The key driver is that land values rise when earnings rise. You can't move land, so there is set amount of it within commutable distance of these cities. Also, each bit is in a unique location relative to all the other bits, so every bit of land is either better or worse than the others in terms of your earning potential when you live there. Close to the centre = cheaper and quicker commuting, whereas further out means more expensive and slower. Buying or renting a bit of it to live on is always an auction, so the best bits (where you earn most) are won by those who those who feel it's worth paying extra to get them (because they are the ones who earn the extra income by living there).
In this way, if wages rise, then the maximum bid that a person can justify paying in order to live in that city rises, and therefore property is more expensive.
I wish more people understood this principle, because so many superficial economic "analyses" I see in the news completely ignore it.
By the way, you're giving the example of physical land, but the general form actually applies to property ownership of any form. (That is, the rent on any property will rise to be equal to the surplus that the renter receives from it, after accounting for transaction costs. In the long run, the property owner is always able to claim all of the surplus from the renter.)
Landlords grow richer in their sleep, without working, risking, or economizing. The increase in the value of land, arising as it does from the efforts of an entire community, should belong to the community and not to the individual who might hold title. -- John Stuart Mill
> In the long run, the property owner is always able to claim all of the surplus from the renter.
Which to me is what's broken about land and other natural resources as private property. If the spirit and intent of a free market is to reward people for working hard, for innovation, and for solving problems, then this is the opposite. It rewards people for just sitting on their wealth. That a finite sum of money can buy you an infinite source of income is antithetical to free market principles.
> This is not a free market, BTW. Land is monopoly.
The only mitigating factor is property taxes, which as a stand-in for ground rents that geolibertarians and Georgists argue for. By the way, the latter are the more honest of the libertarians, as most other schools of libertarianism especially the popular form continually consider property taxes theft.
I wish more libertarians understood the Matthew Effect as well as they did supply and demand.
The idea that landlords have risk free income is nonsense. Ever owned rental property? You have to maintain and repair it, peridocially update it, market it, insure it, compete with other similar properties for tenants, and hope that the tenants actually pay the rent and don't damage it beyond the value of their deposit. You have to hope that your neighbor landlords and owners do the same so that overall property values in the area don't decline. And that supply of housing doesn't grow to the point that you cannot maintain your investment with the rent you are able to charge. If you can't find a new tennant when the previous one leaves, you still have to cover all your taxes, insurance, and loan payments. Yes, the supply of land in any area is limited. This is like almost any other "free market" product. The fact that land supply is finite does not in any sense mean land ownership is a monopoly. The only monopoly owner of land is the government (emminent domain).
Most of what you describe can be subcontracted to a property management company, and you can still make a healthy return.
One of the problems with the rental market in urban centres like London at the moment is that even totally inept landlords can stay in business and make a profit through capital gains alone.
For other readers (I assume you've read it or are aware of it), I really highly recommend at least skimming Progress and Poverty by Henry George [PDF: http://www.henrygeorge.org/pdfs/PandP_Drake.pdf]
It's mindblowing in its simplicity and how obvious it is in retrospect. Essentially that rent, so private land ownership, is the root cause of the persistence of poverty despite huge growth in production and capital. He goes on to make fairly strong (albeit polarizing) ethical arguments for the abolition of private land ownership and so on.
Easy to read, pretty entertaining, and eye opening.
The original Atlantic article mentioned Pittsburgh as one of the cities in the "sweet spot" for affordability and social mobility. Interestingly, Pennsylvania happens to be the one state that has perhaps gone the furthest in implementing George's proposed land value tax reform (at the local level, mainly). Pittsburgh used a different form of property tax that taxed land at a far higher rate than improvements until 2001, and the Pittsburgh Improvement District (I am unfamiliar with what exactly this entails) still uses a pure land value tax as a surcharge on the city property tax. [https://en.wikipedia.org/wiki/Land_value_tax_in_the_United_S...]
abolishing private land ownership has problems -- who decides how the land gets used? Ownership enables execution.
Property taxes are a way to recover some rent from the property owner, while still enabling the independent decision making that capitablism relies on for its productive success
I haven't read George's original works, but his philosophy allows for private ownership of land - it's just that the 'rent' of the land - the value derived solely from e.g. its location - will be taxed at a very high rate.
> Landlords grow richer in their sleep, without working, risking, or economizing.
Maybe in John Stuart Mill's time, but like anything in a free market, profit tends to zero (it generally doesn't hit zero, but gets closer over time). Those margins are calculated as part of time preference (see https://en.wikipedia.org/wiki/Time_preference). That's why you see some land owners purchase land and lose money while they wait for it to appreciate. Time is factored into the calculation.
> I wish more libertarians understood the Matthew Effect as well as they did supply and demand.
