Creative Class

Earlier this week, I discussed the new Gallup-Healthways Well-Being Index of happy cities. Today, with the help of my Martin Prosperity Institute colleague Charlotta Mellander, we take a look at some of the social, demographic, and economic factors that are associated with the happiness and well-being of cities.

There has been considerable debate on the factors that are associated with happiness and well-being at the national level. The well-known Easterlin Paradox suggested that happiness tends to level off after a certain income threshold. Psychologists, notably Edward Diener, have argued that factors such as health, challenging work, and close social relationships, among others, play a considerable role in happiness. Some have even made the case for instituting a new measure of gross national happiness to supplement conventional metrics like gross national product.

Recent studies by Princeton University’s Angus Deaton and Justin Wolfers and Betsy Stevenson of the University of Pennsylvania’s Wharton School question the Easterlin Paradox and indicate a closer link between happiness and income across nations. Carol Graham raises the enigma of the “happy peasant and the miserable millionaire” as a way to resolve this apparent paradox. Graham suggests that happiness is relative to one’s position in society. Take unemployment for example. Unemployment is crushing for previously employed people in places where gainful employment is the norm. But people in poor countries where unemployment is more the norm find other ways to be happy.

The Gallup-Healthways is the first comprehensive data set we know of that tracks happiness and well-being at the metropolitan level, providing data from a large-scale survey of individuals across 185 metro regions. We look at the associations between the Gallup-Healthways Metro happiness index and key social, demographic, and economic factors. Data-matching reduces the size of our sample to 170 metros – roughly half of all U.S. regions. As usual, we point out that our analysis points only to associations between variables. It does not specify causation or the causal direction of those associations which are questions for future research. Still, the results are interesting across several dimensions.

Income, Wages, and Output: So what is the relationship between metro-level happiness and income, wages, and output? The correlation analysis suggests a moderate relation between wages (.45), income (.4), and economic output per capita. The scatter-graphs below show the relationships are reasonably linear, though there is a better fit for wages and income than for output per capita.

Unemployment: Conventional wisdom and academic studies suggest that a rising unemployment rate would take a big toll on happiness. We find a moderate effect across U.S. metros. The correlation between happiness and the unemployment rate is -.34 and between it and the year-over-year (December 2008 to December 2009) change in unemployment is -.3.

Post-Industrial Economic Structures: In ongoing research, we have been testing the notion that happiness and well-being may be more associated with key features of so-called post-industrial economic structures – namely the shift from physically oriented work to knowledge, professional, and creative occupations and industries – and from lower-skilled to more highly skilled and educated workforces. A large body of research has found a close association between human capital (measured as share of the population with a B.A. and above) and economic development across nations as well as regions; other research has found that human capital levels are becoming more divergent across regions over time. To get at this, we looked at the associations between happiness and human capital, as well as between it and creative-knowledge-professional occupations and blue-collar working class occupations.

Human Capital: Happiness at the city or metro-level is more closely associated with human capital with a correlation of .68 – the strongest correlation of any of the variables we looked at. The scatter-graph below shows a fairly linear relationship.

Creative Class: Happiness is also associated with the creative class, a correlation of .45. The scatter-graph below shows a fairly linear relationship.

High-Tech: Happiness is also associated with locations that have higher concentrations of high-tech industries. We find a correlation of .41 between it and the Milken Institute’s Tech-Pole measure.

Working Class: On the other hand, metro-level happiness is negatively associated with the working class, -.34, a finding which is similar to that for states.

Silicon Valley is America’s happiest big metro-region and Washington, D.C. is second, according to a new survey of America’s 52 largest metro regions by the Gallup-Healthways Well-Being Index.

The Gallup-Healthways data breaks down well-being into six main categories. Greater D.C. leads in life evaluation. The Twin Cities of Minneapolis-St. Paul lead in two categories – emotional health and basic access. Silicon Valley takes first place in two categories as well – physical health and healthy behavior.

That said, Boulder tops the list of small- and medium-size city-regions – and posts the highest happiness index score of any metro. Holland, Michigan; Honolulu, Hawaii; Provo, Utah; and Santa Rosa and Santa Barbara, California also post higher scores than any of the larger regions.

The most unhappy metros are mainly housing-dependent Sunbelt cities of sand and Rustbelt locations that have been hard-hit by the Great Reset. Las Vegas has the dubious distinction of being America’s unhappiest large metro.

