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California’s Work Rules Sabotage the Gig Economy

January 1, 2019 By Steven Greenhut 2 Comments

An anti-technology movement from early 19th century Britain has long been part of our lexicon. Luddites were knitters who destroyed textile machines to protect their jobs. Today the term applies to anyone who fights a crusade against the modern economy.

Original Luddites weren’t against technology per se, Smithsonian magazine explained, but only attacked manufacturers “who used machines in what they called ‘a fraudulent and deceitful manner’ to get around standard labor practices.”

California’s modern-day Luddites don’t commit acts of violence against Google, Uber, Amazon and other firms that have shaken up the existing economic order. No one is toasting cellphones in bonfires or sabotaging Federal Express delivery vans, but these New Luddites have used the courts and the legislative process to throw that figurative wrench in the machine. Indeed, the biggest redoubt of Luddite-ism appears to be the California Supreme Court, which in April issued a ruling that has threatened to grind California’s high-tech economy to a halt.

In Dynamex Operations West, Inc. v. Superior Court, the court didn’t directly target these new technologies or business models, but clamped down on the way companies use independent contractors rather than full-time employees as a means to stay flexible and competitive in the marketplace. As Chief Justice Tani Cantil-Sakauye wrote in the unanimous ruling, “When a worker has not independently decided to engage in an independently established business but instead is simply designated an independent contractor…there is a substantial risk that the hiring business is attempting to evade the demands of an applicable wage order through misclassification.”

The case centered around a package-delivery firm, Dynamex Operations West, which turned its full-time staff into contractors. Obviously, when companies use contractors they need not pay them benefits and are not subject to hourly work rules, wage requirements and the host of labor regulations the state applies to permanent workers. The court tossed out the old, flexible way of determining whether a worker is a contractor or employee and imposed a strict new “ABC Test” for deciding such matters.

Under the new standard, California firms that want to classify their workers as contractors must meet all of these terms: The worker is outside the control of the employer for the work performed; the worker performs work that is outside the company’s normal scope, such as a freelancer who does public relations for a tech firm; and the worker is engaged in an independent business enterprise, perhaps having his or her own LLC. One need not be a labor-law expert to realize how this threatens many burgeoning new business models including Transportation Network Companies such as Uber to old-line industries such as Realtors and hairdressers.

Growing economies are dynamic. There’s no way to lock anyone’s job into place (outside of government work). One of California’s long-standing problems—a key reason for its sky-high poverty rates—is that its labor regulations read like something from the Industrial Revolution. The state imposes burdensome regulations regarding everything from work breaks to overtime. That might be fine on the factory floor, but the rules stifle innovation—and make it far tougher for companies to survive. These union-backed rules also raise the bar so high that many startups can’t get off the ground, which deprives consumers and workers of exciting new opportunities.

The obvious work around has been to use contractors. It’s not just a boon for businesses. Most of the nearly 2 million Californians who are independent contractors prefer to make their own schedules rather than show up 9-5 at the office. Ask your Uber driver, Realtor or barber. The Department of Labor found that 79 percent of contractors prefer these working arrangements with fewer than 9 percent preferring traditional employment.

If companies are forced to hire all their workers on a full-time basis, that might raise some people’s incomes, but it would also raise the cost per worker by a third and could lead to fewer jobs. There’s a market-based way to deal with problems raised by the court. For instance, the state could pass tax and regulatory reforms that make it more cost-competitive for individuals to purchase the kind of healthcare benefits offered to full-time employees. The state could create a “third way”—another worker status that lies between “full-time worker” and “contractor.”

The state’s business community has called on the Legislature and governor to address the problems created by the state high court. Gov. Jerry Brown punted. Incoming Gov. Gavin Newsom has deep ties to the tech community, but one of his top aides is from the California Labor Federation. Unions already are backing a bill to codify Dynamex. This is shaping up as one of the biggest battles in the new session. Will the California government let its ballyhooed New Economy thrive, or will it embrace an approach that was last relevant in the 1800s?