The Matthew Effect doesn't take into account the fact that many individuals get richer by requesting and receiving special legal privileges from state actors. Classical liberal thought rejects this i.e. equality before the law. That's why many libertarians are against the state's power to regulate, not because you can't have good regulation (the free market is far from perfect after all), rather because the power to regulate is the power to grant special favors. Politicians, like their private counterparts, are susceptible to self-interest. They need money to fund their campaigns. A consistent application of economic principles is necessary (see https://www.youtube.com/watch?v=JAbDrP7whqw).
> some land owners purchase land and lose money while they wait for it to appreciate
It is impossible to lose money just sitting on land in the absence of property tax, which as I've stated acts as a mitigating factors, even if no one thinks of property taxes as rent paid by the land "owner" to the true owner, the commons. Worst case scenario you own land that no one wants to use, and you have zero income from it.
> the power to regulate is the power to grant special favors
And the granting of perpetual title to land for a finite sum of money and the enforcement of that title through police/military force is the epitome of state granted special favor.
We call ourselves the "party of principle," and we base property rights on the principle that everyone is entitled to the fruits of his labor. Land, however, is not the fruit of anyone's labor, and our system of land tenure is based not on labor, but on decrees of privilege issued from the state, called titles. In fact, the term "real estate" is Middle English (originally French) for "royal state." The "title" to land is the essence of the title of nobility, and the root of noble privilege.
It's not a coincidence that owners are called landlords. It's positively feudal.
> Maybe in John Stuart Mill's time, but like anything in a free market, profit tends to zero
That is true in an perfectly competitive free market, that is, where adequate substitutes are available from alternative vendors so that price competition is unavoidable.
Market freedom does mean that the there isn't a regulatory prohibition on competition, but it doesn't mean that there isn't the absence of a natural bar to competition for a particular good or service. And there certainly are natural limits to real estate alternatives in many cases, as for many uses there is a strictly limited supply of viable substitutes.
This makes real estate an area where effective monopolies (as measured through pricing power) exist, which means monopoly rents can be extracted, which means that prices are not driven to zero economic profit in the manner expected in an idealized free market.
> the property owner is always able to claim all of the surplus from the renter
Not really: this only applies if the demand curve is flat and different cities are not competition with each other.
In practice, the demand curve is not flat because there are people that earn more than others, but they will still pay depending on the wage of the marginal/equilibrium person.
Also, cities compete with each other so if e.g. Silicon Valley rents become sky-high because they capture all the value of tech companies, eventually companies will move or be started elsewhere, thus making it possible for employees to live there.
This. More precisely, and on an ultra-micro level the surplus a property owner may be able to capture all of is the surplus compared with the next best available alternative site. If it's a retail unit in a rare spot next to a busy station, the owner of the property can capture [nearly] all of the leaseholders' additional expected profit due to heavy footfall, but not nearly all their profit period, because otherwise it becomes more profitable for store owners to pass on the opportunity in favour of opening on a site with low customer footfall but even lower lease rates. Similarly, suburban houses based right outside a high-paying office campus won't be priced at much of a premium to the surrounding suburbs, because workers there will expect to own a car anyway and won't mind a slightly longer commute that much.
And all of this assumes there are multiple prospective buyers whose use of the site will generate that surplus. If the use of the site is dramatically more valuable for one prospective buyer than for all the other buyers (e.g. because they have a supplier next door), they'll still only have to bid a fraction more than a market price determined by other buyers without that advantage, and so the buyer gets to keep all that surplus.
This is entirely true, but its effects are exaggerated due to draconian zoning and regulatory issues (like parking). When you slap on height limits, use limits, and parking quotas, the marginal price increase for a given level of demand is drastically higher. The ratio of mobility to affordability is affected mostly by our (in)ability to extract value out of land.
> John Stuart Mill called it the "pons asinorum" of economics.
> Pons asinorum ... The name of this statement is also used metaphorically for a problem or challenge which will separate the sure of mind from the simple, the fleet thinker from the slow, the determined from the dallier; to represent a critical test of ability or understanding.
> (Google) the point at which many learners fail, especially a theory or formula that is difficult to grasp.
> This is not a free market, BTW. Land is monopoly.
First, a monopoly in which there is a monopoly is still just as free (unregulated) as one that is otherwise similar but without the monopoly.
Monopolies and externalities are among the things that are not inconsistent with a free market that are usually assumed away as preconditions in statements making claims about the efficiency or optimality of free markets.
Also, more importantly, land is not a monopoly; its perhaps more common for land for particular uses being a monopolized good in that any particular parcel for sale will not have perfect substitutes available on the market such that the seller of a particular parcel may have pricing power, which is the usual test for a monopoly. (The presence of such a power indicates that their is a definable market in which that seller is the only seller, and its absence indicates that in the markets in which the good is relevant there are acceptable substitutes which compete on price.)
So, it is probably defensible to claim that land is prone to monopolies, but inaccurate to say that land is a monopoly.
Land is a "Resource," just like water, lumber, grain, and ore are generally considered resources.
As we recall from Econ 101, Economics is the study of the allocation of scarce resources.
Land becomes "Property" when we introduce the fundamental tool and building block of society: law. Property law grants the land owner certain rights and restrictions that are set, guaranteed, and enforced by society.
