Des Moines takes the top spot on this real income measure: Its median income of $56,576 translates into $62,446 in spending power.  Greater Washington DC takes second place:  Its median income of $85,168, one of the highest in the nation, equals $61,449 when adjusted for cost of living. Two Texas metros – Houston and Dallas – also stand out, as well as leading college towns.

Top 10 Metros – with the highest real incomes

Bottom Ten Metros – with the lowest real incomes

US News and World Report notes that these real income calculations are based on 2009 median household income figures from the American Community Survey as adjusted by the Council for Community and Economic Research’s quarterly Cost of Living Index, which takes into account factors such as the relative price of groceries, housing, utilities, healthcare and transportation, as well as such common incidental expenses as movie tickets and newspapers.

While you’re at it, you might also want to check out this this interactive map of metro wages adjusted for cost of living differences over at the Real Time Economics blog of The Wall Street Journal.  But back to the main point.

The combination of higher incomes alongside higher housing prices in big cities like New York, Los Angeles, and the San Francisco Bay Area reflects the underlying economic power that comes from the clustering of leading businesses and highly talented people. The Nobel-prize winning University of Chicago economist Robert Lucas famously phrased this as a question: “What can people be paying Manhattan or downtown Chicago rents for, if not for being near other people?” Or as Paul Krugman, who his own Nobel prize for his work on economic geography, put it: “Where do you live if you work in the film industry? Probably in Los Angeles. Why? Because the other film industry people you need to work with are there. But they are there because they need to be near people like you.”  The clustering force brings talented people together, leveraging their skills and generating higher rates of innovation and higher productivity. This in turn provides the basic economic force behind higher incomes, which in turn support higher housing prices. These metros also provide highly desired amenities—from great weather to arts and culture and an open-mined ethos—which command higher prices as well.  Add to that the fact that they are increasingly centers of global trade and commerce and thus draw wealthy buyers from around the world.

And that’s where Greater Washington DC really stands out. It is a big diverse metro – the nation’s eighth largest. It is a human capital magnet, home to four of the five counties nationwide with the highest concentrations of college educated adults and the third largest creative class concentration in the nation. With an unemployment rate of just 5.4 percent, the second lowest of any metro with more than one million people, its economy has proven to be among the nation’s most resilient. Still, its housing prices and overall cost of living allow it to remain relatively affordable, providing great value for its residents. And it’s the only large metro in the country to see its housing values appreciate over the past year (more here).  While most commentators and economic developers remain fixated on trying to build the next Silicon Valley, replicating aspects of  LA’s film industry, or trying to generate New York-style entertainment clusters, it’s worth paying a good deal more attention to what’s behind greater Washington’s capacity to strike such a nice  balance between clustering, and affordability, allowing its residents’ paychecks to stretch much further than most.

To seize your opportunities and navigate a career in this new borderless world, you have to be prepared to pick up stakes. Depending upon where Mom and Dad live, you might need to move to get that critical first job.

Put some serious thought into where you go when you do go. The place you choose to start your career is key to your economic future. Jobs no longer last forever. In fact, the average twenty-something switches jobs every year. Places can provide the vibrant, thick labor market that can get you that next job and the one after that and be your hedge against layoffs during this economic downturn.

Early career moves are the most important of all, according to my Atlantic colleague Don Peck.Writing in the National Journal, he cited a prominent study that finds that “about two-thirds of all lifetime income growth occurs in the first 10 years of a career, when people can switch jobs easily, bidding up their earnings.” Sure you can move from place to place every time you switch employers (and in fact people in their twenties are three- to four-times more likely to move than people in their fifties) but it’s a lot easier to manage a forward-looking career if you choose the best place right out of the gate.

So where to go?

