Backwater Burgh

I've had a difficult time understanding the labor economics of talent shortages. People in the know inform me that businesses based in Pittsburgh are desperate for certain skills. The problem is that workers are unable or unwilling to move where the jobs are. But the real story is that management is unable or, more likely, unwilling to raise wages to attract labor. The financial incentives to relocate or even make a longer commute are not forthcoming.

I'm beginning to see why business leaders and other elites are keen to liberalize immigration policy. Where domestic migration is failing a region, tapping an already geographically mobile labor pool is a smart strategy. But a cynical polity isn't ready to embrace an approach that will keep the lid on higher wages. But natives must temper this hard line with the knowledge that business may leave the country in search of priced-right talent.

Fortunately, we don't have to play the above zero-sum game. Pittsburgh is a city engineering an economic turnaround in the Rust Belt without the benefit of substantial immigration. In order to take the next step, Vivek Wadhwa states that the region must find a way to attract more immigrant entrepreneurs:

Immigrants are risk-takers and natural entrepreneurs, Wadhwa said.

One quarter of U.S. computer and other technology companies that formed in the last decade had at least one foreign-born founder, said Wadhwa, citing a recent survey by his Duke team of more than 2,000 such companies.

The share is closer to half in Silicon Valley, Wadhwa said. But in Pennsylvania, fewer than 15 percent of new technology companies had an immigrant founder.

"You've got a major marketing problem here," Wadhwa said.

Mr. Wadhwa isn't describing more competition for domestic labor. He is suggesting that Pittsburgh lacks foreign born job creators. Immigrant workers are bound to follow the jobs, but so are domestic workers ... if the price is right. Concerning any kind of in-migration, Pittsburgh (and other Rust Belt cities) has a marketing problem. The typical parochial omphaloskepsis (I'm talking about the local political, business, and academic leadership) is exacerbating the talent shortage.

The missing piece to the economic development puzzle is the evangelizing of the shrinking city value proposition. A nationally competitive salary will go further in the Rust Belt and the quality of life is comparable to, if not better than, many Sun Belt boomtowns. Any talent strategy requires the means to effectively get the good word to the necessary workers.

I model migration in terms of the scarcity of information and knowledge. Thanks to the internet, there isn't a lack of information. If anything, there is too much. As for knowledge, face-to-face is still the best way to make that transfer. That's a big barrier to long distance migration.

I'll use my backyard city, Denver, to clarify. Anyone can look up climate statistics. The perception of Denver as a relatively cold and snowy place in the mountains is understandable. That bit of fiction is something the city uses to attract tourists. I'm confident that if more people knew just how pleasant the climate is here year round, we'd have a huge growth problem on our hands. The available information can't possibly capture this experience. The full extent of the region's value proposition isn't known until you spend some time here. Once again, proximity rules.

The work around is the network of trusted sources. Friends and family can give you the real scoop about Denver's weather. They can tell you where to find a job and which neighborhood is thankfully undervalued. You might be able to tease out the same perspective from a careful analysis of information, but who wants to risk the investment of all that time?

My Youngstown visit reinforced the above perspective. People living on one side of the city had no idea about the wonderful opportunities existing on the other side. There isn't a lack of information. There is a deficit of knowledge. What is the experience of living in these neighborhoods really like?

Which brings me back to the talent shortage problem. What are the data not telling me that I should know in order to better understand this issue?