Property can be considered a "Monopoly" only in the context of some sort of market, which implies supply, demand, and flow of goods.
Say we own an acre of land in the middle of Los Angeles, and it is the only plot in the city with an oil derrick. If we define our market to be rentable land within the city of LA, we most definitely do not have a monopoly on the market. If we define the market to be rentable land in the "center" of LA, our power within the market has gone up, but we still do not have a monopoly on the market. If we define the market to be an acre of rentable land in the center of LA with an oil derrick, then we do have a complete monopoly on that specific market.
So if you own land, you can monopolize a certain subset of a market, depending on how you define its parameters.
The key thing to understand from the Wikipedia article mattgibson links to:
Ricardo noticed that the bargaining power of laborers can never dip below the produce obtainable on the best available rent-free land, because whenever rent leaves them with less than they could get on that free land, they can simply move to the new location. The produce obtainable on the best available rent-free land is known as the margin of production. Since landlords have a monopoly over a given location, the only limiting factor for rent is the margin of production. Thus, rent is a differential between the productive capacity of the land and the margin of production.
In the U.S. today, there is no free land. This changes everything. Landowners as a group have an effective monopoly: those who can't afford land have no choice but to rent from them, for one needs a place to sleep, grow food, and to just stand!
No, because a group can't be a monopoly, only a single actor can. A group can be an oligopoly, which is a different thing, but which can act a lot like a monopoly if the cooperate either formally (i.e., as a cartel) or informally.
But, while the group of all suppliers of any given good will always have 100% marketshare for that good, by definition, they do not therefore automatically constitute a monopoly or even oligopoly.
> those who can't afford land have no choice but to buy from them, for one needs a place to sleep, grow feed, and to just stand!
That's irrelevant to the "land is a monopoly" claim, and more relevant to the conclusion that land is a good where there are market features reducing elasticity of demand in certain ranges, which is very different. (Though it magnifies the attractiveness of establishing a monopoly or oligopoly on the good in question, since it increases the rents that can, thereby, by extracted.)
Fair enough. My use of "monopoly" is a poor articulation of what I'm trying to express. In all your comments you seem to be acting as an arbiter of logical correctness, which is good, but where do you actually stand on the notion of land as private property, philosophically and morally? If you favor it, is it as human right, as some libertarians argue, or just a pragmatic social contract? What is your reply to the essay I link to[1], or to Henry George?
--
[1] I agree with its critique of Royal Libertarianism, but not entirely with its prescription.
Thanks for posting this. It proves that I'm not insane. I've noticed for some time now that any increase in income in a region tends to largely be extracted as land rent and now I know that I'm not even close to being the first to notice this.
It's sort of incredible to me that our industry is so beholden to this. Computer-related tech should be the least beholden to rent of almost any industry since we have this Internet thing that allows us to communicate instantly over long distances. But ours actually seems to be among the more geo-concentrated industries.
Great comment. I grew up in florida and know so many bright kids that have to move across the country to the NE or California for tech jobs. Whereas you study accounting, medicine, law etc and can work anywhere.
Of course this is a free market, at least by colloquial standards. The premium end of this commodity (close to work, close to financial centers, etc) is more expensive. This is a feature, not a bug. Just because you don't have an endless amount of something at the exact same price, doesn't mean it can't be sold freely.
>Land is monopoly.
You are free to sell your home to whomever or buy from whomever. I don't think "monopoly" remotely applies. Monopoly would be if all property was owned by one entity, built up by one entity, and you had to deal exclusively with that one entity.
You should read up on Geolibertarianism and Georgism.
Today's land value tax advocates consider graduated land value tax to be unnecessary and problematic, leading to artificial subdivision (and phony subdivision) of land. The point is that Jefferson, to whom libertarians pay homage, considered land monopoly a great evil and land value tax a remedy, as did many other classical liberals.
This imperfect policy of non-intervention, or laissez-faire, led straight to a most hideous and dreadful economic exploitation; starvation wages, slum dwelling, killing hours, pauperism, coffin-ships, child-labour--nothing like it had ever been seen in modern times...People began to say, if this is what State abstention comes to, let us have some State intervention.
But the state had intervened; that was the whole trouble. The State had established one monopoly--the landlord's monopoly of economic rent--thereby shutting off great hordes of people from free access to the only source of human subsistence, and driving them into factories to work for whatever Mr. Gradgrind and Mr. Bottles chose to give them. The land of England, while by no means nearly all actually occupied, was all legally occupied; and this State-created monopoly enabled landlords to satisfy their needs and desires with little exertion or none, but it also removed the land from competition with industry in the labor market, thus creating a huge, constant and exigent labour-surplus.
--Albert J. Nock, "The Gods' Lookout" February 1934
Your Toyota is more of a commodity. There are millions out there that are functionally identical, and millions more can be made. A given piece of real estate with proximity to a major city is very different in this sense, as there are only so many plots of land like it.