To help you choose, my Martin Prosperity Institute colleague Charlotta Mellander and I ranked 223 U.S. metropolitan areas according to factors that indicated how active and high-quality their job markets are. We added variables for the share of young adults and college graduates, to capture places that are open to smart twenty-somethings, where you can not only build friendships and look for mates but create the personal professional networks which are so crucial to both careers and happiness. We included a variable for rental housing, since you’ll need to be flexible at first and mortgages are hard to get. After much back and forth, we decided not to include an affordability variable, because we thought the key was to get that critical first job and launch your career—even if you have to double or triple up with roommates. The seven variables we based our rankings on are:

1.      Unemployment rate

2.      Share of the workforce in professional, technical, management or creative positions

3.      Earnings potential (median earnings of BA holders)

4.      The share of young people (ages 25-34) in the population

5.      Share of the population with a BA or above

6.      Mating opportunities (share of population that has never been married)

7.      Rental housing

In years past, ours and other rankings have taken amenities like nightlife and parks into account. Given the truly frightening state of the economy, we decided to focus this year’s rankings mainly on the job market and economic conditions.. We pulled the data from the latest edition of the American Community Survey.

Greater Washington DC comes in first this time around, with a job market that includes everything from government and Fortune 500 companies, to think tanks, start-ups, and NGOs.  It’s a great place for smart, civically minded new grads who might want to test out a wide variety of career options. Greater New York only comes in fifth, which might sound surprising since it’s such a mecca for grads in a wide variety of careers from banking and management to media and entertainment and creative fields from digital media to indie music. But most of them end up living in Manhattan, Brooklyn, or near-by Hoboken and our stats cover the whole metro. Seventh-ranking San Jose is in the heart of Silicon Valley—the place for techies (though Austin, San Francisco, Boston, and Durham-Raleigh’s Research triangle have lots of tech jobs too). Smaller college towns like Madison, Boulder, Iowa City to name a few – also do well. College towns like these have highly-skilled, resilient economies that have been among the best at weathering the economic crisis. They are great hold-over place for grads thinking about their next move, whether it’s the job market or onto grad school.  Our slide show features twenty five metros in all—and there are a lot more college towns and tech capitals in the mix.

Happy hunting—and have some fun while you’re doing it. Finding a job with a future is a real challenge in this economy, but any adventure worth going on has its hardships, and few quests are as exciting (or rewarding) as the pursuit of the right job—and the best place to live. Good luck.

Have a gander at this mind-boggling chart put together by Mike Mandel.

It shows the share of real growth of private fixed assets – stuff like machinery, factories, technological equipment, and, yep, housing. Or, as Mandel puts it: “All the privately owned productive assets of the country – for the decade spanning 1999 to 2009.”

That decade, Mandel points out, saw the slowest growth of any decade of the post-war period. What’s worse, more than half of it was made up of housing. Technology broadly accounted for just 14 percent of the increase. ”[T]he net real increase in housing fixed assets was more than triple the net real increase in IT fixed assets,” Mandel concludes. “That may help explain why we are in such dire straits now — plenty of new homes, not enough investment in IT.”

And that is why we need to Reset the economy away from housing – which played its role in driving the old industrial economy – and toward new technology, knowledge, skills accumulation, and broad human capital development required to drive the emerging creative economy.

Forget the stimulus: This is broad structural adjustment that begs for Washington’s attention.

Here’s some video from my CNBC StreetSigns appearance with Robert Shiller.

Check out my new piece in The New Republic:

Speaking at a health care reform rally in Raleigh, North Carolina, in July 2009, President Obama declared that the worst of the recession was over. “We have stopped the free-fall. The market is up and the financial system is no longer on the verge of collapse,” he said proudly.

A year or so later, with midterm elections looming and an electorate that is as fearful and angry as any in memory, the stock market has risen, but even a breath of bad news can send it tumbling. As dismal as housing prices continue to be, they have yet to hit bottom in some places. Unemployment remains frozen at an overall level of nine-plus percent, and job creation has been anemic. If the crisis belonged to George W. Bush, the recovery has been Obama’s—and it has been a fragile and tentative one at best. Along with billions of dollars in stimulus payments, the president has spent down most of his political capital. So what is his next step?