Steven Greenhut is Western region director for the R Street Institute. He was an Orange County Register editorial writer from 1998-2009. Write to him at sgreenhut@rstreet.org.

This column was first published in the Orange County Register.

Filed Under: Top Stories Tagged With: Amazon, Google, Technology, Uber

Silicon Valley’s Political Perils

September 15, 2018 By Mark P. Mills 1 Comment

Last week’s news underscored growing concerns over the politicization of tech companies. With his inimitable style, President Trump claimed on Twitter that Google shows political bias by skewing the news found in online searches. Relatedly, a group of some 100 conservative-leaning Facebook employees formed an online community to escape the strictures of a “political monoculture” and provide themselves a “safe” place for “ideological diversity” among their 25,000 co-workers.

It’s a truism that Silicon Valley leans left, but the average tech millionaire is not easy to pigeonhole ideologically. A revealing, if little-noted, 2017 study from Stanford University compared more than 600 “elite technology company leaders and founders,” 80 percent of them millionaires, with more than “1,100 elite partisan donors” of both political persuasions. The distinctions are revelatory for anyone interested in mapping the future of American politics. “Increasingly, technology entrepreneurs are using their personal wealth and firms’ power to exercise political influence,” the survey’s authors observe. “For example, recent federal candidates have referred to Silicon Valley as a ‘political ATM’.” The study found that 80 percent of tech millionaires overwhelmingly donate to Democrats over Republicans; hardly a surprising finding.

But the key reveal of the Stanford analysis is not about party alignment in donations: it’s in what can only be called a kind of political schizophrenia around the core ideologies associated with each party. On one hand, the study showed that Silicon Valley’s titans are firmly aligned with Democrats on social issues, what the survey calls “liberal redistributive, social, and globalistic policies.” But on the other hand, the survey shows that the ideologies—if not the financial support—of tech millionaires solidly align with Republicans on issues relating to the regulatory environment, specifically around such topics as drones, data storage, self-driving cars, and employee policies.

This ideological rift prompted the Stanford researchers to conclude that tech’s business elites are donating politically against their “self-interest.” For analysts and political operatives, the question is whether that’s an immutable or malleable political reality. After all, it’s not just Republicans like President Trump attacking Silicon Valley; Senator Bernie Sanders, the standard-bearer of the Democratic Party’s progressive wing, is one of many in that caucus taking on the tech giants on “fairness” issues surrounding income inequality in general and Amazon CEO’s Jeff Bezos’s uber-wealth in particular.

It’s risky for companies to become identified with a specific political orientation. The recent evidence of a political tilt at numerous Silicon Valley firms—or at least among their leaders—has ignited controversy, not just in Washington but also in the tech community itself. At least one Valley executive worries that “political correctness” could hurt innovation, the mother’s milk of the tech sector. Google’s firing of engineer James Damore for raising questions about gender differences on an internal discussion board showed the willingness of tech companies to police political expression.

There is a real existential risk for tech companies to be found in the historical propensity of governments to declare new tech enterprises, especially new means of communication, as inherently monopolistic—and thus inherently unfair. Back in 1949, on the theory that radio broadcast companies had monopolistic control of that medium, Congress ordered broadcasters to “afford reasonable opportunity for the discussion of conflicting views of public importance.” The Fairness Doctrine would survive for nearly four decades, before it was revoked in 1987.

Some Democrats sought to reinstate the Fairness Doctrine a decade or so ago, in response to the rise of talk radio, which became overwhelmingly conservative after 1987. Now, some Republicans (and Democrats, too) are looking again at the notion of “fairness” in the context of the dominant market share enjoyed by the likes of Facebook or Google. Google’s global share of “search” has reached 90percent, and Senator Orrin Hatch has already sent a letter to the FTC to request an investigation of anti-competitive practices at the company.

