East-Coast Tech Hubs Lose out to Texas

Austin, Texas was the best performing U.S. city of 2013, according to two recent studies by the Milken Institute and Praxis Strategy Group.

Both the Milken and Praxis studies favor cities with strong technical innovation, and while Austin surged ahead along with many cities in the Southeast, the mountain states and the plains – coastal areas, particularly in the Northeast, fared less well.

While Texas towns dominated—due in part to the recent shale oil and gas boom—and Utah and Colorado made significant headway over last year‘s rankings, Cambridge, Massachusetts fell 15 places to rank number 23 out of the 200 cities included in the Milken study. Boston didn’t rank in the top 25.

The Milken study examined growth in jobs, wages, salaries, and high-tech across the country, while the Praxis study—published in full on NewGeography.com—went back five years to look at job growth and employment in the industries normally associated with technology, such as software, engineering and computer programming services, as well as other STEM related occupations. Praxis also looks at population trends and educational output.

Austin’s growth over the past decade has been unprecedented. Home to tech firm Dell, it’s also attracted giants like AMD, IBM, Cisco, Hewlett-Packard, Intel and Oracle. Austin has grown employment in its tech industries by 41 percent since 2001 and the number of STEM workers has risen by 17 percent over the same period.

Strong economies like Austin and Salt Lake City tend to share certain characteristics, says Joel Kotkin, a Forbes columnist and Praxis consultant.

“Most of the strongest local economies combine the positive characteristics associated with blue states— educated people, tech-oriented industries, radical diversity—with largely red, pro-business administrations,” Kotkin says.

“Places like Nashville, Denver and Salt Lake are all getting smarter faster, increasing their numbers of educated people faster than “brain” regions like Seattle, San Francisco, Boston, New York, Chicago and Los Angeles,” he concludes.

Migration away from long-established high-tech areas on the coast may be due in large part to the rising cost of living in those locations.

Young educated adults—the next innovation generation—are migrating to metro areas in Texas and the Southeast that have major research institutions, diverse tech economies and lower cost of living. The keys to Austin’s success lie largely in its affordability and high quality of life, both in its small urban core and rapidly expanding suburbs.

It’s not all bad news for the West Coast though. San Francisco and Seattle are still thriving.

“Some of the leading tech metros were successful despite being high-cost, high regulation locations,” says Ross DeVol, chief research officer of the Milken Institute and one of the report’s authors. “Cities like San Francisco, San Jose, and Cambridge have developed R&D assets and infrastructure that makes it easier to innovate there than in lower-cost locations.”

Seattle—home of Microsoft, Amazon and Boeing—has a diverse technical workforce, as well as a growing focus on software services. Seattle has enjoyed a 45.5 percent growth in tech-company employment and a 19.5 percent jump in STEM jobs over the past half a decade.

On the East Coast, Boston-area tech companies have expanded employment by 16 percent since 2001, but the number of STEM jobs is down 1.6 percent.

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