Read the full article here.

Last week, I posted on a Bureau of Labor Statistics (BLS) report on the metro regions with the highest-paying jobs in nine major occupations. But this report only listed the top two regions in each category. So I decided to take a closer look at the underlying BLS data to compile a more comprehensive mapping of regional pay. With the help of my colleague, Charlotta Mellander, we looked at the pay levels for three types of jobs – high-skill, high-pay, creative class jobs; traditional, blue-collar, working class jobs; and lower-skill, lower-pay service jobs.

The first map (above) shows the distribution of pay levels across all U.S. metro regions. The highest-paying metro pays more than double the lowest-paying one ($66,780 vs. $30,670). In fact, there are roughly two dozen metros which have half the pay level of the highest-paying region. That highest-paying region is San Jose ($66,780), followed by nearby San Francisco ($61,940). Greater Washington, D.C. is third ($60,090), followed by Greater Boston ($58,330), the Boston suburb of Framingham ($57,660), Bridgeport-Stamford, Connecticut ($57,340), Bethesda, Maryland, a suburb of D.C. ($56,900), Greater New York ($56,250), Trenton-Ewing, New Jersey ($55,590), and Oakland, California ($54,590). Lowell, Massachusetts ($54,110), Boulder ($53,640), Seattle ($53,240), Newark-Union, New Jersey ($52,760), Hartford, Connecticut ($51,520), Durham, North Carolina ($50,480), Edison, New Jersey ($50,350), Nassau-Suffolk, New York ($50,190), and  Anchorage, Alaska ($49,730) are all among the top-20 highest-paying U.S. metros.

The second map (above) shows the  geography of pay for creative class jobs – that is, jobs in science, technology, and engineering; business, management, and law; health care and education; and arts, culture, design, media, and entertainment. The highest-paying region in the United States is San Jose (Silicon Valley), where the average creative class wage is $101,575. Greater San Francisco is next with an average wage of $95,472, followed by Greater New York ($90,101), Greater Washington, D.C. ($89,712), Bridgeport-Stamford ($87,747), Greater Boston ($86,681), Bethesda, Maryland ($86,485), Framingham, Massachusetts ($85,344), Napa, California ($84,959), and Oakland, California ($84,069). Four of the top 10 metros are in and around the Bay Area; two of the top 10 are in Greater Washington, D.C., and another two are in Greater Boston.

The third map (above) shows distribution of pay for service jobs. These are lower-skill jobs in occupations like home health care aid, personal care aid, food preparation, retail sales, and office and clerical work. Even at the top end of the scale, they pay less than half of knowledge, professional, and creative work.

Interestingly, many of the same regions make this list. The metro with the highest-paying service jobs is Bridgeport-Stamford ($40,935), San Francisco is third ($39,822), San Jose, fourth ($39,469), Greater New York, fifth ($38,514), Greater Boston, sixth ($38,409), Framingham, seventh ($37,289), and Oakland, ninth ($37,149). Hanford, California ($40,594), Trenton, New Jersey ($37,169), and Seattle ($36,393) round out the top 10.

The fourth map shows the geography of pay for blue-collar work in manufacturing, construction, and transportation and moving occupations.  Two Alaska metros top the list – Fairbanks ($52,247) and Anchorage ($50,785). But, here again, we find some of the same metros – San Francisco in third place ($47,757), Oakland, California in fifth ($45,087), Seattle, sixth ($44,765), Greater New York, eighth ($44,583), and Greater Boston, tenth ($44,031). Bremerton, Washington ($46,762), Honolulu ($44,706), and Nassau-Suffolk, New York ($44,214) round out the top 10.