When it comes to issues surrounding access to accurate and “fair” news and information in particular, the challenging question is whether anyone can easily see if there is (or isn’t) an algorithmic finger on the scale of fairness. In the history of the news business, this is an unprecedented concern. The designers and coders of the algorithms respond that the Web’s interstices are arcane and not easy for the layman to understand. In effect, the experts are saying: it’s complicated, so trust us. From a technical perspective, it would indeed be difficult to come up with a “user interface” that provided credible transparency about how news and information are curated or accessed on Web platforms. But one could have said the same thing, circa 1990, about converting the Arpanet’s technically arcane TCP/IP (Transmission Control Protocol/Internet Protocol) into a Web system so simple that preschool children can use it now.

As Steve Jobs famously said two decades ago, “simple can be harder than complex.” But conquering complexity used to be what animated Silicon Valley. That is, in fact, how Google got started. It’s time to revive that zeitgeist, and make the power of news on the Internet not just easy to use, but easy to trust.

Mark P. Mills is a senior fellow at the Manhattan Institute and a McCormick School of Engineering Faculty Fellow at Northwestern University, and author of Work in the Age of Robots, just published by Encounter Books.

This article was originally published by City Journal Online

Filed Under: Top Stories Tagged With: Donald Trump, Facebook, Google, Silicon Valley, Twitter

Report: Silicon Valley Giants Enjoy Billions in Government Subsidies

July 5, 2018 By Chriss W. Street 2 Comments

The latest Subsidy Tracker reveals that some of the most prominent Silicon Valley tech corporations enjoy billions in government subsidies.

“Good Jobs First” is a not-for-profit organization that reviews state and municipal financial reports to track the size and justifications given by government entities to issue corporate tax abatements and direct subsidies that since 2015 have been required accounting disclosures under GASB Statement No. 77.

Most Americans are supportive of government providing defense, public safety, roads, schools, and public health. But the “Subsidy Tracker 2” reveals that governments are issuing record amounts of subsidies to the richest and powerful tech companies, many headquartered in Silicon Valley.

Supposedly entrepreneurial Silicon Valley has been America’s biggest winner in the corporate welfare game. Tesla has been by far the United States’ leader by collecting $2.4 billion in direct subsidies and over $1 billion in tax abatements since 2007. In addition, its SolarCity subsidiary picked up $1 billion in grants and tax abatements from the State of New York and another $497.5 million in U.S. Treasury Department cash grants.

Other Silicon Valley tech taxpayers miners include Google, the second-most valuable company in the galaxy with a market capitalization of $770 billion. It has enjoyed government largess of $766 million since 2000. Apple, the most valuable company in the universe with a market capitalization of $904 billion, banked $693 million in government handouts since 2011. And Facebook, the fifth most valuable company on the planet with a market capitalization of $558 billion, pocketed $549 million, according to the San Jose Mercury News.

But Silicon Valley is about to be displaced as America’s biggest corporate welfare hub by Seattle-based Amazon. According to the Subsidy Tracker, Amazon built its distribution and data centers network with up to $613 million in government grants and tax holidays.

Amazon is now holding the equivalent of a municipal subsidy auction for the right to host its $5 billion second North American corporate headquarters, HQ2.

In a bidding process that generated hundreds of proposals, Amazon named 20 municipal finalists in January. The subsidy packages for the nine locations that made public bids include 1) Raleigh, North Carolina with $50 million; 2) Denver, Colorado with $100 million; 3) Los Angeles, California with between $300 million to $1 billion; 4) Atlanta, Georgia with $1 billion; 5) Chicago, Illinois with at least $1.7 billion; 6) Philadelphia, Pennsylvania with between $2 billion to $3 billion; 7) Columbus, Ohio with $2.3 billion; 8) Newark, New Jersey with $7 billion; and Montgomery County, Maryland with $8.5 billion in tax abatements and infrastructure incentives.

Mercatus Center at George Mason University warns that elected officials, even with the best of intentions, “do not possess the proper incentives to manage taxpayers’ money prudently” when it comes to passing out corporate taxpayer subsidies.

When private investors act in markets they experience price signals, but government decision makers have no way to account for the value or costs of their decisions. When private investors fail they lose money, but it is taxpayers that lose when government fails.

