Rust Belt San Diego

Like Rochester and Pittsburgh, San Diego was dying. This group of three might strike you as strange bedfellows. But the pattern of economic implosion and revitalization are similar:

After years of decline, Eastman Kodak, once the largest employer in Rochester, filed for bankruptcy protection last month. But rather than following Detroit, Cleveland and other once-bustling industrial cities into decay, Rochester continues to grow at a healthy clip. Why?

The question goes beyond the city limits of what was once called “Snapshot City.” Why does Pittsburgh prosper while Detroit sputters? How did San Diego make the transition from a Navy town to a diversified economic success while Fresno, Calif., has one of the country’s highest home foreclosure rates?

That's the tale of two Rust Belts. There isn't a large swath of the industrial moribund. There isn't even a contiguous region that lends itself to a convenient abstraction. In one cohort, we have metros who have made the transition from one economic epoch to the next. In the other, we have metros still struggling to transform.

To say Rochester is dying (or dead) is to say San Diego is dying. There's too much in the way of poor analysis masquerading as definitive economic geography. Contrasting San Diego with Fresno is telling. Both cities have a growing population. They are both living cities, right? Wrong. "Rust Belt" is shorthand for demographic decline, not economic decline. Unfortunately, the two get conflated.

Urbanization Of Tech Employment

F.I.R.E. Finance, insurance, and real estate. That's the kind of industry I expect to find in the downtown area of a big city. The wild speed and reach of financial capital defines contemporary globalization. At the heart of it all is New York and London, two global giants undergoing a transformation of economic geography. Silicon Roundabout:

The migration away from the industry’s east London heartland has echoes of a similar trend a decade ago, when the technology companies began a gradual march from the business parks of the Thames Valley to the capital. However, the move into areas traditionally associated with banks and media companies challenges the accepted wisdom that technology companies favour offices – often converted – in the fringe locations surrounding the City.

Tech is not just moving next to finance in London's urban core. Tech is replacing finance. Why? Access to talent:

“Silicon Roundabout has been a magnet for the start-ups for some time but the bigger companies are realising that they need to be in London to hire the best people. The difference is, they need the kind of space usually taken by banks and big consumer-facing companies, so they come into the City or the West End,” said James Roberts, head of commercial research at Knight Frank.

Instead of thinking of London as a global hub of money, imagine global flows of people. That's the geography of the Talent Economy, the next round of globalization. Talent is cramming into center city at considerable expense. You need to be where the migrants are.

During the last round of economic globalization, you went to Harvard for the M.B.A. Now you matriculate there because the best and brightest flock in from around world. Boston is an international hub for talent production. To lesser extent, so is Pittsburgh. The dawning economic epoch will favor such metros, as well as the nimble alpha cities such as London and New York (where the graduates from the likes of Boston and Pittsburgh go to be developed).

This geography of globalization will punish the suburbs, just as the dawn of the knowledge economy emptied out the downtowns of industrial powers. Schools will deteriorate. Legacy costs will crush a declining tax base. American urban patterns (see Florida) will look a lot more like Paris: Wealth in the middle and poverty concentrated in the banlieues. However, the key is not where people reside. It's where the jobs are, where the best talent wants to work. A suburban office park is a lousy place to develop talent.

Brain Drain Is Dead

To be anti-brain drain is to be anti-immigrant. Detroit is the poster child for obsessing outmigration. Read about the rampant nativism (against domestic migrants) gripping the city. That's what happens when "patches of earth" matter more than people. Of course, I'm talking about income per natural:

[Clemens and Pritchett] want to call attention to the fact that migration has made a lot of migrants richer. Traditional measures of income tend to mask this fact. In rich countries, we usually ask whether migrants improve the lot of existing residents, not whether migration improves the lot of migrants. Meanwhile, the welfare of migrants rarely figures in debate in developing countries or in development institutions such as the World Bank, because the migrants have gone.

Simply because of the way the discussion is framed, the benefits to migrants tend to be ignored. Imagine a man who moves from earning 10,000 euros in Poland (an above-average wage) to 15,000 pounds in the U.K. (a below-average wage). Simple arithmetic says that he has reduced the average income of both countries; that could be true even if he has impoverished nobody and enriched himself a great deal.

Keep that Poland-to-UK tale in mind. Now consider Tampa brain drain to Silicon Valley (or Charlotte, or Atlanta):

The Tampa Bay Business Journal points to a Dice survey putting the average IT salary in Tampa at $72,802, certainly not the six-figure average of Silicon Valley, but not the dire picture that the CNNMoney article paints, either. The myfoxtampabay article, however, refers to the Tampa “Brain Drain.” It quotes Kaushal Chari, professor of information systems and decision sciences at the University of South Florida, saying that graduates with deep technological skills tend to move to cities such as Atlanta and Charlotte, where there are more tech opportunities with higher salaries.

