With his rock-star looks and positions as senior editor of The Atlantic, head of the University of Toronto’s Martin Prosperity Institute, and visiting professor at New York University, Richard Florida is the highest-profile urbanist in the country—and has been for over a decade. In all my travels, he and his creative-class theory are nigh universally cited. To the extent that civic leaders across America understand the criticality of human capital and talent in the 21st-century economy, it’s because of him.
In his 2002 bestseller, The Rise of the Creative Class, Florida described how the world economy was being transformed by high-performing workers who specialize in innovation. Though he originally distinguished this creative class from white-collar knowledge workers generally, today the two terms are largely synonymous in the public mind and Florida’s analyses. In effect, he developed a sexy way to talk about the increasing criticality of talent to economic success—and it catapulted him to superstardom.
The problem for Florida is that the economic transformation he once celebrated has a dark side that he failed to predict. His newest book, The New Urban Crisis, is Florida’s attempt to grapple with the downsides of the trends he popularized. Among the negative aspects of these changes are an economy that disproportionately rewards “superstar” cities like New York and San Francisco (something he calls “winner-take-all urbanism”), rising income inequality, persistent racial segregation, increasing suburban poverty, and the decline of urban middle-class neighborhoods, resulting in a barbell-shaped economy of rich and poor.
Florida was jolted into addressing these issues by two developments. One was the 2012 election of the cocaine-snorting Rob Ford as mayor of Toronto, whom Florida labels “the most anti-urban mayor in human history.” Ford’s election in Florida’s adopted hometown may have been more a result of the amalgamation of Toronto and its suburbs into a single municipality than it was about Florida’s “new urban crisis.” But the problems in the central city itself were put on relief in the second incident, in which activists from the left launched high-profile attacks on Florida shortly after his arrival in the Canadian metropolis.change_me
One group of Florida’s opponents cleverly adopted the name “Creative Class Struggle.” They saw his theory as an apology for exploitative neoliberalism. Florida, who today takes care to explicitly note that he himself is also a good leftist trained in Marxist analysis—rather like making the sign of the cross to ward off a hex—was deeply pained by this attack from the left, whereas previous attacks from the right had not bothered him. He looked at the data and accepted the reality that Toronto’s middle class was in serious decline: once two-thirds of the city’s population, now only 30 percent of neighborhoods are middle class.
But to tar Florida with the ills of the knowledge economy is like blaming Thomas Friedman for the problems of globalization just because he wrote The World Is Flat. Both men clearly celebrated, profited from, and are in agreement with the values of people who benefit from the phenomena they described—but are certainly not the architects or creators of these trends. It is perhaps fair to critique Florida for some of the failed projects and civic turnaround efforts that cities undertook at his recommendation or inspiration. But then the critics would have to give credit to Florida for the positive stories and results, something they never do. Florida didn’t cause Detroit to go bankrupt even if former Michigan governor Jennifer Granholm’s “cool cities” initiative he inspired is now widely mocked.
Still, having received such outsized fame for describing the creative class, Florida perhaps realizes he’s not in a position to complain when fortune’s wheel deals him out some blowback for its downside. Hence his attempt to identify possible solutions for it in this book.
Florida’s provides a short and readable synopsis of today’s economic challenges. But because they are already widely known and discussed, that will probably likely be the least interesting part to many readers. For those who are less familiar, Florida surveys the realm in his usual highly readable style, reviewing everything from the geography of venture-capital investment to the levels of displacement from gentrification. The book’s most distinctive contribution to this may be Florida’s extensive mapping of the class geography of major urban areas into creative, working, and service classes, and his attempts at creating a typology of these.
More salient are the book’s proposed solutions.
One of the implicit assumptions of The New Urban Crisis, and most other writings on America’s economic malaise, is that the economic success of the current winners—the creative class in the urban centers of superstar and other cities—is sacrosanct. Taxing them more to fund greater redistribution and calling on them to pay more for services is as far as Florida would go. As he writes, “For all the challenges and tensions they generate, cities are still the most powerful economic engines the world has ever seen. The way out of the new urban crisis is more, not less, urbanism.” He continues, arguing, “The way to help [the poor and working classes] is not to turn off the spigot of wealth creation.” He says, for example, it “makes little economic sense” to discourage increased migration of tech companies into the urban center. His prescription for fixing the problem is instead more such migration, attempting to create an “urbanism for all.”