This article was originally published by Breitbart.com/California

Filed Under: Top Stories Tagged With: Amazon, Apple, Google, Silicon Valley, SolarCity, Tesla

Thoughtless Bureaucrats and Driverless Cars

March 5, 2016 By Ian Adams 3 Comments

California’s Legislature set out in 2012 “to encourage the current and future development, testing and operation of autonomous vehicles on the public roads of the state” — but now, the state is poised effectively to ban such cars from the roads and highways. The Department of Motor Vehicles held a public workshop in Sacramento in late January and another in Los Angeles in early February to discuss draft regulations for autonomous vehicles. Though the rules won’t be finalized before the end of the year, the news so far isn’t good — for the cars. Under the cover of “consumer protection,” the DMV proposes to limit the rollout of autonomous technology by, among other things, barring its commercial use, precluding truly autonomous operation, and prohibiting private sale and ownership of self-driving cars.

The DMV is best known for ensuring that 16-year-olds are minimally competent behind the wheel of traditional motor vehicles; it has no particular expertise in evaluating the appropriateness of vehicle-safety requirements. But that hasn’t stopped the department from imposing an excess of caution on the approval of autonomous-vehicle technology. The idea of cars or trucks operating without steering wheels or human drivers is exciting to entrepreneurs and commuters. Google’s autonomous car would have no steering wheel, or even pedals. A delivery service such as Google Express would likely roll out without drivers. Uber is researching how to replace drivers as well. Shipping and logistics companies also envision a future when goods move from harbors to warehouses in autonomous trucks. More than a dozen disabled activists appeared at the hearing in Los Angeles to urge the DMV to allow purely autonomous vehicles, saying they would be a boon for people, such as the blind, who are incapable of driving right now. But the idea is terrifying to bureaucrats and regulators. The DMV’s smothering — and costly — approach will likely become state policy, squelching such innovations.

Keeping driverless cars off the streets is one thing; why ban their sale entirely? DMV chief information officer Bernard Soriano said last month that because the proposed rules would place a three-year limit on the use of approved vehicles, buyers likely wouldn’t receive much benefit over such a short period of ownership. Furthermore, the DMV believes that by prohibiting sales, the rules would protect early adopters of the technology from being stuck with vehicles that are later deemed unsafe by the department. Finally, the DMV maintains that leased vehicles, which remain under the ownership of the vehicle manufacturer, will be easier to collect data from.

The first of the rationales is the most compelling, but only compared with the others. With only three years before retirement, a purchased vehicle’s value — much of it traditionally recouped in its resale — would be destroyed by these regulations. The rule would shift a greater financial burden onto manufacturers and all but guarantee that the only people able to afford early vehicles, even by leasing them, will be wealthy. If anything, the three-year sunset requirement is itself a constructive ban on ownership, which makes the DMV’s second rationale irrelevant. If a small, wealthy segment of the population is aware of the state’s strictures and doesn’t mind temporarily possessing a vehicle that’s doomed by law, it can certainly afford the risk. The state’s supposed desire to protect these people from loss seems at once unnecessary and disingenuous.

The DMV’s third and final rationale — compliance with reporting requirements—is even more poorly conceived. As with every vehicle sold today, the manufacturer, for better or worse, controls the technology used and the data it produces. When you buy or lease a car, you sign a contract that says so explicitly. So the DMV would have access to any safety data it likes, regardless of whether the “owner” is the manufacturer or the end user.

Without question, prohibiting private sale and ownership of self-driving cars and trucks would destroy value and raise costs. Google has already threatened to take its autonomous vehicle business elsewhere. Given that outcome, the DMV’s justifications simply don’t hold up. So why would the DMV push prohibition with such gusto? Why would the state pursue policies to discourage the adoption of vehicles that, by virtually all accounts, would be orders of magnitude safer than traditionally operated vehicles? And, how does a department charged with enacting the will of the legislature land so far afield of the legislature’s stated goal of creating a legal framework that promotes autonomous vehicles? Very simply, lawmakers deferred too much authority to a bureaucracy, and California’s motorists will pay the price.

