- [Narrator] This is Hudson Yards.
Late in 2019, Facebook completed a lease
for over 1.5 million square feet of space
across three buildings in the area.
Amazon also has an office down the street.
And if you go further down the Hudson River,
you'll find a cluster of buildings
leased or owned by Google.
It seems like everyone in tech wants
a piece of New York City's West Side.
- There's a reason that most of the major
big tech brand platforms are based in a few places.
They wanna be near each other
and they wanna be near some of the same resources.
- [Narrator] Mark Muro is a fellow
at the Brookings Institution,
a Washington DC think tank.
He and other economists call
this clustering agglomeration.
- Agglomeration is the tendency of economic activity
to gather, or cluster, or clump together.
It happens because there are often benefits
to businesses, workers, and institutions
being close to each other.
- [Narrator] That clustering can build up an economy,
but there's a catch.
- Even the winners don't feel like winners.
If you're in traffic choked, expensive San Francisco
you don't feel like the current clustering
is working for you,
and neither does anybody else in the United States
and in the Heartland.
- [Narrator] To understand how an agglomeration gets going,
consider New York City.
Tech clusters typically rely
on a robust pool of workers
and the labor pool in New York
is more educated than the national average.
Analysts say that it's become difficult
to find qualified workers
in hotspots like Silicon Valley,
which makes New York attractive for expansion.
Experts say that labor is key.
- Obviously, we've seen these clusters develop,
you know, all over the world.
The reason they occur is because,
when you draw people together
they learn from each other.
- [Narrator] Capacity for growth on the far West Side
grew in the 2000s during Michael Bloomberg's
run as city mayor.
Doctoroff was his deputy.
- We did 140 separate rezonings of the city.
Often of old, under utilized, industrial land
that opened up the capacity to develop
all sorts of new areas.
So, we embarked on a massive expansion
of capacity for space.
- [Narrator] The city also extended the subway
for the first time in 25 years.
- [Dan] One of the big problems
on the West Side of Manhattan
was there was no great way to get over here.
$3 billion was invested in the extension of the subway
into the area as well as other infrastructure.
- [Narrator] Also the city provided land
and millions of dollars for a new Cornell Tech campus.
- Cornell Tech plays a crucial role
in the New York tech ecosystem.
Often times, the research really shows is that
universities catalyze that kind of collaboration
better than almost any other institution.
- [Narrator] All this new development
laid the groundwork for tech companies
to open offices on the West Side,
forming a cluster of highly skilled workers.
- A big agglomeration of say high-tech economic activity
is simply going to be more productive
and more competitive than others
because think of what it has close proximity,
highly specialized workers,
highly specialized providers of business services.
- [Narrator] Research from Mr. Muro and others
suggest that workers who live in these clusters
tend to be more productive than those who don't.
Here's a chart that measures
output per worker by industry group.
Workers in industries like manufacturing or retail
tend to be more productive
if they're in a top cluster.
That advantage stretches further
if you're a worker in an innovation industry.
The effects are so potent
that some of the cities who've generated clusters
are pulling away from the rest of the country.
But that poses challenges for Americans
both in and outside the clusters.
- You only have to look at the complaints
of people who live in Seattle or the Bay Area
to see that very serious negative implications
of excessive or poorly managed agglomeration.
- [Narrator] Like the tech hubs
in Seattle and San Francisco,
New York has issue with affordability.
Late in 2019, the median home in New York City
sold for $563,000 which was much higher
than the national median.
A similar story unfolds in the commuting data.
Most states in the New York metropolitan region,
have commute times well above national averages.
And in the city proper,
commute times are on the rise.
In some cases,
tech workers earn enough to make the pain worthwhile
and that's encouraging educated people
to leave smaller cities.
In the big coastal cities,
wage and employment levels are outpacing
other parts of the country.
- We have Google, Facebook, Amazon combined
over 20,000 jobs in the near future.
We have 9,000 startups in New York City.
It's increasingly true that
every company is a tech company.
Whether you're in finance,
whether you're in real estate,
whether you're in fashion, media.
You name it,
all of these sectors are already headquartered here,
and they need people who understand
and know how to build technology.
- [Narrator] In regions further from the top,
incomes and employment levels aren't keeping pace,
which sends a message.
- For the foreseeable future,
to really have a great career in tech in America,
you probably do need to head out to
the Bay Area, or New York, or Seattle
and work for one of the big tech titans.
I think that's an unfortunate reality in the United States.
(upbeat music)