This is an assumption I would question. It’s true that urban-creative industries have been major economic drivers for global cities and in part for the overall economy. But manufacturing was king once too, and Washington didn’t hesitate to adopt economic policies that harmed it, on the rationale that doing so would improve overall GDP and economic efficiency. Imagine if the first implicit assumption of all U.S. economic policy in the 1990s had been that nothing could negatively affect the Detroit auto industry and its workers because manufacturing was creating wealth.
Gratuitously attacking Silicon Valley techies out of some desire to punish the successful would be bad, but policies that reduce the urban creative class’ outsized share of success—while raising GDP and median income curves—should not be ruled out. Barack Obama was the first president since Herbert Hoover to never once hit 3 percent annual GDP growth. President Bush’s economic record was likewise dismal. Job growth in the U.S. since 2000 has averaged 0.5 percent per year, compared to 1.9 percent during the 1980s and 1.9 percent during the 1990s. (Recent years have seen better growth rates than this anemic average.) And real median incomes are lower today than in 2000.
Since Florida’s original Rise of the Creative Class was published, aggregate economic results have not been good by postwar standards. He says, “Our ability to innovate and grow the economy is literally powered by the clustering of talent, companies, and other economic assets in cities.” But the new urban crisis is precisely that there hasn’t been much economic growth at a time in which that type of clustering has increased.
It’s not obvious that the rise of the creative class in major urban centers has been good for America as a whole. Florida himself notes, “The back to the city movement…conferred a disproportionate share of its benefits on a small group of people and places.” This doesn’t mean that urbanization and the rise of the creative-class economy are to blame for this malaise. But economic policy derives its political legitimacy from delivering results. When policies fail to be accompanied by good results, they lose credibility in the public mind and merit reconsideration. The real challenge is to expand GDP, median income, and job growth. Options that would, for example, reduce the size or change the character of creative-class industries should not be ruled out of bounds if they would be beneficial overall in achieving those goals.
Yet few analysts seem capable of even imagining a future where economic growth is not driven by the same creative-class industries and the same cities as today, even though they champion disruption and creative destruction at every turn. We need a broader possible space of solutions. For example, in a recent New York Times column entitled “Break Up the Liberal City,” Ross Douthat suggested we should pursue urban disagglomeration. We need, as it were, more creative thinking on the topic. As we’ll see, Florida actually does have some interesting ideas, and ones that can be implemented independently of his call for more urbanization and clustering.
Florida’s policy recommendations fall into two main buckets. The first defines the contours of the creative-class economy and attempts to expand access to it or success within it. The second involves a more fundamental economic transformation.
In the first area, Florida wants to double down on global city-style urbanization featuring high density and transit-oriented development of the type that caters to creative-class industries. His recommendations for closing the economic gap here mostly entail reducing costs, especially housing costs, for those at the bottom of the economic ladder. This includes a much more pro-development policy in cities, which would lower housing prices and allow for densification in new areas. Florida smartly cautions against high-rise development here. He realizes from cities such as Paris and Barcelona that high density and high rise are not the same thing, even though in the United States these concepts are often conflated. And he understands people are more attracted to living in human-scaled places.
The tremendous difficulty developers encounter when trying to build new housing in areas such as coastal California, New York City, and Boston, is one of the biggest factors driving prices through the roof. Yes, the demand curve has shifted. But increasing prices should be signaling the marketplace to add new supply. That response has been muted in cities where regulation and not-in-my-backyard resistance (sometimes called NIMBYism) make it hard to build. This helps explain persistently high housing prices on the coasts. Florida wants to make it easier to build in these places.
He also wants to eliminate market-distorting tax policies. He advocates a land value tax, first proposed by 19th-century social reformer Henry George. In a land-value tax only the value of the land, but not any improvements, is taxed. Today’s system of property taxation, which taxes both buildings and land together, punishes people who develop property with a high tax bill, while rewarding land-banking speculators who keep property vacant with lower bills. The land-value tax levels the playing field. Florida also wants to eliminate the deductibility of home-mortgage interest, which he sees as encouraging suburban home ownership at the expense of urban renting.
All of these ideas—fewer development restrictions, land value taxes, and eliminating mortgage interest deductibility—have much to commend. But they would create losers as well as winners, making them politically challenging to implement, to say the least.