Ian Adams is an attorney in California and senior fellow of the R Street Institute.

This piece was originally published by City Journal online.

Filed Under: Top Stories Tagged With: DMV, Google, regulation, Self-driving cars

New Legislation Targets Encrypted CA Smartphones

February 3, 2016 By James Poulos 5 Comments

A worldwide controversy over whether to ban encrypted smartphones has opened a new front in California, where lawmakers introduced legislation that would crack down on the devices.

Assembly Bill 1681, introduced by Assemblyman Jim Cooper, D-Elk Grove, would mandate that phones made “on or after January 1, 2017, and sold in California after that date” must be “capable of being decrypted and unlocked by its manufacturer or its operating system provider,” as CNET reported. “Any smartphone that couldn’t be decrypted on demand would subject a seller to a $2,500 fine. If the bill becomes law, there would be a ban on nearly all iPhones and many devices that run Google’s Android software across the state.”

With California home to both Google and Apple, observers quickly declared a broadening trend toward increased legal pressure on tech companies. But competing justifications for the crackdown have emerged, with lawmakers outside California opting to hang their own legislation on a different peg. As Ars Technica remarked of AB1681:

Despite very similar language to a pending New York bill, the stated rationale is to fight human trafficking, rather than terrorism.

AB1681’s language is nearly identical to another bill re-introduced in New York state earlier this month, but Cooper denied that it was based on any model legislation, saying simply that it was researched by his staff. He also noted that the sale of his own iPhone would be made illegal in California under this bill.

World worry

California policymakers have become an intimate part of the global push to prevent smartphone encryption from helping individuals and groups evade law enforcement monitoring and detection. At the Davos Open Forum, Rep. Darrell Issa, R-Calif., joined an international panel of public and private-sector officials to air concerns about the potential for over- or under-enforcement. “Governments claim the need for greater security and seek to monitor global communications, while citizens, more willing than ever to share, demand greater protection of their digital privacy,” according to Vice News, whose editor in chief moderated the discussion.

In the U.S., meanwhile, top law enforcement officials have sought to coordinate a nationwide effort patterned after California’s and New York’s, each of which drew support from its respective Attorneys General. “The National District Attorney’s Association hasn’t hidden its intention to mobilize its local offices,” according to The Verge. “The association, along with the International Association of Chiefs of Police, announced in November that they planned to partner with state legislators to enact mandatory smartphone decryption bills around the country. The group wrote in a letter that it looked ‘forward to working with lawmakers to strengthen our current laws, and ensure they are representative of today’s technology and the challenge public safety officials face in preventing crime and safeguarding their communities.’”

An uphill battle

But pushback has already begun from within the crypto and tech communities. On the one hand, advocates and activists have long warned against granting governments a so-called “backdoor” to the data and metadata stored on devices and accessible through them. “There have been people that suggest that we should have a backdoor,” Apple CEO Tim Cook recently said on “60 Minutes,” as the Silicon Valley Business Journal noted. “But the reality is if you put a backdoor in, that backdoor’s for everybody, for good guys and bad guys.”

On the other hand, however, going further, “legal and technical experts argue that even if a national ban on fully encrypted smartphones were a reasonable privacy sacrifice for the sake of law enforcement, a state-level ban wouldn’t be,” as Wiredobserved. “They say, the most likely result of any state banning the sale of encrypted smartphones would be to make the devices of law-abiding residents’ more vulnerable, while still letting criminals obtain an encrypted phone with a quick trip across the state border or even a trivial software update.” For that reason, both the California and New York bills face an uphill climb, despite strong pressure to pass them — or some version of them — into law.

Originally published by CalWatchdog.com

Filed Under: Top Stories Tagged With: Apple, Attorney General, cellphone, Google, Jim Cooper, Legislature, smartphone, Tim Cook

Is Apple Ready To Jump Into Electric Car Market?

September 27, 2015 By James Poulos 3 Comments

California was poised to make automotive history again as Apple met with the state’s Department of Motor Vehicles. As the Golden State grapples with divisive choices over emissions regulations, electric and self-driving cars have emerged as the latest home-grown innovation with big political stakes.

