Talent Density Dividend

Michigan Future mines the archives of Edward Glaeser's New York Times blog. The post of interest reinforces the value of the talent dividend that CEOs for Cities is evangelizing. But the pro-urban living agenda misses the point. It's where the brains work that matters:

A stronger explanation for the social multiplier that exists between education and unemployment is the power of “Human Capital Spillovers,” which is econ-speak for the benefits of having well-educated neighbors.

In 1993, James Rauch wrote a seminal paper showing that holding individual education constant, wages rise with the skills of metropolitan areas. Enrico Moretti has taken over this topic and written sophisticated papers that look both across metropolitan areas and within firms, showing that supermarket workers get more productive when better workers are in their shift.

The more celebrated migration trend is that of residents moving from suburbs to downtown. Often this flow is conflated with proximity benefits and human capital spillovers. Increasing density of highly skilled jobs in the urban core is the real story here:

For decades, the suburbs benefited from companies seeking lower rent, less crime and a shorter commute for many workers. But now, office buildings in many city downtowns have stopped losing tenants or are filling up again even as the office space in the surrounding suburbs continues to empty, a challenge to the post-war trend in the American workplace and a sign of the economic recovery's uneven geography.

The talent density dividend concerns the workplace, not residences. Thus the army of urbanists advocating for cooler cities are overlooking a dramatic shift in economic geography. That's not to say that workers won't follow jobs back into the city. Just that the suggested policy agenda is misaligned with what is happening on the ground.

If you want to attract more college educated people to your region, then do a better job of clustering where they work. Redding up downtown is a losing proposition. Increasing residential density will save the municipality money, but it won't spark an economic turnaround. More vibrant neighborhoods will not better develop human capital. Shelling out millions for transportation won't increase educational attainment rates. If you build it, I doubt they will come.

The billions spent on talent attraction and retention are going right down the brain drain. It's a colossal waste. How many more cool city initiatives are we willing to endure?