The Geography of U.S. Productivity

The difficulty in studying localities and comparing them with the national picture is largely because of the lack of comparable data. At the Labor Department, productivity is measured by comparing labor input (hours worked) to a sector’s output (in dollars). At the regional scale, Parilla and Muro use metro-level output from Moody’s Analytics and employment data from the Bureau of Labor Statistics to estimate local productivity. In doing so, they observe massive variations across the U.S. economy, from an average of $299,000 per worker a year in Midland, Texas to $38,000 per worker in Jacksonville, North Carolina.

According to their research, the largest U.S. cities tend to be the most productive areas, along with areas in the energy belt that specialize in oil, gas, and mining. The low end of the productivity spectrum consisted of smaller cities in the southern and southwestern U.S. These findings aren’t that surprising given that cities and boom towns tend to be more productive.

From: The Geography of U.S. Productivity – The Atlantic

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One thought on “The Geography of U.S. Productivity

  1. First of all, of course, the metric of productivity used in the study is rather obviously not the only way that productivity could be measured. Productivity is a ratio of outputs to inputs. Given that they made the choice of using labor-hours-to-revenue, it seems unsurprising that Silicon Valley would be the most productive region in the nation.

    For instance, what if the input portion of that ratio were not hours of work, but wages? Or if the inputs were not merely hours of work, but also included raw materials? Overhead, pro-rated physical plant maintenance, and various forms of insurance seem to have been totally disregarded, but are these things not also needed to create products to sell? Given that the result was “Silicon Valley is the most productive region,” maybe we ought to include as an input the cost of licensing rights for supporting IP in the case of IP-heavy products, including but not limited to legal expenses seemingly inevitably associated with IP products underlying the outputs?

    Or if the output portion of the ratio were not revenues but profits? Or, if the observe is more politically concerned with overall employment rates rather than income levels, mightn’t output be measured by head count? Or if we do care about how much money people make instead of how many people have jobs at all, does median employee income count as an output?

    Granted, alternative metrics may still point to Silicon Valley as the most productive region. I’m just saying, labor-hours-to-revenue is not the only way we might measure productivity.

    And secondly, let me call out the conclusory paragraph of TFA, in which the authors of the productivity study

    …suggest policies that help with the high cost of housing in these productive regions, to remove the barrier of entry for workers to move to these highly productive cities. But more important is boosting productivity in regions that have been suffering. How to do that, though, is a much more complex question.

    A worthy thought by the author — maybe we neither can, nor want to, make the entire country be exactly like San Jose, nor can we move everybody who wants a job there, nor can we relocate every employer who wants to increase productivity there.

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