The move put the self-driving car under development by the tech titan — codename: Project Titan — at the center of a flurry of speculation, opinion and analysis. Citing documents it had obtained, the Guardian reported that Mike Maletic, a senior legal counsel, “had an hour-long meeting on 17 August with the department’s self-driving car experts Bernard Soriano, DMV deputy director, and Stephanie Dougherty, chief of strategic planning, who are co-sponsors of California’s autonomous vehicle regulation project, and Brian Soublet, the department’s deputy director and chief counsel.”

Alongside Google and Uber, that makes three Silicon Valley heavyweights lined up to crank out driverless cars at some point in the future, the Guardian added, noting “Google already has a fleet of robot cars on the streets of California and is planning to have several hundred built in the near future.”

Critical mass

But the competition in driverless cars has already heated up around the world. “According to the California DMV,” Fast Company noted, “their autonomous vehicle program has issued permits for testing to Volkswagen, Mercedes-Benz, Tesla, Nissan, BMW, and Honda, along with Google and auto component manufacturers Delphi, Bosch, and Cruise Automation.” That program, begun at the start of this year, “is working on ways to guarantee autonomous vehicles are safe, tested, and meet quality and performance benchmarks.”

The race to deploy a robocar has led those companies, plus Toyota, Ford, and GM, to line the Valley’s main thoroughfare with research laboratories. The Central Expressway, reaching roughly from Stanford University to San Jose Mineta International Airport, has become so crowded with competitors that Apple’s penchant for secrecy may be at risk if it takes its cars out for a neighborhood spin. “Although Apple recently bought a 43-acre parcel in North San Jose, it doesn’t have much room in Silicon Valley to test its automotive ideas with the secrecy that usually surrounds its tiny devices,” the San Jose Mercury News surmised. “The question is: Would it be willing to test in public?”

Busy rivals

Traffic in secrecy has run both ways, however. Whatever Apple has under wraps, the Mercury News concluded, “its actions have contributed to a frenzy from rivals — especially in the auto industry — to take ownership of autonomous technology, in-car mapping software, vehicle-to-vehicle communication and dashboard Internet applications that could reshape the way we get around in the decades to come.”

To vault to the top of the pack, however, Apple would likely have to square off against Tesla, which has enjoyed a substantial head start. “In the next few years, Tesla has the potential to become the Apple of electric cars, even if Apple enters the industry,” according to Quartz. “The company will have four models on the streets — the Roadster, the S, the X, and the 3 — by the time Apple or any other competitor is likely to have a single model. Tesla will also have its Gigafactory — a massive production facility in Nevada that can produce up to 500,000 cars a year — up and running. If Tesla can bring down its prices, its cars could become a common sight on roads.” Of course, Tesla has automotive rivals of its own, with Audi, Mercedes and Porsche all poised to deliver electric vehicles in about five years or so.

Meanwhile, few inside the auto industry have thrown in the towel on more traditional vehicles. “When it comes to actually making cars, there is no reason to assume that Apple, with no experience, will suddenly do a better job than General Motors, Ford, Volkswagen, Toyota, or Hyundai,” GM ex-chairman Bob Lutz told CNBC, predicting that Apple’s labors would become “a giant money pit.”

Originally published by CalWatchdog.com

Filed Under: Top Stories Tagged With: Apple, Electric car, Google, Silicon Valley

If You Want a Job, Where Should You Move?

June 15, 2015 By Joel Kotkin and Michael Shires 2 Comments

Since the U.S. economy imploded in 2008, there’s been a steady shift in leadership in job growth among our major metropolitan areas. In the earliest years, the cities that did the best were those on the East Coast that hosted the two prime beneficiaries of Washington’s resuscitation efforts, the financial industry and the federal bureaucracy. Then the baton was passed to metro areas riding the boom in the energy sector, which, if not totally dead in its tracks, is clearly weaker.

