the biggest tech cities has slowed, yet it’s been growing in certain other, smaller cities.
And now for the part that should really catch our eyes: One of the places where tech jobs have grown the fastest in recent years has been the New River Valley. The Brookings report says that tech jobs in the New River Valley grew by 11.8% from 2019 to 2020. Only two other metros in the country (with at least 1,000 tech jobs) grew at a faster rate: Lawrence, Kansas, at 19% and Cape Coral-Fort Myers, Florida, at 14%. The actual numbers are small – we’re talking just 113 new people, from 950 in 2019 to 1,063 in 2020 – and the New River Valley ranks way down as the 181st biggest market for tech workers in the country, according to Brookings. So let’s not get misled by headlines (even our own) into thinking the New River Valley is about to turn into Silicon Valley. Directionally, though, this is still a big deal for a part of Virginia that’s in the process of reinventing its economy, so let’s claim our victories where we can. The growth of a tech community in the New River Valley is something that has implications far beyond the Montgomery County line. These numbers are also something that I hope state legislators in Richmond will take note of because there are some items under consideration in the state budget being negotiated this week that could accelerate this growth even more.
First, let’s walk through this report, which I hope every local official in Southwest and Southside will read in full.
We’ll start with the problem, just augmented with new numbers. Between 2015 and 2019, only eight metros accounted for nearly half of the nation’s new tech jobs. By size of their tech workforce, they are San Jose (aka Silicon Valley), New York, San Francisco (which abuts Silicon Valley but is considered a separate metro even though it may all be part of the same economic ecosystem), Northern Virginia, Seattle, Boston, Los Angeles and Austin. Two of those alone – San Jose and San Francisco – accounted for “almost 20% of the nation’s entire new tech employment during the pre-pandemic period,” the report finds. They grew so fast that even some of these so-called “superstar cities” – Northern Virginia and Boston, in particular – lost market share.
This really is a case of the rich getting richer. It is also not good for the country to have such a bifurcated economic system. We’ve always had industries that have clustered in certain cities (think cars in Detroit, steel in Pittsburgh), but the difference from the past is that those industries still had an economic connection to other parts of the country. Those steel mills depended on coal from Appalachia, for instance, and railroads based in Roanoke and elsewhere to transport that coal. If Detroit did well, so did Pittsburgh, and so did Roanoke, and so did coal country. The modern economy breaks those connections. Silicon Valley isn’t buying algorithms from digit factories somewhere in the heartland. That means tech hubs are economically untethered from the rest of the country; their success no longer translates into success for the rest of us. If anything, it breeds resentment and political polarization. The trickle-down economy no longer works.
As a country, we haven’t had nearly enough discussion about this and how to fix it – we’re too easily distracted by silly things. But there are those who have thought about it. The congressman who represents Silicon Valley – Ro Khanna, D-California – has been going around the country preaching that we need to “spread the digital wealth.” America Online co-founder Steve Case (remember AOL?) has been devoting his energies to a program called the Rise of the Rest to encourage tech investment in nontraditional tech cities. The massive technology bills now in a congressional conference committee seek to address this by setting aside billions to invest in “regional tech hubs.” (I devoted a column to why the Senate version is preferable.)
All that is still necessary, but this report shows that some small but important shifts are starting to occur.
Before the pandemic hit, there were nine other cities whose tech hubs were growing fast enough to merit “rising star” status: Atlanta, Dallas, Denver, Kansas City, Miami, Orlando, St. Louis and Salt Lake City. Together they created 87,000 new tech jobs between 2015 and 2019. For comparison purposes, Silicon Valley and San Francisco together created 108,679 new jobs during that period – so those rising stars were nice, but not yet at superstar scale. Still, it’s important to note that during that period 73 of the nation’s 100 biggest metros “experienced either negligible, flat, or negative growth in their share of the nation’s technology sector in the pre-pandemic years,” the report finds. Only 27 had strong enough tech sectors to grow market share. And 24 metros – often in the Northeast and Midwest – didn’t just lose market share, they lost tech jobs, period. Hence, the dispersion problem.