Perhaps the most important point in The New Urban Crisis is Florida’s call to turn low-pay, low-status service jobs into middle class jobs. Proposals to upgrade the productivity level, status, and pay of what are currently undesirable service jobs—in foodservice, retail, janitorial, personal services, etc.—get far less attention than they deserve. Virtually all of the discussion about the shrinking middle class revolves around the decline of industry and how to restore the fortunes of American manufacturing with calls to “bring back the jobs.”
To be sure, manufacturing is more critical to American prosperity than some believe. For example, one reason service jobs are low paying is that the quantity and pay of manufacturing jobs have been in decline. To see this effect in action, during the blue-collar oil boom in North Dakota the Wal-Mart in Williston was offering $17.20 per hour in starting wages. But even a newly robust manufacturing sector isn’t going to produce jobs in the quantities our country needs. Manufacturing is simply too efficient today, and is becoming increasingly roboticized.
That leaves the service economy. Americans seem to believe that service-class jobs are doomed to perpetually being bad jobs. But Florida reminds us that manufacturing used to be considered a pretty bad job too. A world of sweatshops and child-factory labor was not exactly the world of the American middle class as we know it. America turned its bad jobs in manufacturing into good ones—through legislation, union organizing, productivity improvements, and new corporate management practices. This raised pay, improved safety and general working conditions, and also raised the status of those jobs. Florida believes it is imperative to do the same for at least a broad swath of service jobs.
Doing that is a challenge, and the mechanisms aren’t obvious. Jobs can’t just be upgraded by fiat. Every potential solution appears to have downsides, at least in the short term. For example, the rise of occupational licensing, which restricts access to even service-industry positions like hair styling, has been cited as a contributor to economic sclerosis. But curtailing licensing requirements, as good a policy as that may be, would likely reduce wages in the short term by busting up a de facto cartel. Florida’s major suggestion for upgrading jobs is raising the minimum wage. This would benefit some workers, but also cause job losses and suppress future hiring. Urbanists who rightly see the threat posed to small businesses by rising rents should clearly understand that rising labor costs have the same effect.
This is the conundrum of any means of upgrading service jobs. If the pay and working conditions of service jobs improve, and they become more productive positions, this will mean fewer jobs, all other factors being equal. Florida deserves great credit for being willing to state some of these tradeoffs. For example, he says that the creative class needs to be willing to pay more for services—and by implication consume less.
Of course all things are not equal. Economies are dynamic and complex, which is another reason why attempting to intentionally create change is difficult. It’s generally easier to screw things up than make things better. But we have few good options other than attempting to improve the productivity, pay, and status of these service-class positions. It’s not possible to turn everyone into a high-end knowledge worker. By definition half the workforce has below average intelligence. A quarter of the population has an IQ below 90. The genius of the industrial age is that it gave the broad majority of the population, not just the cognitive elite, the ability to build a middle-class life. We have to find a way to do something similar for service-class jobs, or else resign ourselves to indefinitely providing government life support to a large number of Americans.
Though he supports raising the minimum wage, Florida understands the limits of the government’s ability to simply force this to happen. He points out, “Upgrading service jobs is not necessarily an area that calls for direct government intervention. It could be done through the private sector and its drive to become more efficient and profitable.” If they don’t want to end up hoisted on populist pitchforks, private-sector leaders would be wise to step up to the plate on this.
One area where the government could help is in reducing low-skill immigration as part of an immigration reform package that favors higher-skill immigrants that power the creative-class economy. If the problem is low wages for American service-class workers, then clearly there is no warrant to continue deliberately increasing the supply of labor for these positions through more low-skill immigration.
By highlighting the need to upgrade service jobs, Florida gets at what economic policy needs to focus on more broadly: those outside the urban creative class. This relatively small group of creative class fortunates has received immense civic attention and love in the last fifteen years. It seems the top priority of every mayor in the country is attracting creative-class talent, which has been aggressively catered to and has frequently benefited from large government subsidies. Yes, high-income earners and businesses are needed to pay any city’s bills. But attracting a critical mass of creative talent is no longer a problem in many places—quite the opposite in fact.
The challenge now is to reinvigorate America’s flagging middle class. Whatever people think of Florida’s ideas in this regard, something needs to be done. Without a change in metropolitan policy, the American Dream as we know it may be over, at least for broad segments of the country.
Aaron M. Renn is a senior fellow at the Manhattan Institute. He is the author of The Urban State of Mind and blogs at www.urbanophile.com. This article was supported by a grant from the Richard H. Driehaus Foundation.