A given piece of real estate is a monopoly in the same way that a given individual car is.
There are a large number of pieces of real estate with proximity to any major city. They may all be controlled by some monopoly, depending on local laws etc, but typically they don't.
It's true that it's easier to make new cars than new land, but that does not in itself make the buying and selling of these things all that different. Note that the making of Toyotas actually is a monopoly.
If we're arguing based on time, we might as well say that the tides are changing the amount of land available in any given geographical region. The only difference is scale (i.e. Toyota won't be putting out new vehicles forever)
Another way to say this is that what is commonly referred to as the American dream is in direct contradiction to the law of rent.
The article chooses to phrase "the American dream" as "The American Dream begins with a good job and place to live that you can afford." Generally in this context 'a good job' is taken to mean that the pay and benefits offered as compensation elevate you comfortably above the total cost of living. As you pointed out, if a lot of people are colocated in a region with a scarcity of minimally-acceptable housing, then the first condition of the American dream (that a lot of these people have compensation comfortably in excess of the cost to live (e.g. the cost to buy the property they want)) necessarily implies that prices will be bid upward just to the point where all of the "comfortable excess" that the compensation-above-cost-of-living is eaten up by the elevated home prices.
So the second condition of the American dream, ("a place to live that you can afford") can only be fulfilled if you change your perception about what kind of home you want -- and so a lot of the article can be understood as describing a preference shift in Millennials (and many others, for example I am a bit older than Millenials but also face this dilemma).
Instead of preferring "normal American family homes" as have been readily available in many good-to-live-in places for about the last half century, we now have to say that that preference is no longer an affordable preference to have (even though probably most of us are unhappy that changing world circumstances has dictated this change in the affordability of the preference, and feel it is an overall bad sign for world economic progress). And we replace the preference with what seems to be more of a desire for social mobility, urban amenities, and proximity to very large employment hubs.
The inevitable tension between the two components of the American dream, good job and affordable house, has caught up to us, which is perfectly predictable, and in response, it seems social mobility is more preferred than preserving the sort of American 'family home' lifestyle by foregoing wages and social mobility in order to live in a more affordable area.
I expect that a lot of this has to do with status signaling and money, and probably also mate selection. The relative gains in status to pure wealth optimization seem much stronger now than before -- even if wealth was still the most dominant part of status in the past. This is anecdotal, so I could be very wrong, but it just seems to me that you could earn a lot less, but establish a family home, and still be a high-status member of a community in the past.
But now, it's just money.
It doesn't matter if you've built your own, stable life in a small town community in America, and you've done so with extremely impressive hard work, frugality, and wits, while also supporting and nurturing a family. If you do all that now, but you don't earn a high wage, you're treated as a total nobody for society to shit on and mock.
But if you spend all day doing things that are arguably bad for society in a cubicle farm in a skyscraper and go home to a tiny apartment in a city where you'll never be able to buy property, yet your salary is in the top 25% in the country, you're treated like you deserve respect and like you are a productive member of society. More or less.
As someone who's lived in both the Dayton and San Francisco areas, I have to say: SF has a lot more going on and might be my choice if I were still single. But with a family, I'm a lot happier living in the Dayton area now.
It helps that my mortgage here it ~1/2 of what rent was in the bay area (and ~1/4 of what I would have paid for a smaller place in SF proper.)
Of course, the big differentiator in my case is that with working in software, I can work remote - I've spent more time working for California companies from Ohio than from California.
As someone who is trying to convince my girlfriend about why living outside the south for at least a few years is necessary to get a good career start, this article is invaluable. I wish it were the case, but the good jobs (particularly technology-related jobs) unfortunately don't happen to be evenly spread over the United States.
This applies for jobs outside of technology, but the unfortunate part my household is finding out is that even if you get a name brand institution on your resume, moving to an area with very scarce jobs like most areas in the South outside an international airport means your credentials don't matter perhaps as much as your last name because the tier of jobs you're looking for with a solid middle class job is the .1%er jobs of big cities equivalently.
Your exclusion of cities containing international airports seems odd to me. You're excluding most major cities. You're basically saying there aren't many solid middle class jobs in the rural areas of the South. I think it's generally true, outside of the South as well, that urban areas have more middle class jobs.
I'm not trying to invalidate whatever experience you and your household are having.
I'm just saying there are tons of tech jobs in the South. Many Southern cities are in the top 25 cities/metro areas for software jobs, e.g.,
Austin, TX; the DC suburbs in VA and MD; Jacksonville, FL; Raleigh, NC. And while they typically don't show up on lists, I know first hand that cities like Mobile, AL; Huntsville, AL; Tampa, FL; Richmond, VA; Nashville, TN; Knoxville, TN and Atlanta, GA have healthy tech sectors as well.
I find it mildly ridiculous when people act like you can't find a good programming job outside of West Coast / Chicago / Boston / NYC.