Imagine a woman tech worker who moves from earning $80k in Tampa (an above-average wage) to $95k in Silicon Valley (a below-average wage). Talent migration is a losing proposition for both places. From the perspective of the migrant, she's making 20% more by moving. What brain drain?

That's my main takeaway from Robert Guest's book, Borderless Economics. I finally finished reading it over the weekend. Income per natural is featured in Chapter 5, "Networks of Trust: How the Brain Drain Reduces Global Poverty." The act of migration is economic development. We're just too focused on turf to recognize it.

The main point of the book is to convince the reader that a cost-benefit analysis of international migration supports the admission of more foreigners to the United States. The destination country isn't stealing brains from the developing world. Instead, it is fighting global poverty much more effectively than providing foreign aid.

Guest does much more than demonstrate how migrants benefit from relocation. Both sending and receiving countries receive a substantial bump. The brain circulation between India and the United States, as well as between China and the United States provide a solid foundation for his argument.

I think Guest's book applies equally well to domestic migration. Eventually, regional economic development will get wise to what is going on in the international economic development arena. Reading Borderless Economics would be a strong kick in that direction.

Mating With Migrants

Outsiders are alluring. The locals can't compete with the accent. Or can they? The art of seduction in Dallas, Texas:

In Austin and other big cities in the state — Houston, Fort Worth, Dallas, San Antonio — the Texas twang is being infiltrated by what linguists call General American English, a more-or-less Midwestern accent, the standard heard on TV and other spoken media.

Blame it on the girls, say University of Texas researchers.

"The typical pattern for any language change is always the young women," says Lars Hinrichs, assistant professor of English language and linguistics at UT and director of the Texas English Project. "If you pronounce things the new way, you have power — you're hotter. The more popular girls lead the way." ...

... "Who's picking up on this new transition? It's not the old people. It's the young people doing it," Hinrichs said. Young white females are the earliest adopters.

And like other adaptations that are steadily transforming the Texas accent, it emerged first in Dallas and its suburbs. Then it spread to Houston, then on to Austin and San Antonio, he said.

Emphasis added. I'd bet that the diffusion of General American English followed the same road those from out of state used to move to Texas. The local agents of linguistic change have to compete with the new girl, whom all the boys are chasing. We seem to be hardwired to mate with migrants.

A major variable to geographic mobility is gender. Women are more rooted in place, figuratively and literally. To be crass, a woman on the move is a whore. She's attractive because she is exotic, which makes stuck locals very uneasy. The traditional power hierarchy is upset. Migration is too damn sexy.

Redefining Urbanization

I've tended to think of cities in terms of hierarchy, the relationship of goods and services across space. That's how I was trained. Blogging about brain drain for almost six years, I now see cities as products of migration. Density takes a backseat to the gravity drawing in people from elsewhere. Nigel Thrift on redefining urbanization:

[C]ities are increasingly both networked and perforated by information technology in ways which are bringing them together as actual forceful entities rather than as simply conglomerations. In some places, that process is purposeful (think of the example of Living PlanIT’s kitting out of a new town in Portugal). But more generally it is the growth of GIS, locative services, and telematics which is producing a gradual but definite change in how we think about cities–cities in which place defined by movement becomes a defining characteristic.

Emphasis added. Until I read that, I hadn't realized how far I've strayed from conventional urban economic geography. I should mention that Thrift is a part of a collection of bloggers (e.g. Ben Wildavsky) who are tracking the globalization of higher education. I contend that the transnational flow of university students is the defining feature of the Talent Economy. I would describe a city in terms of its migration connectivity profile. We can understand how the world works through the lens of migration.

For you Pittsburgh-centric readers out there, I see your city as well-positioned to take advantage of the emerging economic epoch. Like China, Pittsburgh is connected the rest of the world via talent exports. Pittsburgh is people, not a place.

Cool City Cop Out

Is your city in the dumps? Can't figure out how to fix it? Get cool, now:

You think building great managers is tough? It is. So tough that we grew up and looked at that opportunity and needed a nap after pondering the complexity of making it happen. So we write the check and build cool space instead. Ping-pong table anyone?

Sometimes, drawing parallels between regional talent management and corporate talent management is a fool's errand. This is not one of those times. Developing people is hard work and takes a long time. Moving the needle on primary and secondary education is painfully slow. Ask any politician. Better to build a new convention center or give in to the casino idea. That is to say, buy a ping-pong table for your shrinking city.

Portland, Oregon is the cool office space. The metro decided that economic development was too hard. Better to be an emerald city than a backwater with relatively good schools:

Interview partners agreed that even though the region has been practicing what Richard Florida is recommending (i.e. focusing on improving the living conditions), it did not implement these strategies deliberately. The success of the region in translating quality of life into economic competitiveness seems to be an accidental and unintended result of a much longer strategy aimed at environmental goals for their own sake rather than economic objectives.

