Souce: McKinsey & Company/The Atlantic
BY BRIAN LIBBY
In 1978, Portland was a very different place, whether we’re talking economically, culturally, or even its physical makeup. Many of the places that now define the city, from Waterfront Park to Pioneer Courthouse Square to the Pearl District, did not exist. Timber still dominated local industry. There was scarcely an art gallery to be found, and any right-minded artist looking for career advancement and attention knew to head for New York. The local food/drink scene was more Maxwell House, Budweiser and Gallo than Stumptown, Widmer and Sokol Blosser. Sure, we’ve always had our natural wonders, and by the late 1970s a generation of more progressive politics and politicians had taken root. But when the Trail Blazers won the NBA championship the year before, it seemed to trigger not just sporting euphoria but a kind of breakthrough in the national consciousness: the idea that this one-time backwater burg could become a city that mattered – not just to us but to the rest of the country.
Today, the city lacks such inferiority complexes. We receive an embarrassment of riches when it comes to media attention and tourism. People may roll their eyes at a TV show like Portlandia and the local brand of youthful, earnest quirkiness of the demographic it lampoons: the Ivy League-educated barista with tight jeans, Erkel/Costello glasses, tattoos and a fixed-gear unicycle eating artisan offal from a biodiesel-powered roach coach. But there’s more to the nation’s near-fixation than laughing at Fred Armisen in a bad wig. Portland, with its urban growth boundary, pedestrian and transit-oriented development and suspicion of all things corporate, has for a long time now represented another path for the United States, much as San Francisco might have to our parents or Seattle to our older siblings.
But if we were to consider Portland’s transformations according to a cold hard measurement like gross domestic product, would the rising ambition show, or would our lack of Fortune 500 companies and old-money wealth doom us to cultural cache without a financial foundation?
According to a recent report by McKinsey & Company, Portland is not merely producing a colorful socio-cultural mirage to mask the unemployment data. The report, cited in a blog post yesterday by Jordan Weissmann of The Atlantic, compares America’s top 30 cities by GDP in 1978 to 2010. Portland thus winds up one of five US cities to crack the list, along with Tampa, Orlando, Sacramento and Riverside. We’re the only northern city to rise, while four out of the five to drop from the list (Indianapolis, Milwaukee, Buffalo and Columbus) were from the north, although the Northeast and Midwest rather than our Northwest region. And indeed, the emergence of the South and West become major factors in the nation’s changing GDP top 30.
“First, there's the fall of the Rust Belt and the rise of the Sun Belt,” Weissmann writes. “As the country's economy eased away from manufacturing, which tends to be clustered in discrete regions, and towards services, which can be almost anywhere, people moved away from the old, frigid, and declining industrial centers towards states with cheap real estate and warm weather. Population growth ultimately means economic growth. And so you see the emergence of places like Riverside, Phoenix, Orlando, and Tampa.”
Weissman goes on to note the dominance of finance, which kept cities like New York and Chicago at the top of the GDP list. Even as the Internet and other factors made financial capitols like these less relevant in some ways, the rise of financial speculation in the wake of Individual Retirement Accounts in the 1980s and deregulation from the 1980s-2000s made these wealthy cities even wealthier.
Then, of course, there’s the shift to the West. “The locus of world trade moved from the Atlantic to the Pacific during this time period,” Weissman adds, “which benefited cities in California and its neighbors. The tech sectors helped bolster San Francisco, San Jose, and Seattle.” And Portland. According to a list of America's leading high-tech metropolises published by Atlantic Cities, the Rose City ranks fourth after Seattle, San Jose and San Francisco. We're clearly part of a West Coast "tech belt" comparable to the Rust Belt of the Northeast during the 20th century. (Hopefully in 40 years Billy Joel won't be lamenting our demise.)
Source: Atlantic Cities
Beyond the parts that Weissman notes, the McKinsey report goes on to note broader population and economic trends. For example, contrary to the notion of the United States being a nation of small-town main streets and Europe being a place where everyone lives in cities, practically the opposite is true. 80 percent of the US population lives in large cities, versus less than 60 percent in Europe. Almost 85 percent of American GDP was generated by 259 large cities in 2010, while the large cities of Western Europe contributed less than 65 percent.
