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Who's Your City: Creative or Unbanked?

Adam Rust's picture

Posted October 1, 2012

To borrow a phrase from Richard Florida, "who's your city?"

Could it be that its more important to have people lining up to use the ATM rather than signing up for the next session on regression?

Florida, as well as several other academics in the field of human capital, links educational attainment with

economic development. Whereas the top places thirty years ago were cities that made things, in today's information economy, the strongest are the ones that make ideas. It is an attractive concept and it continues to find traction.

The creative narrative does have its detractors. Some critics say that even if educational attainment is a good indicator of health, it tends to lag the real work of transformation. It is not hard to see their point. Florida likes to laud cities when they have lots of baristas. But there's no path to turning around a community by encouraging more consumption of top-grade coffee beans. People start ordering lattes and cappuccinos only after they achieve some financial security.

Thus, the hunt for next great statistical proxy for economic development goes on.  Even with the additional of creative classes to the canon of development indicators, it remains challenging to find variables that have relevance. Amartya Sen says that agency (free speech, voting, physical mobility) creates the environment for human development. The logic of NAFTA and GATT is that development happens when constrictions to the flows of capital are lifted.

But what can be a better expression for the moment when a household begins their own trajectory toward economic development than the moment when they enter the banking system? Without some kind of account, savings are limited to the size your mattress and payments are limited to cash or to visits to Western Union.

So - I have constructed a simple list that puts one indicator of achievement in the creative economy next to the FDIC's data on the unbanked and underbanked. In some instances this is difficult because Census goes into far greater detail on geographies. In the American Community Survey's table B15003 - educational attainment  - they offer numbers for micropolitan areas as well as for metropolitan places. Given that I can't find comparison data points for micropolitan regions, I'll have to limit the ACS figures to those for larger cities.

By the way, top micropolitan areas for Ph.D's: Ithaca, Ames, Santa Fe (Los Alamos), Albany (Oregon), Lafayette (IN), and Claremont (NH). Micropolitans where the greatest share of adults have less than a high school degree: Brownsville (TX), Fresno, Lumberton (NC), Corbin-London (KY), Midland-Odessa (TX), Beckley (WV), Clovis (NM) and the three largest cities in Puerto Rico.

To truly satisfy Richard Florida's notion of the creative economy, you would have to include the share of baristas and artists in your calculation. A simpler proxy is to merely count those with non-medical doctorates. Unlike lawyers and doctors, most Ph.D.s write their intellectual scripts instead of only mastering a set of established skills. That's no shame on the doctors and lawyers. I would prefer not to use a surgeon whose freelancing on a new method. The top ten metros for share of people over age 25 with a doctorate:

  1. Madison, WI: 2.7 percent of adults have doctorates, 1 percent unbanked, 13.5 percent underbanked.
  2. Raleigh-Durham, NC: 2.63 percent, 2.6 percent, 15.5 percent.
  3. Washington, DC and Northern Virginia: 2.57 percent, 4.6 percent, 16.9 percent.
  4. San Jose/San Francisco/Oakland: 2.50 percent, 2.4 percent, 11.6 percent.
  5. Boston: 2.2 percent, 4.2 percent, 14.7 percent.
  6. Austin: 1.85 percent, 10.2 percent, 20.4 percent.
  7. Denver-Boulder: 1.66 percent, 5.2 percent, 18.0 percent
  8. Nashville: 1.59 percent, 9.5 percent, 14.2 percent
  9. Hartford: 1.5 percent, 5.3 percent, 13.6 percent
  10. Philadelphia: 1.48 percent, 7.8 percent, 16.0 percent

The linkage between concentration of PhD.s and relative absence of the unbanked/underbanked seems to drop as the list drops. However, part of the interaction bias stems from the exclusion of smaller communities. Many of our academic strongholds are located outside of big cities. Nonetheless, their intellectual talent still attracts business to move there and helps to grown native firms.

Top ten cities for adults (over age 25) without a high school degree are almost entirely constituted among smaller cities. Only Los Angeles-Riverside scores in the top ten. At 32nd, Birmingham is only the fifth city large enough to make the FDIC's list.

So having mentioned the top big cities for dropping out, I'll provide Census' count which includes micropolitans. Here are the Big City leaders for share of PhD.s, share of unbanked and underbanked, sorted by order of share of dropouts:

  1. Los Angeles, CA: 21.5 percent dropouts, 1.16 percent with Ph.D.s, 9.7 percent unbanked, 18.6 percent underbanked.
  2. Houston: 18.9 percent, 1.31 percent, 11.9 percent, 28.4 percent
  3. Las Vegas: 16.8 percent, 0.7 percent, 6.2 percent, 33.2 percent
  4. Dallas: 16.5 percent, 0.96 percent, 9.8 percent, 27.5 percent
  5. Birmingham: 15.77 percent, 1.25 percent, 12.1 percent, 33.0 percent
  6. New Orleans: 15.68 percent, 12.4 percent, 23.2 percent
  7. Reno: 14.9 percent, 1.41 percent, 10.9 percent, and 24.9 percent
  8. New York: 14.7 percent, 1.5 percent, 9.7 percent, and 19.6 percent.
  9. Charlotte: 13.9 percent, 0.82 percent, 8.9 percent and 27.8 percent.
  10. Chicago: 13.5 percent, 1.2 percent, 8.6 percent and 16.4 percent.

Right away, I notice that there are often high concentrations of unbanked/underbanked households in our capital cities of banking. There are many people operating outside of the financial system in Charlotte, Birmingham, and New York.

A few cities where there are barbells in educational attainment: Sante Fe, NM with the 2nd highest share of Ph.D.s and in the top quartile of dropouts. Austin is 6th in Ph.D.s but in the top half of dropouts.

I've made the move from Birmingham to Chapel Hill. My own moment where I realized the scope of change came when I was riding the bus shortly after I arrived. Whereas a bus in Birmingham was a silent commute chosen as a last resort by folks in fast-food uniforms, a typical conversation in Chapel Hill was dotted with phrases like "r-squared" and "when my book comes out."

Overall, though, these numbers suggest that regional economic development is still well-defined by the size of the upper echelon of its workforce. But when it comes to identifying distress, dropping out of school or the banking system are both very effective.

As well, both can do a good job of identifying where you fit in our nation's social strata. If you think of your ten closest friends, are more of them Ph.D.'s or high school dropouts?

It is the same with banking. Today, you can get a check cashed for more than five dollars and you directly buy a share of stock (not a mutual fund) for four dollars. In the last few months, have spent more time with your friends discussing the best price on money orders or on good stock tips? For most Americans, the money order question if more important. There are more folks in the unbanked/underbanked category (about 28 percent) than there are in the share-owning group (less than 20 percent.)