All of those places have international airports except Knoxville, Richmond, Tampa, and Alabama. My point is mostly about having sufficient population density that an international airport is justifiable for the region, and that spurs sufficient mass of high quality information-centric jobs rather than primarily jobs low on the capitalist value chain. To further elaborate and simultaneously move the fence posts (but was part of my snarky intent) is that the tech jobs that are in these places aside from mobile software are almost always ones people on HN overwhelmingly do not want. These jobs are disagreeable from either an ideological perspective (defense, oil) or ambitious career perspective (industry-specific CMS apps, subcontracting support / maintenance on legacy applications, outsourced enterprise J2EE development, IT).
To me, the equivalent of "there's tech jobs all over the place in the US" is "there's jobs all over Craigslist, why are you complaining about lack of jobs?" Trust me when I say that most of the jobs I've seen outside areas with strong tech sector presence are likely not very good "tech" jobs. There's absolutely exceptions, but they are oases in the Sahara desert to me.
Having moved to the South mid-career, I have to agree that there are lots of jobs here, but most of them are undesirable for one reason or another. For most of the tech jobs in the region, there will be plenty of competent co-workers, but your lords and masters will be mostly clueless.
But I also have to correct your knowledge of airports.
I agree that population density is the key point. The South inarguably has lower population density overall, but my point is there are plenty of urban areas dense enough to have healthy tech sectors with "good tech jobs".
I live in Virginia. I lived in Alabama for a long time. I have friends who are good, solid developers living throughout the Southeast using technologies like Ruby on Rails, Go, Clojure, Node.js, Elastic Search, Cassandra/Spark, etc. Sure, some are consulting gigs, but plenty are startups. And none are for ideologically-questionable industries, unless you include NASA in defense.
My "anecdata" does not disprove what you're saying, but your statement doesn't mean much to me when you add qualifiers like "outside areas with strong tech sector presence." Sure, you're going to have fewer options for jobs in rural areas, but isn't that true everywhere?
In other words, the South has lower population density overall, but it still has areas of high population density, i.e., cities. And in my experience, the jobs in the Southern cities are no worse than jobs in other cities. You can find smart people using new exciting technology to solve interesting problems all over the South.
I think we agree overall, just some nuances and me being a pompous jerk.
The people that make node.js, ES, Cassandra, Clojure, etc. are not in these areas so much - plenty of users of technology all over the world (pretty sure South Africa has RoR users and Arduino hackers). Compared to the relative population sizes of these metro areas to, say, just SF and NY (let's exclude Seattle and even Boston) there is a clear and obvious lack of comparable companies like those making OSes, databases, compilers, etc. in the Southeast (the Northwest is overweight considering how few people live there compared to the rest of the country). Integration is pretty common, and that's one of the areas of software that is kind of plug and chug and mostly innovative in a business sense rather than technology. For relative population sizes counting, we should have one company in the Southeast like Facebook, Google, Yahoo, or Microsoft. But there just isn't. Heck, Zappos is in Vegas but they were moved there last I remember (but is Zappos a tech company? I dunno actually).
But I must insist on distinguishing between companies that make revenue from tech and companies that use tech to make revenue, and that this business driver creates major differences in the distribution and attractiveness of job opportunities available for tech folks. It's the difference between the very typical non-tech companies that outsource all their software development for key products to the South for cost reasons while their sales folks and executives' families stay in the Bay Area and those that are paying $400k+ in comp packages for world-class Javascript developers they scour from all over the world.
I'd like to pull some hard numbers, but laziness prevails here. Searching through jobs before in the past before I moved between the West and Southeast, your boring J2EE job is 80% of the software jobs in software in the Southeast, but it's maybe only 30% of the jobs in the Bay Area. The mere presence of good software jobs (and middle class jobs) is not what I'm debating though but the relative number, and that (the real questionable assertion to me) that this spills over to lack of other middle-class jobs in comparison that are also related to the capitalist value chain.
Yeah, I think you're right. You make a good point about there being plenty of users of interesting tech everywhere, but the creators of interesting tech are rarely in the Southeast. I can't think of any big players really.
To be fair to you, I was partially responding to a general attitude I find on HN that if you're not on the West Coast, then you're clearly not a real/good/respectable software developer – which is not what you were saying.
And I'm probably somewhat biased by the awesomeness of my little town (Charlottesville, VA), which has interesting startups like VividCortex (creating awesome DB monitoring tools using Golang), RoomKey (since purchased but started here as a Clojure shop), Center for Open Science (creating frameworks and doing cool stuff in Python), etc. And people in my circle are committers to Elastic Search, Kafka, etc., but I acknowledge that's uncommon.
There's a fair chance I met you at a meet-up in the DC area, which smaller professional communities can be good for. I'm familiar with VividCortex and met a few engineers up there at DevOps DC. When there's less companies, it's easier to form tighter bonds and there's less chance for negative competition like in much denser areas of competing professionals.