The Winter Olympics’ host city of Vancouver tops the new list of the world’s most “liveable” cities by the Economist Intelligence Unit.  Toronto comes in fourth. Canadian and Australian cities do well. Not a single U.S. city makes the top 10. More here.

This week, Forbes and Joel Kotkin released a  list of the “world’s smartest cities.”

“In today’s parlance a “smart” city often refers to a place with a “green” sustainable agenda. Yet this narrow definition of intelligence ignores many other factors–notably upward mobility and economic progress–that have characterized successful cities in the past.

The green-only litmus test dictates cities should emulate either places with less-than-dynamic economies, like Portland, Ore., or Honolulu, or one of the rather homogeneous and staid Scandinavian capitals. In contrast, I have determined my “smartest” cities not only by looking at infrastructure and livability, but also economic fundamentals.”

The list included:

1. Singapore
2. Hong Kong
3. Curitiba, Brazil
4. Monterrey, Mexico
5. Amsterdam
6. Seattle, Washington
7. Houston, Texas
8. Charleston, South Carolina
9. Huntsville, Alabama
10. Calgary, Alberta

Are these really the “smartest cities?“

Last week the Global Entrepreneurship Research Association (GERA) had its annual meeting in Santiago, Chile and launched the 2010 Global Entrepreneurship Monitor (GEM) executive report. The annual meeting was held in a developing country for the first time. The meeting is a mixture of media events, planning meetings, and strategic decision-making. In addition, social events make this a welcome activity.

The 2010 GEM executive report, in addition to reporting on the state of entrepreneurship in the world, had sections on the economic crisis and social entrepreneurship. The main finding was that entrepreneurial activity had declined in the developed countries but not in the developing countries. In other words, do not look to Europe to lead the world in the future. As a founder of the Hungarian team, the so-called transition countries are not going to lead either. The labor force of Europe is in decline and, therefore, Europe and Japan are in no position to provide entrepreneurial leadership in the future as they age.

By the year 2050, most of the labor force in Europe will be aging and the under 40 labor force will be in the developing world according to my colleague Jack Goldstone at George Mason University. In other words, the creative, innovative and entrepreneurial talent will be in Brazil, Chile, India, China, and Indonesia. The developing world will have to provide the economic leadership for the market. While the world will be flat, hot, and crowded, the creative talent will also be in these places. GERA is uniquely positioned to measure and track the progress that the world is making in shifting the creative epicenter from Europe to Asia and South America.

This seminal meeting of the GERA represents the first step of the association in this transition. After spending the first 10 years of this decade trying to figure out if Denmark is more entrepreneurial than the United States, we are now shifting to measuring the entrepreneurial progress of the developing countries. As Richard Florida said to me a few years ago, the young are the same all over the world. If that is the case they will surely be the leaders in the future.

I was talking to a 60-year-old, retired entrepreneur at a party the other night. Successful guy, very sharp. I asked him what he thinks is next for Florida and he said he did not have much hope for Florida, mostly due to lack of visionary leadership. Then he said something that really struck me. He suggested that Florida is on a course to reset to its old state of being “cheap, sunny, and dumb.”

That really struck me because while we are all talking about the great reset that is going on, I had not thought to ask the question, “What does Florida reset to?” And he may very well be right. At the state level, we are relaxing the rules for developers  to encourage even more sprawl to try to kick-start our construction industry again. We are actually lowering impact fees in places. We are lowering protections on the environment. This seems like a reset towards “cheap, sunny, and dumb.” There are powerful forces and attitudes that could very well push Florida back into this reset mode. And that is pretty scary.

While we all generally agree that this reset is needed and welcomed in some cases, we should be careful that we don’t reset back to a point so far back that we actually lose too much of our hard won progress. We all have to ask ourselves and our leadership what the plan and vision is for this reset. Each community is facing this and we act as if the reset is just something that will happen. That is not the case, yet I hear far too little  debate as to how we actively shape the reset.

I recently had the opportunity to visit Milwaukee, WI, for the first time (thank you FUEL Milwaukee!). And visiting cities for the first time, to me, is particularly exciting. Arriving for the first time is a pure and unadulterated experience. First impressions matter and how a city presents itself to a first-time visitor is very important. I learned this from my friend Charles Landry.

