Economic Specialization of Settlements

Settlements can be classified by the distinctive types of economic activities that take place there. All sectors of the economy—be they the various types of agriculture, the various types of manufacturers, or the various types of services—have distinctive geographic distributions.

Economic Base

The economic activities in a settlement can be divided into two types:

• Basic businesses export primarily to customers outside the settlement.

• Nonbasic businesses serve primarily customers living in the same settlement.

The unique cluster of basic businesses in a settlement is its economic base.

A settlement’s economic base is important because exporting by the basic businesses brings more money into the local economy, thus stimulating the provision of more nonbasic services for the settlement. It works like this:

New basic businesses attract new workers to a settlement.

• The new basic business workers bring their families with them.

• New nonbasic services are opened to meet the needs of the new workers and their families.

• For example, when a new car assembly plant opens, new supermarkets, restaurants, and other consumer services soon follow. But the opposite doesn’t occur: A new supermarket does not induce construction of a new car plant.

Settlements in the United States can be classified by their distinctive collection of basic businesses. The concept of basic businesses originally referred to manufacturing, but with the growth of the service sector of the economy, the basic businesses of many communities are in consumer, business, and public services.

Economic Base of Selected U.S. Communities

If a settlement’s basic businesses are growing, they attract other basic and nonbasic businesses that can benefit from proximity. The result can be a cluster of businesses that reinforce each other’s growth. For example, Boston’s basic sector in biotechnology consists of a cluster of business sectors that complement each other. Conversely, if a settlement’s basic businesses are shedding jobs—such as Detroit’s auto industry—then other businesses in the cluster may also decline.

Distribution of Talent

Individuals possessing special talents are not distributed uniformly among cities. Some cities have a higher percentage of talented individuals such as scientists and professionals. Attracting talented individuals is important because these individuals are responsible for promoting economic innovation. They are likely to start new businesses and infuse the local economy with fresh ideas.

To some extent, talented individuals are attracted to the cities with the most job opportunities and financial incentives. For example, growth in tech jobs is not distributed uniformly across the United States. Between 2013 and 2015, the number of tech jobs increased by at least 10 percent in 18 of the 100 largest cities. Just three cities—San Francisco, San Jose (adjacent to San Francisco), and New York—attracted one-third of the growth in tech jobs between 2013 and 2015.

Growth in Tech Jobs, 2013–2015

For many talented individuals, the principal enticement to working in a particular location is cultural rather than economic. Forbes Magazine and Sperling’s Best Places have identified the coolest cities in the United States, based on nine factors . The coolest city in 2017: San Francisco.

Pause & Reflect 12.3.3

Do communities with high growth in tech jobs rank high on “coolness” or low? What might account for that pattern?

Some communities are more attractive than others for young people on the move, especially after graduation. The attractiveness of the community derives in part from job opportunities and in part from the amenities offered for non-work times.

Sperling’s Best Places is an example of a website attempting to quantify the relative attractiveness of communities (accessed at www.bestplaces.net). Sperling’s measures how “cool” a community is through nine criteria, including eco-friendly transport options, racial and ethnic diversity, recreational opportunities, and nightlife.

America’s “Coolest” Cities, 2017