Charlottesville, VA is a sort of Sunnyvale, CA in my mind - it's about the same mental distance as the craziness going on in the real urban area up north of it, and it has some history with some access to capital (UVA / William & Mary alumni really). Heck, I considered moving there but I consider it still tough for local jobs without the relative drop in cost of living. Granted, where I moved it sunk potential income harder, but the even lower cost of living is critical when bootstrapping companies, and cheap craft beer is a perk few areas where you can buy a great house for under $200k can claim.
I suppose it's hard to argue with you if your point is that their aren't many SV-style mobile/web app companies outside of Silicon Valley. There are, however, a lot of software and other engineering jobs in many southern cities (e.g. Austin, Raleigh) albeit probably fewer than in the Northeast and the West coast.
There's a number of local companies doing their own regional form of SV companies though that's an increasing trend that could reverse the gold rush to big cities. For example, a local company here is more popular than GrubHub (http://valetgourmet.com). A lot of smaller municipalities (Asheville is a good example) have a cultural distaste for using services and products from outside the area due to the lack of a strong local economy and becoming potentially corporate colonies, so a lot of these companies are intentionally low market cap because they have more humble concerns than getting big, raising a bunch of funding, and retiring at 30. It's part of why I like it here, but the lack of ambition has a double edged sword resulting in a cap on quality that is typical for most places. What's becoming something a little alarming is that even those of us that want to stay away from big cities are being lured back with pretty insane comp packages / opportunities back in big cities, so brain drain is still an issue while (investment) capital is centered around big cities.
I would remove the DC metro area from your list - it may be traditionally part of 'the South' geographically, but cost of living is very high and the culture is much more similar to the northeast.
Right, I wasn't saying it didn't. I was saying that it's silly to exclude all of the major cities and then say the South doesn't have good jobs. No matter what region you're talking about, the good tech jobs are in typically in/near cities.
Is it a paradox? It makes sense if you think about it. If you are in a city that is very good for moving up, then you will make more money. Then homeowners can sell their houses for more money and property owners can charge higher rent. If you are in a city with little opportunity for moving up, then you won't be able to afford to pay higher prices for housing, so homeowners and property owners will be forced to lower their prices to make a sale or land a tenant.
I agree with this, but I don't think that it accounts for everything. For example, my experience in Denver is that wages are below national average, but cost of living is much higher. The consensus that gets spouted here is that the opportunity to live near the mountains is great enough to offset whatever monetary discrepancy there is.
This sounds very much like where I'm living. Asheville, NC is among the highest costs of living in NC but has among the lowest wages (cost of beer may be low, but I pay about the same for restaurant meals as I did in the DC area). But this is misleading because Asheville has among the richest of all zip codes in NC and even the US as well (Biltmore Forest's median household income in the zip code is $150k+). What also makes the statistics misleading is that a massive percentage of the population is retired which leads to a high percentage of cash-only home purchases which combined with the general lack of concern for value by many well-off retirees (many retirees here have multiple homes either in Florida or New Jersey) inflates housing for those that are still working.
The kids that keep flocking here seem to be fine with low wages in exchange for better quality of life than big cities - myself included. But "getting ahead" doesn't really exist here unless you're an incredibly talented restauranteur typically given the general lack of fast-growing industries that support much of a middle class besides healthcare. The culture here really does not respect greed very well unless you're already in the right social cliques that respect greed to some degree.
In short, I'd say that this socioeconomic is actually very representative of the problems that the US as a whole faces with generational gaps and opportunity gaps and shows that even if we eliminated race as an issue we'd still be left with surprisingly little difference in economic outcomes for labor (I think Asheville is something like 89%+ caucasian).
> For example, my experience in Denver is that wages are below national average, but cost of living is much higher. The consensus that gets spouted here is that the opportunity to live near the mountains is great enough to offset whatever monetary discrepancy there is.
While I don't know if that's actually true of Denver, its quite plausible that vacation destinations (like Denver's mountains) would drive up local real estate and consumables prices with competition for transient uses, while much of the economic activity associated with the vacationing uses would materialize elsewhere (with people buying nonconsumable supplies), driving up the cost of living more than they provide direct local economic activity.
Denver has traditionally been very close to the national average for cost of living, and also has average wages (much lower on both fronts than, say, San Francisco.)
In the last 3 years or so, rents have gone up largely because laborers who can't find work in other cities have been able to find work in or near Denver, driving up demand for housing while simultaneously driving down average wages. This is slowly being alleviated as new housing is being built, but it'll be a few more years before an equilibrium is reached.
I guess it's all a matter of perspective. I don't think that comparing anywhere to San Francisco yields many meaningful results, though. It's pretty much an outlier no matter how you look at it.
I would hazard to say that the legalization of pot has more to do with these troubles than anyone wants to admit to. It draws in people who subscribe to that lifestyle from a huge surrounding area (increasing demand for housing and supply of labor).
I'm not sure that equilibrium is really something that is in the cards here, anyway. The job market is just one piece of the puzzle, and the horrific city planning isn't doing anyone any favors.
Needless to say I'm aggressively looking for other places to be.