Milwaukee Art Museum

I arrived via the airport with the typical location outside of city. My host takes the highway toward the city. As we approach the Hoan Bridge, we pass amid the Port of Milwaukee. On both sides, there are mountains of bulk materials and cranes. While not beautiful, there is the appearance of activity and a muscularity that says “we work here.” As we crest the bridge (with its own very strange design element) I am startled because the city presents itself there in panorama. The city in the hills to the left, the waters of Lake Michigan to the right. And to the right, near the lake, your eye is drawn to the white sails of the Santiago Calatrava masterpiece at the Milwaukee Art Museum.  It looks so different and unexpected in the tableau that one cannot help but to stare. Unexpected because this is the Midwest where modern iconic design is not the norm and that is not a shot; I am originally  from the Midwest!  More photos click here.

While many question the value of “starchitects” and iconic design, I have to say that my impression of Milwaukee was and is shaped in no small part because of that building. It is different and it says something about Milwaukee that no amount of advertising and marketing could equal. It says in a profound way “we are not what you expect” and that Milwaukee is looking to the future and beyond the beer brewery image of its past. The building says it in a visible and demonstrable way that one cannot deny.

Cities that are arguing over the cost/benefits of such iconic architecture should consider the context in which the new building will occur. In starchitect-rich Singapore, one more Calatrava or Libeskind is just keeping up with the crowd. In cities with a dearth of quality architecture (lots of those) or cities that need to redefine themselves in the 21st century, a new building can be a catalyst for new design and a whole host of other values.

About 14 months into the downturn in Canada, about 20 months in the U.S.A., and I’ve been examining how the recession has affected workplaces and what some longer-term implications may be. Today, I offer a Canadian perspective. I invite you to add your own. Next week I’ll try to create an American list, or compare and contrast the recessionary experience in the two countries.

Four ways the recession may have changed creative class workplaces in Canada

1. The rapid spiral from booming economy to downturn in the fall of 2008 both forced and allowed many companies to re-focus, fast. Many quickly removed employees not seen as having a long-term future with the firm; they also sharpened scrutiny on various business lines or projects, canceling those not deemed likely to be profitable in the short term. In Canada, economists now say the job shedding happened much faster than in past recessions.
2. For some employees, the “golden hand cuffs” came off and they have had an opportunity to move. For staff with bonuses tied to the profits of particular projects or the company generally, a down year can mean you’re not leaving as much money on the table if you quit. The significant increase in self-employed workers is likely a consequence of this. People are going out on their own.
3. The government “may” start to recognize that North American economic future is in knowledge-work, high technology, more than old-style industrial manufacturing. In Toronto there are now more jobs in the Finance Insurance Real Estate sector (FIRE) than manufacturing (324,000 vs 316,000), and by early 2010 there will likely be more in Professional Scientific & Technical Services as well (at 315,000 now).  Already, the financial services industry in Toronto has created an alliance to educate and lobby the government to provide a further boost to this successful sector.
4. As in the U.S., women’s jobs have tended to be less affected by the recession, which hit manufacturing and resource industries harder than service and knowledge work. This may be the start of a big shift in how families with children live and work as well.

What else?

Here’s the abstract for a new paper on said with Charlotta Mellander and Kevin Stolarick.

Economists have argued that individuals choose locations that maximize their economic position and broad utility. Sociologists have found that social networks and social interactions shape our satisfaction with our communities. Research, across various social science fields, finds that beauty has a significant effect on various economic and social outcomes. Our research uses a large survey sample of individuals across US locations to examine the effects of beauty and aesthetics on community satisfaction. We test for these effects in light of other community-level factors such as economic security and employment opportunities; the supply of public goods; the ability for social exchange, that is to meet people and make friends; artistic and cultural opportunities, and outdoor recreation; as well as individual demographic characteristics such as gender, age, presence of children, length of residence, income and education levels, and housing values. The findings confirm that perceived beauty or aesthetic character of a location has a positive and significant effect on perceived community satisfaction. It is one of the most significant factors alongside economic security, good schools, and the perceived capacity for social interaction. We also find community-level factors to be significantly more important than individual demographic characteristics in explaining community satisfaction.

The full paper is over at the MPI site, here.

Kevin Stolarick and our MPI team map Toronto’s personalities featured in this article from the Toronto Star. The patterns could not be more striking.

Thoughts, anyone?