Right now, job creation momentum is the strongest in tech-oriented metropolises and Sun Belt cities with lower costs, particularly the still robust economies of Texas.

Topping our annual ranking of the best big cities for jobs are the main metro areas of Silicon Valley: the San Francisco-Redwood City-South San Francisco Metropolitan Division, followed by San Jose-Sunnyvale-Santa Clara, swapping their positions from last year.

Our rankings are based on short-, medium- and long-term job creation, going back to 2003, and factor in momentum — whether growth is slowing or accelerating. We have compiled separate rankings for America’s 70 largest metropolitan statistical areas (those with nonfarm employment over 450,000), which are our focus this week, as well as medium-size metro areas (between 150,000 and 450,000 nonfarm jobs) and small ones (less than 150,000 nonfarm jobs) in order to make the comparisons more relevant to each category. (For a detailed description of our methodology, click here.)

An Economy Fit For Geeks

Venture capital and private-equity firms keep pouring money into U.S. technology companies, lured by the promise of huge IPO returns. Last year was the best for new stock offerings since the peak of the dot-com bubble, with 71 biotech IPOs and 55 tech IPOs. It’s continuing to fuel strong job creation in Silicon Valley. Employment expanded 4.8% in the San Francisco Metropolitan Division in 2014, which includes the job-rich suburban expanses of San Mateo to the south, and employment is up 21.2% since 2009. This has been paced by growth in professional business services jobs in the area, up 9% last year, and in information jobs, which includes many social media functions – information employment expanded 8.3% last year and is up 28.7% since 2011.

San Jose which, like San Francisco, was devastated in the tech crash a decade ago, has also rebounded smartly. The San Jose MSA clocked 4.9% job growth last year and 20.0% since 2009. Employment in manufacturing, once the heart of the local economy, has grown 8% since 2011, after a decade of sharp reversals, but the number of information jobs there has exploded, up 16% last year and 35.7% since 2011.

Meanwhile, there’s been a striking reversal of fortune in the greater Washington, D.C., area, while the greater New York area has also fallen off the pace. In the years after the crash, soaring federal spending pushed Washington-Arlington-Alexandria to as high as fifth on our annual list of the best cities for jobs; this year it’s a meager 47th, with job growth of 1.5% in 2014, following meager 0.2% growth in 2013, while Northern Virginia (50th) and Silver Spring-Frederick-Rockville (64th) also lost ground, dropping, respectively, five and 15 places.

Job growth has also slowed in the greater New York region, which also was an early star performer in the immediate aftermath of the recession, in part due to the bank bailout that consolidated financial institutions in their strongest home region. Virtually all the areas that make up greater New York have lost ground in our ranking: the New York City MSA has fallen to 17th place from seventh last year, as employment growth tailed off to 2.6% in 2014 from 3.2% in 2013. Meanwhile Nassau-Suffolk ranks 49th, Rockland-Westchester 60th and Newark is second from the bottom among the biggest metro areas in 69th place.

The Shift To ‘Opportunity Cities’ Continues

Not every tech hot spot has the Bay Area’s advantages, which include venture capital, the presence of the world’s top technology companies and a host of people with the know-how to start and grow companies.

But other metro areas have something Silicon Valley lacks: affordable housing. Most of the rest of our top 15 metro areas have far lower home prices than the Bay Area, or for that matter Boston, Los Angeles or New York. And they also have experienced strong job growth, often across a wider array of industries, which provides opportunities for a broader portion of the population.

The combination of lower prices and strong job opportunities are what earns them our label of “opportunity cities.” The Bay Area may attract many of the best and brightest, but it is too expensive for most. Despite the current boom, the area’s population growth has been quite modest — San Jose has had an average population growth rate of 1.5% over the past four years. In contrast, seven of our top 10 metro areas, including third place Dallas-Plano-Irving, Texas, and No. 4 Austin, Texas, are also in the top 10 in terms of population growth since 2000. If prices and costs are reasonable, people will go to places where work is most abundant.