“It is America’s cities that explain why the United States continues to enjoy higher per-capita GDP than Europe,” the McKinsey report reads. “The higher share of US urbanites—and the fact that they command a larger per capita GDP premium over US smaller towns and rural areas than do their European counterparts—explains three-quarters of the per capita GDP gap between the two economies.”
What’s more, despite the continuing presence of New York, Los Angeles, Chicago, Houston, Dallas and Washington as our biggest mega-cities, the McKinsey notes their declining importance compared to middle-sized cities, like Portland.
“The true vigor of America’s urban economy comes from a broad base of dynamic middleweights and the relatively high per capita GDP they achieve,” the McKinsey report goes on. “There are just over 255 middleweight cities in the United States, compared with just over 180 in Europe. And they generate more than 70 percent of US GDP today, compared with just over 50 percent in Western Europe. In fact, the top 28 US middleweights alone contribute more than 35 percent of US GDP.”
It’s easy to assume these numbers say more than they do. The Atlantic post by Weissman is titled “America’s Most Important Cities: 1978 vs. 2010,” yet can or should we so directly equate economic output with importance? Can cultural significance be quantified? To a degree the later can. Sales of performance tickets, albums, and books can be measured, as can tourism via hotel bookings, etc. Even so, in an age of reducing nearly all human activity to algorithms something gets lost.
Meanwhile, you can’t talk about Portland and economics without coming around to the phrase “creative class,” as espoused by economist Richard Florida. Yesterday I actually got into a brief Twitter disagreement with Florida after reading his list of the nation’s most “innovative” cities for The Daily Beast, which had Corvallis ranked higher (#7) than Portland (#13).
Granted, these lists are inherently silly, calling to mind the Simpsons episode where Homer reads in a “US of A Today” newspaper the headline, “America’s favorite pencils: #2 is #1.”
That said, what does it mean to be innovative? Corvallis is home to an HP outpost, and HP files lost of patents, which are a frequent measuring stick for innovation. So is the presence of a large university, such as Oregon State. But is Corvallis truly an innovative city? Not to reduce this conversation to cliché and stereotype, but in the scores of trips to and through Corvallis I’ve made as a nearly life-long Oregonian, the word “innovative” never crossed my mind: not in the fraternity houses on campus, not in the Arby’s or KFC lining its main thoroughfare (9th Street), and not in its downtown shops. Granted, as an Oregon Ducks fan I’m biased as it concerns comparing Corvallis with Eugene, but if Oregonians were polled as to which town is more progressive or culturally vibrant, I’m fairly confident Eugene would enjoy a near-landslide. That’s to say nothing of the idea that Corvallis is more innovative than Portland. We needn’t even bother to explain that one.
Source: The Huffington Post/Richard Florida
Richard Florida, the man who gained notoriety via his 2002 book The Rise of the Creative Class, has now penned a 10th anniversary updated edition of the book. “What we are going through is not any run-of-the-mill economic cycle,” he writes. “It's an enormous structural transformation – similar if not larger in scale and scope to the shift from the Agricultural to the Industrial Age.”
Florida notes the declining share of working-class jobs in America, which represented more than 60 percent of the US workforce in the 1880s and “didn't fall below 50 percent until the years immediately following World War II, when it began to decline steadily, falling to forty percent in 1970, thirty percent by 1990, and roughly twenty percent today.” jobs include all not just factory and manufacturing jobs but construction, transportation and maintenance. “Workers who directly produce things in factories account for just six percent of the workforce and are expected to decline even further over the next decade to around five percent,” Florida writes, “roughly equivalent to the level of Agricultural jobs during the last great crisis of the 1930s.”
The creative class, the economist says, “comprised less than 10 percent of the workforce in the late nineteenth century and no more than 15 percent for much of the twentieth,” but began to surge in the 1980s, with more than 20 million new jobs created to become approximately one-third of the American workforce and more than two thirds of the total US payroll. He cites Bureau of Labor Statistics projections that an additional seven million or so creative class jobs will be created over the next decade.
What Florida’s analysis spends less time analyzing, but what is just as relevant if not more, is the service industry. As far back as John Naisbitt’s 1982 bestseller Megatrends, the service industry has been discussed as a bigger and bigger provider of American jobs. And service-industry work isn’t just unappealing because of its relatively low wages. Long-term economic growth is based on gains in productivity, but that’s much more difficult to accomplish in service than in manufacturing. A cook or waiter can’t fundamentally change the way food is prepared and brought to the table from an efficiency standpoint, even if we incorporate present-day phenomena like food carts. And so many of those migrating to Portland are perhaps trained for creative industry jobs but wind up working in the service industry instead.