Then came the pandemic. Tech growth slowed in the big eight superstar metros – from 4.9% per year to 2.9%, the report found. Tech growth slowed in the next tier of rising stars, too – from 5% to 2.9%. Makes sense, right? The pandemic slowed down everything. And yet many smaller cities saw their tech jobs grow at a faster rate.
“A significant number of cities in the rest of America saw notable upticks as remote work increased and tech growth spread out slightly in the first year of the pandemic,” the report says. “Altogether, 36 of these 83 metro areas outside the superstar or rising star echelon saw tech employment change accelerate in 2020 compared to the pre-pandemic years. … In sum, nearly half of the nation’s secondary large metro areas added tech jobs at a faster rate than they did in 2015-2019, when only one superstar and one rising star metro area did.” (New York and St. Louis were the exceptions.)
And that’s where we bring all this home. So what were these smaller cities that saw tech growth? Many were in the Sun Belt – no surprise there, if you’ve been paying attention to economic trends for, oh, the whole post-World War II era. But then we come to this observation in the report: “A number of smaller quality-of-life meccas and college towns also seemed to add tech jobs sharply during the initial year of the crisis.”
Ka-ching!
The New River Valley is obviously a college town – a two-college town, actually. And the region – both the New River Valley specifically but the wider region in this part of Virginia – has for some time now been promoting quality-of-life amenities as an economic development draw. All those trails and greenways and blueways aren’t just there because they’re fun.
So here’s what the data Brookings has put together shows: From 2015 to 2019, the New River Valley actually lost tech jobs – from 989 to 950. In just two years, it made up that difference and then added more to hit that 11.8% growth rate.
Again, small numbers but an impressive growth rate that becomes a good talking point. The Roanoke Valley actually showed slightly more new tech jobs during that period – 124 – although that amounted to a growth rate of 3.6%.
For comparison purposes, Charlottesville during that time added 147 – which for that metro meant a growth rate of 5.8%.
Statistics are funny things.
Before we get hung up on the percentages, let’s focus on the actual numbers: 113 new tech jobs in the New River Valley, 124 in the Roanoke Valley. Those are good things. When compared to 147 in Charlottesville, well, Charlottesville’s growth rate might be higher than Roanoke’s and about half that of the New River Valley, but all the numbers are still pretty close. If you’re Roanoke, you might wonder why Charlottesville has a glitzy tech reputation and Roanoke doesn’t – especially since the underlying data shows Roanoke has more tech jobs (3,580) than Charlottesville (2,659) does. (Brookings counts six categories as tech jobs: computer and peripheral manufacturing, semiconductor manufacturing, software publishers, data processing, other information services, computer systems design. Some of those we don’t have, so I suspect we’re big on the “other.”)
In any case, I’m tempted to type “Yes, Virginia, there is a tech industry west of the Blue Ridge.”
Alas, the data set didn’t include information on other communities in this part of Virginia: It only counted only the 100 largest metros plus any others that had more than 1,000 tech workers, so Lynchburg didn’t hit that mark, which perhaps suggests some room for improvement there (although in theory there might have been a lot of growth under the surface that we just don’t see because the numbers haven’t hit 1,000).
While we’re on statistics, here’s another important one: This data shows the number of tech jobs in Richmond actually declined during the pandemic. From 2015 to 2019, the capital had a tech job growth rate of 2.3% – but during the pandemic that turned into -5.7%, and a job loss of 522 tech jobs.
It’s a strange, strange world when we in this part of Virginia are crowing about our growth of tech jobs and places in the urban crescent are looking at slow growth (1.5% in Northern Virginia) or actual job losses (in Richmond).
Now the big question: Is this just a temporary blip or the beginnings of a larger, tectonic shift? The report says it’s hard to tell.
On the one hand: Despite the rise of smaller tech hubs, the sector’s geographical skew is still increasing, just not as fast it once was. In 2010, 35.2% of the nation’s tech jobs were in those eight superstar metros. By 2019, 38.2% were. Now the figure is up 38.4%.
On the other hand: “Data extending the analysis beyond 2020 and into 2021 using job postings and startup information reinforces the impression that the pandemic disruption has somewhat – though not massively – reallocated tech activity across cities.”
So, maybe, maybe not. The report points out that we still don’t know how much remote work will change things. “Neither the scale of the moves seen to date nor the most frequent format of remote work seem to forecast a wholesale decentralization of tech,” the report says.