The geography of high-paying jobs is strikingly uniform. The highest-paying regions are bi-coastal – dominated by metros in the Bay Area and the Bos-Wash corridor. And the pattern holds not just for the highest-paying metros but for all U.S. metros. Pay levels for the three major occupational groups are closely correlated across the U.S. regions. Creative class pay is closely correlated with both service class pay (.86) and working class pay (.67); and service class and working class pay are also closely correlated (.74). This likely reflects regional differences in housing prices and other living costs as well as other structural characteristics of these regions such as human capital, demographic characteristics, and overall productivity. That said, it’s important for policymakers as well as for analysts to take into account the systematic geographic differences in pay across U.S. regions. But the striking fact is that a small number of U.S. regions pay considerably more than others for virtually every type of work.

A new study (PDF) from the Bureau of Labor Statistics provides important insight on states where workers toil the longest hours and make the most money. The study by Dante DeAntonio uses data from the Current Employment Statistics – a monthly survey of more than 400,000 U.S. business establishments – to provide estimates for employment, hours, and earnings for all 50 U.S. states. Catherine Rampell summarized some key findings of the study earlier this week over at Economix.

Take a look at the map of the hardest-working states in terms of hours worked. Nevada tops the list with an average of 37 hours per week. Wyoming, Louisiana, Texas, Kentucky, and Alabama all average more than 36 hours per week. At the opposite end of the spectrum are Montana, the Dakotas, Hawaii, and New Hampshire which average less than 33 hours per week.

Now look at the map of the highest-earning states in terms of average hourly earnings. The top earner is D.C. followed by Connecticut, Massachusetts, New York, New Jersey, Washington, Alaska, California, and Maryland. The lowest-earning states are South Dakota, Mississippi, Arkansas, Oklahoma, and West Virginia.

What’s most striking is there’s virtually no overlap at all between the two maps.

So, I decided to take a closer look at some key economic and demographic factors that might be behind the variation in state earnings and working hours. With the help of Charlotta Mellander, we ran a series of scatter-graphs and performed a simple correlation analysis. I remind readers of the usual qualifiers: Our analysis is based on correlations which point only to associations between variables and do not identify causality. Still, some patterns are striking.

First and foremost, we find a total lack of  correlation between hours worked and earnings across the 50 states – there was no statistical significance at all for the correlation between these two variables.

Second, we find that when it comes to state earning power, working smarter trumps working harder across the board.

The connection between human capital and economic development has been theorized and documented empirically by economists like Gary Becker, Robert Barro, Robert Lucas, Edward Glaeser, and many others. Human capital (that is, the percentage of a state’s workforce with a bachelor’s degree and above) is closely associated with earnings – the correlation being .65. We ran a scatter-plot for these two variables. Connecticut, Massachusetts, New York, Washington, and New Jersey all stand way above the line, while Mississippi, Montana, and the Dakotas fall far below it.

Earnings are also closely associated with the kinds of work that states specialize in. The correlation between creative class jobs and hourly earnings is .79. The line on the scatter-graph runs quite steeply upward. Clearly, the transition to smarter, more knowledge-based state economies has a big effect on earnings levels.

On the other hand, state earnings are negatively correlated with blue-collar, working-class jobs (-.67). The slope of the line is steeply negative. Interestingly enough, industrial states like Michigan, Illinois, Ohio, and Indiana all stand above the line. Below the line are states like Mississippi, South Dakota, Oklahoma, Idaho, and West Virginia.

Some believe that immigrants pose an economic burden on states – that they drive wages down and consume high levels of public services. Our analysis suggests this view is wrong. We find that state earnings are  positively associated with the percentage of immigrants (.64). There appears to be a geographic component to this. Northeastern states – Connecticut, Massachusetts, New York, and New Jersey – all stand above the line, while California, Texas, Nevada, Arizona, and Florida stand below it. This may also reflect the industrial and employment structures of these state economies.