In the Dallas metro area, the job count grew 4.2% last year, paced by an 18.6% expansion in professional business services, while overall employment is up 15.7% since 2009. Job growth last year in Austin, Texas, was a healthy 3.9%, while the information sector expanded by 4.7% and since 2011 by 17.8%.

Many Texas cities, of course, have benefited from the energy boom — the recent downturn in oil prices make it likely that growth, particularly in No. 6 Houston, will decelerate in coming years.

But what is most remarkable about the top-performing cities is the diversity of their economies. Most have tech clusters, but several, such as Houston, Nashville, Tenn., Dallas and Charlotte, N.C., have growing manufacturing, trade, transportation and business services sectors. The immediate prognosis, however, may be brightest in places like Denver and Orlando, where growth is less tied to energy than business services, trade and tourism. Nashville, which places fifth on our list, has particularly bright prospects, due not only to its growing tech and manufacturing economy, but also its strong health care sector which, according to one recent study, contributes an overall economic benefit of nearly $30 billion annually and more than 210,000 jobs to the local economy.

The Also-Rans

Some economies lower in our rankings have made strong improvements, notably Atlanta-Sandy Spring-Roswell, which rose to 12th this year, a jump of 12 places. Long a star performer, the Georgia metro area stumbled through the housing bust, but it appears to have regained its footing, with strong job growth across a host of fields from manufacturing and information to health, and particularly business services, a category in which employment has increased 24% since 2009.

In California, one big turnaround story has been the Riverside-San Bernardino area, which gained six places to rank 11th this year as it has again begun to benefit from migration caused by coastal Southern California’s impossibly high home prices.

Several mid-American metro areas also are showing strong improvement. Louisville-Jefferson County, Ky., jumped fifteen places to 21st, propelled by strong growth in manufacturing, business services and finance. Kansas City, Kan. (23rd), and Kansas City, Mo. (46th), both made double-digit jumps in our rankings. In Michigan, Detroit-Dearborn-Livonia, bolstered by the recovery of the auto industry, gained six places to 59th, while manufacturing hub Warren-Troy-Farmington Hills picked up two to 39th. These may not be high growth areas, but these metro area no longer consistently sit at the bottom of the list.

Losing Ground

One of the biggest resurgent stars in past rankings, New Orleans-Metairie, dropped 17 places to 43rd, while Oklahoma City fell 17 places to 33rd. These cities lack the economic diversity to withstand a long-term loss of energy jobs if the sector goes into a prolonged downturn.

Yet perhaps the most troubling among the also-rans are the metro areas that have remained steadily at the bottom. These are largely Rust Belt cities such as last place Camden, N.J., which has been at or near that position for years.

Future Prospects

Now the best prospects appear to be in tech-heavy regions, but it’s important to recognize that a key contributor to the tech sector’s frenzy of venture capital and IPOs had been the Federal Reserve’s unprecedented monetary interventions, which are now phasing out. As it is, headwinds to expansion in the Bay Area are strong. High housing prices, according to recent study, may make it very difficult for these companies to expand their local workforces. The median price of houses in tech suburbs like Los Gatos now stand at nearly $2 million — rich for all but a few — while downtown Palo Alto office rents have risen an impossible 43% in the last five years.

Companies like Google, which has run into opposition over its proposed new headquarters expansion, may choose to shift more employment to other tech centers, such as Austin, Denver, Seattle, Raleigh and Salt Lake City, where the cost of doing business tends to be less. Similarly the stronger dollar could erode the modest progress made by some industrial cities, such as Detroit and Warren, as it gives a strong advantage to foreign competitors.

Normally we would expect these processes to play out slowly. But in these turbulent times, it’s best to keep an eye out for disruptive changes — a new economic cataclysm, should one occur, could quickly shift the playing field once again.

Joel Kotkin is editor of NewGeography.com and Presidential fellow in urban futures at Chapman University, and Michael Shires is Associate Professor of Public Policy, Pepperdine University

Cross-posted at New Geography and Fox and Hounds Daily

Filed Under: Top Stories Tagged With: Employment, Google, jobs, Los Angeles, Silicon Valley