Florida notes that working-class jobs weren’t always as attractive as they became after World War II. Before then, the Industrial Revolution had brought the factories but not the fair labor standards that would accompany the New Deal during the Great Depression. Factory work saw wages rise and productivity rise after unions pressured companies to take better care of their employees. Florida believes a similar transformation of today’s service industry jobs needs to happen.
“Yes, we will all have to share the cost of higher-paid service work, just as we paid more for cars and manufactured goods after World War II,” he writes. “But think about it this way. What would you rather pay a little more for? The workers who make your car, washing machine or refrigerator, or those who prepare your food and take care of your kids and aging parents? The burden of renewed prosperity is one we all have to share.”
One way that Portland and Oregon are already rather different: our state is one of only seven in the US that does not allow tip credit for minimum wages. In most states, a worker who earns more than $30 per month in tips can be paid a wage less than minimum wage. Only Oregon, Washington, California, Montana, Nevada, Minnesota and Alaska do not allow tip credit and instead have the same minimum wage for tipped and non-tipped workers. This has nothing explicit to do with being a member of the creative class such as a designer, editor or artist. But again, many who enter the creative class start out in the service industry, and the livability of a service-industry job enables one to seek education or other means of transition to more compelling and better paying work.
Making better wages waiting tables isn’t the defining characteristic of Portland’s transformation culturally or economically. That said, each city and region have slightly different values and hierarchies about what’s important. As we all know, the city’s adopted mantra is “Keep Portland Weird”. That’s not just weirdness in the sense of looking and acting goofy, but in pursuing personal passions for largely non-financial reasons. More than 150 years after the Great Migration that brought thousands of settlers west in covered wagons, Oregon and California retain their two-sides-of-the-same-coin relationship: When the Oregon Trail split somewhere just west of the Rockies, California became the destination for those with fortunes of gold in their dreams, and our Northwest region became a destination for those seeking the perfect plot to raise crops.
Source: McKinsey & Company
The fact that Portland’s gross domestic product is now among the top 30 American cities is a testament to the added population here, as more seek the Northwest’s beauty and progressive smart-city livability. But population doesn’t account for the entire story. In one chart accompanying the McKinsey report, major cities that increased or decreased their GDP and changed accompanying place on or off the list are shown to have done so either more by population increases or per-capita GDP growth. San Jose and Boston lead those gaining in per-capita GDP, but both had low population growth. Southwest cities like Austin, Phoenix, Riverside and especially Las Vegas were high on population growth but relatively low on per-capita GDP growth.
Portland comes out as the city with the most even combination of population and per-capita GDP growth between 1978 and 2010. Portland doesn’t have San Jose’s degree of tech-industry investment, nor Boston’s foundational spectrum of great research universities. We don’t have the warm sunshine that makes sunbathers and retirees alike flock to Southwestern cities. Yet like gymnast in a world of body builders and sprinters, we seem to possess something all the more coveted today: a sense of balance—between work and living your life, between high wages and a sense of place, between scorching Southwestern desert sunshine and frigid Northeast freezes, between economic output and environmental protection, and, in some uncategorizable but nevertheless wholly existent way, between the past and the future.
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Outstanding and informative , B , great job!
This should be required reading for every PDX leader.
Posted by: Bill Badrick | June 28, 2012 at 03:32 PM
Very nice article Brian, a thoughtful look into some of the metrics we currently use to rank cities and metros.
I have real issues with many popular measures of innovation and creativity, such as patents issued and the number of occupations listed as artist or musician.
Using tools from this millennium, I ranked the 50 largest metros by the number of local music projects (per capita)in Bandcamp, ReverbNation, and Kickstarter, and Portland was #5 after SF, Boston, Nashville, and Austin.
I like your notion of Portland as a "balanced" city, "right-sized" if you will. I would be concerned if Portland was leading the pack in population, housing or economic growth.
One of the indices I've devised is the Stability Index, which shows there are severe consequences to rapid growth, which cannot be controlled. Better to grow intelligently, even though at times it seems we are plodding.
Best always,
Bert
Posted by: Bert Sperling | July 13, 2012 at 11:48 AM