Closing digital skills and broadband gaps key to push back against the divergent features of today’s digitally super-charged economy

For much of the 20th century, market forces had reduced job, wage, investment, and business formation disparities between more- and less-developed regions. By closing the divides between regions, the economy ensured a welcome convergence among the nation’s communities. However, in the 1980s, that long-standing trend began to break down as the spread of digital technology increasingly rewarded the most talent-laden clusters of skills and firms. As the economy changed, convergence gave way to divergence, as a fortunate upper tier of big, dense metropolitan areas (the top 2 percent of US communities based on measures of growth and wages) began to consistently grow faster than the median and least-prosperous cities. What might place-sensitive distributed development look like in practice? To give a sense, we suggest five examples of the kinds of strategies that would help—three that focus on ensuring more regions have the assets and capabilities to flourish, and two more that suggest what specific regional development initiatives might look like. Here’s a look:

• Boost the digital skills of left behind places. The workers, industries, and places that possess strong digital skills have enjoyed distinct economic rewards. To push back against this winner-take-all dynamic of today’s tech economy, every region’s workforce should be prepared to participate in the digital economy.

• Ensure businesses in lagging regions have access to capital. The pullback in small business lending following the financial crisis has hit less densely populated parts of the country particularly hard. Efforts to improve data on small business performance can help banks lower the transaction costs of extending small loans while innovations in financial technology can help create a secondary market for them and reduce risk. Boosting alternative, non-bank sources of capital, such as venture capital funding, can also help support regional economic growth.

• Reduce gaps in broadband. Large gaps in broadband service and subscriptions have put businesses and workers in less densely populated areas at a huge disadvantage. Policy proposals should focus on connecting more people and encouraging greater subscription rates in places already endowed with broadband.

• Identify “growth poles” that can support regional growth. While it may be inefficient to “save” every left-behind small city or rural community in the U.S., targeted federal policy aimed at strengthening 10 or so promising mid-sized centers of advanced industry activity would bring more growth to some communities adjacent to many more lagging towns and rural areas. Federal investment in these “growth poles” will put more communities on a path toward self-sustaining economic growth.

• Help Americans move to opportunity. The federal government should expand the availability of financial support for individuals who want to make long-distance moves to places promising greater economic opportunity. At the same time, federal policy should encourage states and localities to relax zoning restrictions and construct new housing units to increase the supply of affordable housing. For those who wish to stay in their communities to live but not necessarily to work, state and local governments could provide a subsidy for workers commuting to adjacent communities.