Minneapolis/St.Paul MN is right in the sweet spot. Tons of really good jobs out here, plenty of reasonably affordable and interesting housing in the sub/urban areas. Good education system, great music scene.
There are some downsides of course, the winters of course and there are some racial social issues (not addressing here to avoid derailing thread).
With all that being said I am looking to add some good software devs to my green field project at a very big local player in the medical insurance field.
It's also strangely in that sweet spot of big city that you have to drive everywhere in. It's in the top couple good case studies of mid-20th century American urban planning.
I mean, that light rail system is just, man. It's no wonder the Twin Cities are (one of) the most bike friendly cities in the country -- if you're not driving somewhere it's the only other way to reliably get where you're going in reasonable time :)
The driving everywhere thing is what I can't stand about Minneapolis. Most of the tech jobs are in the burbs, which means driving. I try to mitigate the driving by living uptown walking distance to bars/grocery store... however with what I am paying for rent I may as well move to one of the bigger tech hubs.
The only way to reap all of the benefits of Minneapolis is to work/live downtown. However, most of the tech jobs are in the burbs so it's a problem! Furthermore, downtown minneapolis is pretty lame. All the cool events/restaurants and bars are not found downtown.
Our light rail and commuter rail system is a joke. I mean, they are nice to have but decades of NIMBYism and political interference delayed and morphed them into systems that work but are shadows of what they could have been.
IMO the one thing that saves our mass transit is that busses are allowed to ride on the shoulder bypassing most traffic. I lived in the north burbs and had a job downtown Minneapolis. I could take an express bus from a nice ramp facility to right into downtown with just one extra stop. 20 minute trip vs nearly an hour in a car.
However, forget about using mass transit if you're trying to get anywhere outside of downtown Minneapolis.
Also, the cities are bike friendly but not as friendly as most 'best places to bike' actually say they are. Most articles go by sum of miles of bike lanes, but many bike lanes here are pretty terrible. Not protected, poorly maintained, not plowed or light enforcement for cars badly parked. I'd say Minneapolis is as bike friendly as any other ubran area with a sizable health conscious population.
It's even more reliable then, compared to public transit. I think we have one of the largest winter commuting populations in the country. The down side is the trails get plowed last, after the roads and highways.
Minneapolis/St. Paul are not huge cities and having the benefit of growing up here I find that my professional network pretty much covers the greater metro area. It seems like everyone knows each other or is only a connection or two away.
With that being said, the best way is to pull on a professional network (natch) and the best way to build that network is to attend some of the tech focused meetups in either city. Ruby.mn is pretty popular if you're into Ruby (or just wanting to meet devs in general).
Otherwise the safest route is to join up with one of the large firms and build a network from there to branch out into more smaller gigs if thats your thing.
Not that I have any real comparison but I feel like our tech scene is pretty weak. While there are jobs, and companies, they are mostly monolithic fortune 500 dinosaurs. Who in tech wants to work for General Mills?
Some of the mega corps do have some really cool work going on. It's not all rank-and-file development, I'm not even talking about R&D. The cities are fairly small compared to other larger midwest cities and if you have a decent reputation as someone who can deliver code or pick up good work there is plenty of opportunity to shine very brightly at a large org and have your pick of projects to tackle.
Fortune 500 aside, there are a lot of smaller startups in the cities. They mostly focus on creating products aimed at the health insurance industry though, which in my experience is fairly dull work.
I agree and disagree. On the one hand, General Mills, Wells Fargo, and Target are never going to be as cutting-edge as Google. On the other hand, most jobs at Google aren't cutting-edge, either. The two guys I know at Google are doing stuff that's not that much different than your average line-of-business programmer.
I'd say availability of tech jobs in the "sort of interesting" category is great in MSP, but the truly amazing jobs are still rare.
That's simply not solving the problem. Yes, you get the money, but you're not getting all of the benefits of living in a major hub. You're missing the times you meet a valuable contact on the train, or at a house party, the free or cheap events and seminars, the chances to see someone important in your field and ask them questions directly. And that's not including all the non-business benefits of living in a socioeconomic hub: good places to eat, public art, etc.
Certainly it might be worthwhile to trade all that for lower rent, but don't think you're getting the same thing for less money. You aren't.
Conversely, by working remotely you can live where you want to. You can own forty acres adjacent to prime public lands. You can keep horses. You can take a lunch break and hike up the mountain in your back yard and look out over the vast empty prairie.
I'd go back to working at Wal-Mart before I move back into a city.
I do the remote-thing from Louisville, KY. There has never been a moment that I feel like I'm missing out on the non-business benefits. I've gone to more concerts, plays, excellent restaurants, operas here than I've ever gone when I was living in one of the trendy coastal cities. This is directly related to having more disposable income.
Networking opportunities are less, certainly. There are plenty seminars, workshops, and what have you to keep up technically, but there are no big name companies or famous practitioners around. Few SW engineering companies, but decent amount of industries requiring developers.
