the urban prospector

Searching for Golden Opportunities in America's Cities

Job Creation the Solution to Gentrification?

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The current reinvestment in Newark raises the specter of gentrification.  As seen in my last post, stores in downtown newark are changing. Furthermore, new development, including affordable housing units, are unaffordable to a large section of the Newark population. As has been seen in cities like New York and San Francisco, this is not an easy problem to solve. There are many potential strategies and perhaps a combination of strategies will prevent Newarkers from being priced out of the city.

While many solutions focus on housing policy, an article by  Ruben Duarte at Plantetizen proposes another strategy; increasing incomes. Duarte states, “Raising the minimum wage, increasing pay overall for most workers (pay in general for workers has not kept with inflation, let alone grown), ensuring equal pay for women, providing an adequate funding for assistance programs, and many other programs that directly address how much money individuals and families bring in will do far more to mitigate the negative effects of gentrification than any onerous development requirement or price control ever will.”

I think that in many ways this is a good strategy, however there is one major problem. The low wages in our country reflect a low demand for labor. Although I support higher wages, an artificial raising of wages is not going to produce the necessary results. Instead, we must address why labor demand is low.

Auto assembly line of yesterday and today Images:  libcom.org (left), john-steppling.com (right)

Auto assembly line of yesterday and today
Images: libcom.org (left), john-steppling.com (right)

Our economy is considered to have transitioned from an industrial economy into a service economy. Much of this is the result of increased technology. Communications technology has allowed businesses to spread work over a larger geographic area while other technology has allowed for the automation of thousands of jobs. In 1964 Isaac Asimov made some predictions for the year 2014, including, “The world of A.D. 2014 will have few routine jobs that cannot be done better by some machine than by any human being. Mankind will therefore have become largely a race of machine tenders.” This idea was also explored in Kurt Vonnegut’s “The Player Piano.” Over the past 50-60 years since these predictions were made, things have only gotten worse in terms of jobs. Average hourly wages peaked in the 1970’s and have yet to return to their high. While there could be many causes of this wage loss, it does very closely correlate to the closure of factories across the country.

As factories jobs were lost, whether due to outsourcing or automation, these workers were forced to find new jobs. Given the challenges of retraining for jobs that are in demand, many of these workers ended up filling the expanding services sector. As the job losses mounted, more and more workers started competing for these new jobs, decimating any pressure for wage growth. Certainly places like Walmart could pay much higher wages, but without pressure either from organized labor or market changes, why would they? There is a reserve of labor ready and willing to take these jobs despite their low wages and poor working conditions. While using public or government force to increase wages may help some people, it does not address this reserve of labor. If this reserve of labor can be addressed, wages will naturally rise.

One way to create jobs (at least locally) is to bribe incentivize companies to relocate through tax credits and other offers. Tax incentives often have problems of their own and are not a real strategy for economic growth. Also, there is nothing to prevent the further automation of jobs. Instead of coaxing already existing businesses to relocate, we should be working to develop new products and businesses locally. As these products and businesses are developed and brought to market, the potential for automation and outsourcing is minimized.

Business incubators are becoming a popular way to encourage the creation of new businesses and development of new products. Having an organization that can provide support to bring an idea to market is essential to economic development and the creation of more incubators will go a long way to improving our economy. That said, incubators are helpful to develop already existing ideas or prototypes. There is another level of economic development that needs to occur to prime the pump for the incubator.

Makerspaces can work to develop prototypes that can then be used by incubators to develop full fledged businesses. Makerspaces come in different forms, but the essentially it is a place where people have access to tools and can make things. They can range from the fully commercial TechShop to the more grass roots NYC Resistor. While much of the use of these spaces is simply for hobbyist, the power of these places to develop new products is impressive. The Square, which is revolutionizing small business’ ability to accept credit cards was prototyped at TechShop and MakerBot, an affordable 3d printer, was developed by the founder of NYC Resistor. While not everything developed in a makerspace will be suitable for business development, the potential for new inventions and products is very high.

The benefits of makerspaces are not only limited to the potential to develop new products. Makerspaces are incredibly collaborative spaces. Much of the work of the new economy is completed in teams, so to be able to thrive in this economy, the ability to collaborate is essential. Developing a culture of collaboration will make an area more attractive to potential businesses. Finally, the creative process itself develops essential skills. Developing a product requires a certain amount of engineering and manufacturing skills. Furthermore, it requires design and problem solving skills which are highly transferable.

A great economic development strategy would be to have several maker spaces all connected to an incubator. Hobbyists could still have fun tinkering, but anyone who wanted to develop a prototype for commercial purposes would have that chance. These maker spaces could work in collaboration with local high schools and colleges, essentially acting as a shop class on steroids. Students could escape the boredom of study hall and actually use their math and science knowledge to make whatever they want. Paying attention in geometry would rank much higher on a students list of priorities when finishing their creation relied on getting the right answer. These students would also be developing a whole series of skills that would help them both in finding jobs and in pursuing higher levels of education. Some of them might even be able to skip employment and start their own businesses.

Ultimately, students would be better prepared for the modern economy, more products would be brought to the market, new businesses would be hiring, and there would be a labor force able to adapt and adjust products to new and changing conditions. This is economic growth that won’t quickly be automated. While it might not be enough to hire everyone working in the lower pay grades of the service economy, it might be enough to drive wages across the economy up. Furthermore, if done effectively, it could raise the wages of those suffering the most from gentrification, allowing neighborhoods to improve without simply switching out an old population for a new one.

 

 

 

 

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