Earnings were also higher in states with higher concentrations of gay people (.55). Some might say that higher earning states attract more immigrants or gays. But my own view is that openness affects wages by enabling states to better compete for more highly educated and highly skilled workers across demographic, ethnic, and racial categories.

Smarter states also work less. Working hours are negatively associated with state human capital levels (a correlation of -.59) and also with creative class work (a correlation of -.33). Working hours are, however, positively associated with blue-collar, working-class jobs (.4).

How do work effort and earnings affect the happiness and well-being of states? Interestingly enough, it appears that hours worked play a bigger role. The correlation between state well-being and earnings is less than .3 (.29), while the association between it and hours worked is more than .4 and negative (-.45).

Our analysis reinforces a simple fact that working smarter, and not working harder, is what brings higher earnings to states. In contrast to the view, held by some, that immigrants drag down wages, states with higher levels of immigrants have higher earnings. So do states with higher levels of gays and lesbians. It’s hard to say exactly what’s causing what here – if immigrants or gay people are attracted to richer states that offer more opportunity and higher wages, or if they are part of an economic system that generates higher earnings. My own view is that more open and tolerant states are better able to compete for a wider range of talented and skilled workers across the board. And, smarter states not only generate higher earnings, they afford a greater level of happiness and well-being to their residents.

It’s time to get over the notion that simply working harder brings wealth and economic development. The structure and composition of jobs matter greatly. At a time when job creation is at the top of the agenda, this is something policy-makers need to factor into their thinking about exactly what kinds of jobs we wish to create.

As one looks around the economic landscape I am struck by the devastation. One number stands out above all others. One in five males between the ages of 25 and 55 is out of work! That is a staggering number. The numbers are not going back to anything “normal” anytime soon according to the IMF. Financial crises followed by recessions do not return to normal levels of employment for over a decade. Why you might ask? The answer I guess is that the levels of debt need to be worked down. Everyone owes everyone money and none pay anyone. Second, the recession destroys real capital. In this situation it was housing. It will take years to work off the excesses of the housing crisis.

So what does entrepreneurship have to do with the recession? If we take what we know today, entrepreneurs and innovation play a vital role in the economy. But can they help us in the great recession? In other words, what policy should we be pursuing to move the unemployment rate below 10 percent and back into the neighborhood of 5 percent? We know that new firms are important. They create most of the net jobs.  However, only a small percent, perhaps 4 percent, create almost all of the jobs in any given four-year period. And this seems to hold up in different times, different countries, and different industries.

So how do we forge a policy? Two stories are told out there. First we know that age and size are important variables. And we know that age appears to be more important than size. In other words, we should target firms based on age not size. The two stories out there are one by Zoltan Acs and the other by Carl Schramm. In a highly influential study, Acs found that the average high impact firm was about 20 years old and came in all sizes, small, medium, and large. Schramm, on the other hand, using a Census Bureau study, found that firms less than five years old created almost all of the jobs independent of size.  They both cannot be right.

However, if we are interested in short-term policy solutions and not real economic growth, we should help stimulate solo self-employed. They have a start-up rate that is three times as large as firms with employees. They start easily but also go out of business quickly. So an effective policy would be to make it easier for them to stay in business longer.

A simple policy would be to cut the self-employment tax, not over 15 percent of all new solo self-employed firms to zero for three years. If they hired any employees we should cut the employer share 7.5 percent for three years also. This would greatly increase the survival rate for these new firms. Of course this is not a long-term solution because many of these firm will contribute very little to productivity, economies of scale, or wealth creation. But they will pull down the unemployment rate.

The impact on the deficit would not be great since many of these people would not have survived to pay payroll taxes anyway. Once the economy picks up the issue of long-run growth can be addressed. But in the short run, let’s get people working.

Despite the recent The Economist magazine proclamation of pending equality in the workplace, evidence suggests that the situation is more complex.