There is undoubtedly a trade-off, but I am not wholly convinced that choosing the high cost/high opportunity trade-off is necessarily the best one. Personally, I felt like I drank the kool-aid a little too much when living in Sodosopa.
Do you miss interacting with your coworkers in person? That is one thing I feel like I would miss, and I am talking about both people that I work with directly and those that I don't.
Yes, I do. I go work on site a few times a year, for a couple of weeks each time. That helps rekindling contacts. Frequent webcam and an open chatbox help too.
This paradox sounds like what my Canadian friends describe Vancouver BC as.
The house prices on the west part of Vancouver are more than $1.5M CAD for a single family home, but the average salary is around $60-70k. There is almost no real industry in Vancouver, except for tourism, and some people that work in HQ for mining companies, etc, so there isn't enough actual high-wage earners to afford paying those preposterous prices.
And yet the house prices keep going up. Everyone says it's mainland Chinese coming in a driving up the prices, but that's what they've been saying since the 1980s, so it can't be true.
There were two major trends that started around 1980 and contributed to housing prices rising meaningful faster than inflation and natural population growth: first, women joining the work force and creating dual-income families, and second, the drop in interest rates from >10% in the early 80s to <4% today. Both leveraged prices up. Neither can reoccur. Very few people foresaw this potential third trend which is foreign money seeking safe haven in urban US real estate. If a large number of the wealthy citizens of every other country on earth decide they want to live in San Francisco and New York, that could continue to push prices up and disconnect them from local market fundamentals like wage affordability. The reaction to this should be to increase land value taxes but California and New York in particular have taken an almost completely opposite approach, taxing income highly and land and property very little.
I don't know about Vancouver BC. But I'll give a highlight about my country capital (Tunis) which is a third-world.
Home prices in the good places go from $250K to $2M and the infrastructure is not as good as you'd expect. The average salary is from $3k to $5K. Here is the thing:
1. Lack of good places to have a home. This means you have to bid for land.
2. Lack of good places in other cities, which means rich people in other cities moving to bid on these places.
3. Lots of people make money abroad (foreign salaries) and return after 15 years of work to buy land and construct a home.
4. Older people who would not sell or rent land/homes they need (my parents and some relatives) aka as land/homes hoarding.
5. A good portion of these homes are owned/inherited through generations and they are not interested to sell because of the lack of new/better opportunity.
There must some similar reasons if the price holds for too long.
A system like that is very easy to counter. If residents are truly not the ones buying property, they can simply vote for stringent renters protection, and liberal squatting laws. That will quickly dry up the market for foreigners buying property and letting it sit there.
I spent the summer in Provo, UT (45 mins south of Salt Lake) and what I saw impressed me. Lots of development, lots of tech companies, low housing costs, low crime, low density. Also of the few cities in the world that have Google fiber, Provo is one of them.
Some drawbacks: only a little public transit infrastructcure, community has high percentage of mormons, strict laws on drinking.
Overall though there's a lot to like about it. If I had the money to invest in real estate, I would be looking in that area first, since I suspect that the place will boom within the next decade.
I wonder if a boom would bring a change in some of the issues that many people find less desirable (ie. drinking laws).
Part of why the Bay Area sees the demand it does is not just because of jobs, but because of the combination of great weather, great food/drink, lots to due in the area, and a highly liberal bent.
Those things would likely outlast any sort of future tech bubble popping (if we are indeed in another one).
The "Top 10 Cities for Social Mobility, Ranked by Affordability" graph suggests that the affordability drop is extremely sharp, but as we can see from the "Percent of Homes Millennials Can Afford vs. Social Mobility" graph, Absolute Mobility remains fairly steady for a number of cities beyond the top 10 cities. Cutting off at the top 10 makes the affordability vs mobility tradeoff seem more severe than it is.
I would love to see a much more granular look at the data.
Particularly another source that maps affordability against social mobility to see if there are smaller communities that sit in the sweet spot but were maybe too influenced by proximity to another market. But maybe just the original data sets. Curious if anyone has some tips on where to find that?
The third chart should have been a scatter plot, not a sorted line graph—which isn’t actually a thing, since you’re just plotting scatter plot data sorted by one variable and not the other, and connecting the dots for whatever reason.
Can you tell me any names of companies to look at for applying or websites/resources/organizations where I might find names? I'm interested in checking the city and its opportunities out.
The key driver is that land values rise when earnings rise. You can't move land, so there is set amount of it within commutable distance of these cities. Also, each bit is in a unique location relative to all the other bits, so every bit of land is either better or worse than the others in terms of your earning potential when you live there. Close to the centre = cheaper and quicker commuting, whereas further out means more expensive and slower. Buying or renting a bit of it to live on is always an auction, so the best bits (where you earn most) are won by those who those who feel it's worth paying extra to get them (because they are the ones who earn the extra income by living there).
In this way, if wages rise, then the maximum bid that a person can justify paying in order to live in that city rises, and therefore property is more expensive.
This is not a free market, BTW. Land is monopoly.