Big Cities Still Matter

If you’re currently living in a big city, please stick around. The alluring trend of moving to a more affordable locale to work remotely as COVID-19 upends our lives will likely not hold up in the long run. And that’s because places like Chicago, Los Angeles, New York and other large metropolitan areas have the traits that make them hubs for a strong, innovative economy.

Hyejin Youn, assistant professor of management and organizations at the Kellogg School of Management, and her collaborators analyzed industrial employment and population changes in 350 U.S. cities between 1998 and 2013. The survey included more than 100 million workers.

She observed a transition from economies based on manual labor to more innovative, cognitive labor economies when the population reaches a certain sweet spot — around 1.2 million people. Along with population size, she found those cities are also capable of attracting and retaining certain industries that tend to grow much faster than the rate of population growth. Some of these “superlinear industries” include the arts, entertainment, professional services, science and information technology.

“What we observed is not a blip in history,” Youn says. “These two factors [population size and the ability to attract cognitive industries] go hand in hand and depend on one another.”

According to Youn, human interactions are known to drive the creation of ideas. In other words, innovation depends on the rate of human interaction, which is pushed forward by increases in population size.

Youn thinks the largest cities will likely survive after COVID-19 despite fleeting trends of workers flocking away from major urban centers. But she warns that innovation may take a hit.

Since innovation, in many ways, is driven by strong communication, serendipitous interactions and people being largely together in the same physical space for quick decision making, Youn warns that new ideas and breakthroughs might slow down as we continue to work from home.

“Remote work is efficient only if communication processes are well established and most tasks are well defined with little room for ambiguity,” says Youn. “If you’re presenting a new idea to your company, you will need multiple ways of communicating it, and it will probably not be understood the first time. This is very hard to do online compared with face-to-face interactions.”

Cities account for 90% of the U.S. economic output and are home to 86% of the population, according to recent data from the Bureau of Economic Analysis and the Census Bureau.

Youn’s study may have implications for policymakers, especially mayors who are trying to transform their cities’ economies. For example, cities losing more people than they gain must look at population size as a strategic priority, according to Youn. “They wouldn’t be losing only economically but also squandering a lot of possible innovative power.”

Areas in the United States that have typically relied on manufacturing but now face challenges due to outsourcing and globalization may consider a policy of “upskilling,” where they make their workforce employable in more advanced industries.

“The caveat here is this transformation may be more dependent on national rather than city policy,” Youn said. “The federal government needs to think about the industrial composition of the country as a whole.”

The largest cities will likely survive after COVID-19 despite trends of workers flocking away from major urban centers. But innovation may take a hit.