Californias Central Valley

1
Californias Central Valley
Presented to San Joaquin Valley Forum Merced,
CA
Joel Kotkin
Senior Fellow, Regional and Demographic
Studies Milken Institute
2
Challenges to Valley Community Leadership Forces
Shaping the New Geography

• The development of new technology
• The increased importance of locational choice of
  key population groups and industries
• Changing role of cities, suburbs and countryside
• New age demographics

3
Population GrowthSelected California Regions,
1993-99
Click to edit Master title style

• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level

3
Source US Census Bureau
4
Central Valley Region
1990-2000
2000
Source US Census Bureau
5
San Joaquin Valley - Largest IndustriesIn Terms
of Employment, 2000
Source WEFA
6
San Joaquin Valley Job Growth1990-2000
Source WEFA
7
Employment GrowthSelected California Regions,
1993-99
Click to edit Master title style

• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level

7
Source WEFA
8
Best Performing IndustriesIndustries Greater
than 1,000 Employees, 1995-2000
Source WEFA
9
Per Capita Income GrowthSelected California
Regions, 1993-98
Click to edit Master title style

• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level

Source US Census Bureau
9
10
Unemployment RatesSan Joaquin Valley, 2000
Source WEFA
11
After the Techwreck and the Trade Center
Disasters.

• Why the information revolution still matters.

12
The New Economy Covers more than traditional
high tech

• ALL industries are transforming themselves
• into information industries
• Examples
• Fashion industry (design, marketing, media)
• Entertainment (Digital Effects, Synthespians)
• Warehousing (Just-in-time information systems)
• Financial Services (on-line brokerages,
  banking,insurance)
• Aerospace (electronic warfare)
• Healthcare (genetic engineering, information
  sharing, biomedicine)

13
High-Tech vs. Low-Tech GDPU.S. GDP Growth
Source Milken Institute
14
(No Transcript)
15
Spread of Products to a Quarterof the Population
Source Federal Reserve Bank of Dallas
16
Positive Internet Economy Trends, 2000
Source Milken Institute
17
Employment in IT Occupations1990-2000
Source Milken Institute
18
Annual Wages Per WorkerIT-Producing Industries
Source Milken Institute
19
High-Tech Growth remains critical to income
growth.
The evidence is dramatic.
20
High Tech Causes Divergence in IncomeIncome Per
Capita
Source Milken Institute
21
Milken Institute/Forbes Best PlacesTop 15 Small
Metros, 2000
22
Lessons of The New Geography
The real question for communities is what role
they can play in this new economy. Those that
find niches will thrive those that dont are
doomed to stagnate or decline.
23
The Net is supposed to let people work anywhere.
Why does location, location, location
matter more than ever?

24
Company Location Determinants
Source Bank of Boston
25
The growth of a region now depends onthe
decisions of individual entrepreneurs,
investors, creative workers to locate there.
To them the world is a vast smorgasbord in
which various locales compete for their
affections and attention.
26

• THE PERAMETERS CREATING ECONOMIC SUCCESSHAVE
  CHANGED
• Cheap is not enoughthere are lots of cheap
  places both inside and outside the USA
• Educational infrastructure is more critical as
  firms value workforce quality first
• Access to markets more important due to quick
  turnarounds (air,rail, roads key)
• Reputation of area increasingly critical to lure
  well-educated workers and managers to area.
  

27
Does the World Trade Disaster Change This
Picture?It will make it tougher for major first
tier cities in the future.

• I would no longer be pleased to
• be on the 100th Floor of the Sears
• Tower--- Matt Walton, disaster specialist,
  President e-team, consultant to New York City and
  DOT

28
Post-NomadismThe Search for Home and CommunityA
Potential Edge for Valley Communities?

• Baby boomers looking for meatloaf communities
• Americans return to fundamental values
• Dysfunctional schools leading urban dwellers and
  suburbanites to consider new alternatives
• Americans tired of moving around

29
Post-Nomadism Americans Looking to Stay PutIn
the 1970s over 20 of Americans moved every
yearsince then, it has declined
30
What Kind of Environments are best for
information sector companies?

• It depends on the industry, the people it
  employs and their motivations.

31
Information Technology Increasingly Comes in Two
Forms and Has Two Cultures

• Hard Technology
• Creating Bandwidth
• Science, Math and Engineering Base
• Enabling Software
• Predominately Suburban (Nerdistans)
• Soft Technology
• Filling the Pipeline
• Graphic Arts
• Media and Entertainment
• Predominately Urban (Boutique Cities)

32
Nerdistans

• Science-Based Communities
• Locations on the Periphery
• High-education Levels
• Planned EnvironmentsExamples
• Irvine, California
• Raleigh-Durham, North Carolina
• The Woodlands (Outside Houston, Texas)
• Plano/Richardson, Texas (Outside Dallas)

33
College GraduatesAssociates, Bachelors, Masters,
Ph.D.s
Source Doug Morrison, Pepperdine University
34
Most Generation XersAs a Percent of Total
Population, 2000
Source US Census Bureau
35
The Urban Core Becoming Boutique Cities

• Compact, Expensive
• High Appeal To Information Workers
• Attractive LocationsExamples
• San Francisco
• Manhattan
• Seattle
• West Los Angeles

36
Media MoneyBillions Spent on Major Media
Industries
Source Milken Institute
37
Socio\Demographics of Those Moving Into Out of
New York City
Source Louis Harris
38
Childless Women U.S.15-44 Years of Age, 1980-98
Click to edit Master title style

• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level

38
Source US Census Bureau
39
Households with No Kids U.S.Household Head
35-44 Years of Age, 1970-99
Click to edit Master title style

• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level

Source US Census Bureau
39
40
Whats Next?