Commentators on my recent post here at Creative Class raised several good points:

Alan Says:  Start celebrating when women earn 50% of total salaries – I expect the champagne will remain on ice for a long time/ probably forever.  Sorry of this seems pessimistic.

Jana Says:   There’s a big difference between women being 50% of the workforce and women being equally represented in the workforce. My guess is that the majority of the women in the study are in lower level positions than the men. An example being that in one company I worked for was that the majority of the accounting department was female, but these were people inputting invoices, doing reconciliations and payroll. The counterpart was that the head of the department was male.

Without a better look at the statistics I’m not sure if this is something to celebrate.

The folks at Economix blog also weighed in:

Furthermore, the Current Population Survey data show that women are more than twice as likely as men to work part time (24.6 percent in 2008 compared with 11.1 percent in 2008). A measure of equal participation in paid employment should take that difference in hours into account.

The Economist notes that women remain underrepresented in management positions but registers considerable optimism concerning current trends.

By contrast, recent research by the sociologists Philip Cohen, Matt Huffman and Stefanie Knauer showed that women’s entry into management positions in the United States slowed significantly in the 1990s.

The consensus seems to be that The Economist jumped the gun in declaring a female victory.

In light of this discussion, it’s worth re-examining and considering Penelope Trunk’s long-held belief that women — along with younger generations invading the workforce — have changed the entire workplace game. I agree with Trunk that for many women and men, the new career (or should I say life) goal isn’t to maximize salary but instead to maximize life experiences, including those of raising children, spending time with friends and family, and generally enjoying the rich offerings life gives.

From a 2005  Penelope Trunk blog post:

Forget the glass ceiling because it’s about to become irrelevant. Not because women are finally going to get to the top of Fortune 500 companies in forces of more than two companies at a time. That may happen, but no one’s holding their breath. The glass ceiling is going to become irrelevant because the women who are coming into the workforce now see what’s above that glass and they are uninterested.

…. five years after earning an MBA, 40% of women are working from home. Often the press writes about this statistic like it’s a travesty, but I think it’s great. It’s an achievement that these women have decided they can find success on their own terms instead of having to fit themselves through paths that were established for men, decades ago.

The disenchantment with corporate life is not limited to women: eighty percent of men aged 20 to 39 said that a flexible job to accommodate kids takes a higher priority than doing challenging work or earning a high salary.

Many women with children — and increasingly their male partners as well — will gladly forgo career advancement, and the higher salaries that go along with it, in return for a more flexible job that allows for a better and more fulfilling family life.

Moreover, many organizations have much less hierarchical structures today. This suits the many women and men who value life experiences over corporate ladder-climbing. Working on interesting projects and with great people is a life experience they treasure — climbing a corporate ladder increasingly is not.

Your thoughts?

From The Economist, December 30, 2009:

The rich world’s quiet revolution: women are gradually taking over the workplace

At a time when the world is short of causes for celebration, here is a candidate: within the next few months women will cross the 50 percent threshold and become the majority of the American workforce. Women already make up the majority of university graduates in the OECD countries and the majority of professional workers in several rich countries, including the United States. Women run many of the world’s great companies, from PepsiCo in America to Areva in France.

Women’s economic empowerment is arguably the biggest social change of our times.

From another article in the same issue:

The rich world has seen a growing demand for women’s labor. When brute strength mattered more than brains, men had an inherent advantage. Now that brainpower has triumphed the two sexes are more evenly matched. The feminization of the workforce has been driven by the relentless rise of the service sector (where women can compete as well as men) and the equally relentless decline of manufacturing (where they could not). The landmark book in the rise of feminism was arguably not Ms Friedan’s “The Feminine Mystique” but Daniel Bell’s “The Coming of Post-Industrial Society”.

Or perhaps Rise of the Creative Class is a landmark book for demonstrating why women have increasingly found a fit in the wage-earning world.

Your thoughts?

(Thanks to colleague MW for drawing my attention to the article.)