Unintended consequences acknowledged, Portland now actively markets itself as a cool office space. So much the better to attract talent. That's what you do when you can't develop talent. Instead of innovating, you play ping-pong. When you want to get serious about being an entrepreneur, you move back to Indianapolis.

Cool is not an economic development strategy. For Portland, cool and all that came with it is a byproduct of being a more environmentally sustainable city. For my money, great place-making inspires people to do great things. Some college campuses made me feel like I wanted to be a famous scholar. I was smarter just by sitting in the cathedral-like library. Brilliant landscape design or architecture can help. They aren't necessary.

Brain Dead Indiana

It’s almost as if they’re gonna get smarter by locating to an urban area. - David Audretsch, Indiana University professor of economic development

Indiana is dying. Desperate Rust Belt times require desperate Sun Belt measures. The state wants to give its residents the right to work. What's the rush? All the brains are leaving:

Q: What are some reasons why Indiana might have difficulty holding on to well-educated workers?

A: The real question is: Are we drawing people in? Do we have opportunities for highly skilled workers whether they graduated in Indiana or not? When you look at the data, the answer is some. More than we did in the past, but we are definitely net exporters of educational attainment. When you look at the so called great knowledge clusters in the country — Silicon Valley, research triangle in North Carolina; Austin, Texas. They’ve got a big inflow of people coming in, because of good match-ups between skills and industry.

Probably not the answer the journalist was expecting. Did Dr. Audretsch duck the question? The game of economic development is one of talent attraction, not retention. Indiana does not have a brain drain problem. Brain drain isn't a problem anywhere in the entire United States. But we throw billions of dollars every year at it, a colossal waste.

After residents graduate from college, Indiana does a lousy job of developing people. Again, Audretsch with some key insight:

We know that in larger cities, there’s going to be a lot more demand for highly educated workers. Indiana doesn’t have these kinds of mega-global cities like Chicago or New York or Dallas. The job opportunities in places like these are just greater for all levels of education. That’s something Indiana battles.

Emphasis added. Global cities do the best job of developing people. That's why so many people move to one. The upside for Indiana is that, at least domestically, even more talent leaves US global cities every year. Chicago poaches the best of Indiana's college graduates. Indiana poaches Chicago's best mid-career professionals and aspiring entrepreneurs. The focus on college graduate migration is a major gaffe.

Job Creation Geography: Top 10 Pittsburgh

You move where the jobs are. Yes, geographic mobility is still in a long decline. But all US workers are not frozen in place. New hiring is sparse. The exceptions to the rule:

Since the Great Recession ended in June 2009, the United States has gained about 1.2 million jobs, mostly in the services sector. Of the top 100 metros, 59 have added jobs overall, while 41 have lost jobs.

The top 10 job-creating metros account for 38.5% of net U.S. job growth and include Houston (7.2%), Dallas (6.1%), Boston (6.0%), Phoenix (3.5%), Detroit (3.1%), Miami (3.0%), Nashville (2.7%), Pittsburgh (2.5%), Washington DC (2.2%), and San Jose (2.1%).

Emphasis added. Job growth is one thing. Recovery is quite another. Detroit has a long way to go back to peak employment. To attract migrants, demand for talent needs to outstrip local supply. That's Pittsburgh.

Relocation to Houston, Dallas, and even Boston isn't news. Some destinations don't change. However, the Great Recession did pick a few new winners in the vote-with-your-feet game. Pittsburgh is one of them.

Brain Drain Boondoggles: New Mexico Tax Credit

New Mexico must be flush with cash. State revenue isn't a problem. In these booming economic times, lawmakers are itching to give companies a tax credit:

A bill to reverse brain drain in New Mexico advanced Wednesday, though in slimmed-down fashion.

The proposal would give tax breaks to state businesses that hire students who graduate from New Mexico universities with advanced degrees in select fields.

To qualify for the $5,000 tax credit, a company would have to employ somebody with a master's or doctorate in science, technology, engineering, math or health from one of the state's three research universities. ...

... A company would get the tax credit if it hired a graduate for a full-time job with benefits for at least seven months in the first year.

Hey, leave the brain drain out of this. Call a tax cut a tax cut. Heck, it's really a subsidy. The money will suppress wages. Companies love a hometown discount. New Mexico wants to add some gravy to that meal. The bill has bipartisan support.

Graduates who would have stayed regardless (likely a strong majority) also represent a tax credit opportunity. A few who might have left will stay. The per capita cost for that brain gain will be astronomical. In essence, Republicans duped Democrats into slashing state revenue, all in the name of brain drain.