• There is an opportunity --- particularly in the
  downturn --- for various kinds of other
  communities to get into the high-tech game.

41
Emerging Weaknesses in First Tier Tech and
Creative Industry areas

• The high tech revolution has left a hangover of
  high costs in areas such as the Manhattan, San
  Francisco, West LA, Seattle, Silicon Valley,
  Austin
• With growth, the perception -- and reality -- of
  quality of life has diminished in many leading
  creative and tech workers
• Rising gaps between affluent tech residents and
  working class could set stage for class, and to
  lesser extent, race, conflicts.

42
Rental Rates vs. Household IncomesSanta Clara
County
Source Joint Venture Silicon Valley
43
Metro Area House-Price Growth Outlook 1998-2008
Source Milken Institute
44
What is a Leap Frog Tech Pole?

• A high-tech area that is not adjacent to a
• major metropolitan area
• A region that leverages its physical and
  social infrastructure to attract skilled workers,
  entrepreneurs and investors.
• A smaller community that is wired for
• the digital revolution

45
Examples of Leap Frog Tech Poles

• Boise, Idaho
• Fargo, North Dakota
• Huntsville, Alabama
• San Luis Obispo, California
• Fairfield, Iowa
• Madison, Wisconsin

46
Valhallas The First Rural Success Stories

• Elite Communities of Wealth in Rural Areas
• Good Telecommunications/air Connections
• High-Income Migration
• Examples
• Jackson Hole, Wyoming
• Park City, Utah
• Santa Fe, New Mexico
• Boulder, Colorado
• Naples, Florida
• Aspen, Colorado

47
What are the implications of the New Geography
for rural communities and small towns

• The nature of this economy breaks the traditional
  links between affluent and working class
  communities
• The new emphasis on lifestyle and knowledge
  drives work and wealth to locations that appeal
  to the affluent, information worker
• Areas without amenities face major challenges
  recruiting knowledge workers, investors and
  entrepreneurs

48
How can these communities find niches in the New
Geography?

• Take advantage of problems of the leading tech
  regions and offer lower costs, better services,
  community support
• Address the shortfall in computer and internet
  skills among the local population
• Build strong tech infrastructure, preferably with
  private sector but if necessary with community
  resources as well.

49
Situations differ but there are basic rules for
communities that are best for emerging tech and
high end information companies.

• Ambitious areas need to appeal more to culturally
  diverse populations and people without children
• Look to develop a focus to community and sense
  of place
• Stress jobs/housing balance to reduce commutes
• Develop educational and arts institutions to
  improve workforce and lifestyle potential of
  local population
• Remember The New Economy is as much about
  sociology as economics and technology

50
Limiting Factors for Central Valley Communities

• Inability to retain/appeal to younger information
  workers
• Lack of digital switches, broadband, wiring
• and other high-tech infrastructure
• A tendency to want to sell communities
• based largely on low cost, rather than
  qualitative factors
• Lack of educated workforce

51
Telecommunications Infrastructure is a Must

• Companies may want to locate in neglected
  communities, but not at the expense of basic
  productivity
• More and more work will be done from home,
  meaning DSL and other broadband services must be
  available
• Infrastructure must be built, even if it
• takes municipal resources. Communities do not
  have to accept passively digital death
• (Manning Iowa,Grant County, Washington)

52
Rural DSL ServiceDSL Service by Towns Served and
Size
Source U.S. Census Bureau RBOC
53
Californias Digital DivideBy Region
Source Public Policy Institute of CA
54
Californias Digital DivideBy Income, Education,
and Age
Source Public Policy Institute of CA
55
Californias Digital DivideBy Race/Ethnicity,
Central Valley
Sample size too small to analyze these two
groups.
Source Public Policy Institute of CA
56
Projected School EnrollmentK-12, San Joaquin
Valley
Source CA Dept. of Education
57
High School Graduation RatesSan Joaquin Valley
vs. CA, 1995-2001
Source CA Dept. of Education
58
SAT PerformanceSan Joaquin Valley, 2000
Source CA Dept. of Education
59
Whats the Pitch to Corporate America?

• Valley offer strong cost advantages in
  increasingly competitive markets
• Communities with ample space are less likely to
  resist positive growth than affluent,
  increasingly NIMBY areas
• Many Valley areas are within relatively short
  driving distance of SoCal and Bay Area tech
  centers

60
Ultimately, the Ball is in YOUR Court

• Government, particularly on the federal level
  will not, and probably can not, do much to bridge
  digital divide
• Pitch to entrepreneurs, investors must be made by
  dedicated, sincere community effortremember no
  tech oriented individual, investor or company has
  to locate in your communityYOU AND YOUR
  COMMUNITY must make the case!

61
Questions and Comments?