I’ve written before that localities in rural Virginia shouldn’t count too optimistically on remote workers to reverse their demographic trends. Hope is nice but hope is not a strategy.
However, there are some things we can point to that would accelerate this tech growth in at least some places – starting with the Roanoke and New River valleys. In December, a plan was announced to build shared lab space in Blacksburg and Roanoke as a way to grow the region’s nascent life sciences cluster, with Johnson & Johnson as a partner. The state board of the GO Virginia economic development group put up $600,000 toward the project. That funding is mostly for 2,500 square feet of lab space at the Virginia Tech Corporate Research Center in Blacksburg. Legislators from the Roanoke and New River valleys asked for $15.7 million to renovate a building in Roanoke and equip it with up to 30,000 square feet of lab space – an example of how the two valleys’ economies are increasingly intertwined. The request is included in both competing versions of the budget – one from the House, one from the Senate – so you’d think it would be secure, but nothing in the budget is ever secure until the ink dries on the governor’s signature. (For more on this project, I refer you to Megan Schnabel’s excellent backgrounder.)
If state Sen. Steve Newman, R-Bedford County, can persuade fellow budget conferees to keep the $20 million in the Senate budget that would pay off the bonds for the former Central Virginia Training Center site in Amherst County, that could pave the way for the state to sell off that property. Given the campus-like nature of that property, it would be a perfect location for an outpost of that life sciences cluster in the Lynchburg area. The fact that Lynchburg didn’t make the cut of metros with 1,000 tech jobs should give added impetus to this request. (Yes, I realize the immediate goal is just to sell off an unused state property, but the potential here is huge and can’t be ignored.)
Meanwhile, there’s another budget item – included in the House version but not the Senate version – for $5 million for Virginia Tech “to partner with local industries including Volvo Truck, Mack Truck, Torc Robotics (Daimler) and their suppliers to create a unique, world-class future truck research and development center in Southwest Virginia.” The language goes on to note that Virginia Tech is one of 60 finalists for up to $100 million in federal funding for research into autonomous and self-driving vehicles and that this funding “will bolster the likelihood of winning this challenge, secure federal investment to Southwest Virginia, and attract high-tech companies to the region.” Here’s another tech industry cluster developing in the region: automotive research and self-driving vehicles and drones. Megan Schnabel wrote this background story in December about Tech being a finalist.
If the General Assembly wants to help accelerate the growth of a tech cluster in this part of the state, it will approve both those appropriations – and at least one other. I wrote earlier about how the Senate Finance Committee had curiously stripped funding for additional programs at the University of Virginia’s College at Wise, including a data analytics major. If this Brookings report does nothing else, it shows that, however tentatively, there is some movement in the marketplace toward creating a more geographically dispersed tech industry. The legislature could help that with some timely investments in programs in this part of Virginia.
Indeed, the Brookings report concludes with a look at what can be done to encourage the growth of tech clusters. The report is skeptical of efforts to pay workers to move to rural areas (West Virginia has such an initiative, focused on three specific communities: Lewisburg, Morgantown and Shepherdstown). “It remains doubtful that such incentives – offered in limited numbers to the relatively few truly footloose tech workers – will by themselves do much to reverse the winner-take-most nature of America’s economic geography,” the report says. “Such strategies may help some amenity-rich smaller towns generate buzz, but that will not be the case for most communities.”
Instead, Brookings says “renewed state investments in public higher education (after a period of disinvestment) will be necessary in building up new tech hubs” – which sure fits with many of the budget requests mentioned above. The writers go on to recommend five things:
1. Building authentic, differentiated tech clusters.
2. Developing a skilled, abundant and diverse digital workforce.
3. Providing excellent broadband connectivity.
4. Cultivating a vibrant tech community with plentiful networking opportunities and acceleration programs.
5. Crafting an excellent quality of place, complete with top-notch schools, parks and greenspace, bike lanes and coworking spaces.
That sounds an awful lot like what the Roanoke and New River valleys and a lot of other communities in this part of the state are trying to do. Any state legislators hesitant about that proposed funding should read this report, and then maybe they won’t be.