Talent Retention Fuels Brain Drain

Is your region trying to keep the best and brightest from leaving? Those talent retention policies undermine economic development and, ironically, cause brain drain. The proof:

"I think the real punch line here is that it appears that it's the better inventors who are more likely to respond to these laws," Fleming says. "It's the people who have lots of patents, it's the people who have high-impact patents, it's the ones with many coauthors. Prior research has shown that the best engineer is worth much more than the average engineer. And if those are the people whom the states are losing, it's a big hit. Policy makers in these states are really shooting themselves in the foot. Some have argued that firms will not invest in R&D unless they can keep their people, but other research by Mark Garmaise at UCLA has shown just the opposite."

To that end, Marx and Fleming have shared their findings with government officials in their home state of Massachusetts, where legislators are considering a bill that would restrict the terms of non-compete agreements in the state. A hearing is set for September 15. Brain drain is arguably an issue in Massachusetts, which reportedly retains only about 60 percent of its college graduates.

You can read a copy of the unpublished report here. The case study looks at Michigan talent migration patterns. The results are fascinating:

Limited job mobility within a state that enforces non-competes is likely to entail higher opportunity costs for more productive inventors, with their past track record also making them more visible to and hence likely to be recruited by out-of-state firms. Likewise, those with significant past collaborative ties might have greater awareness of out-of-state opportunities through their professional networks, and hence be more likely to emigrate to the best available option even outside their original state. Interestingly, both of these kinds of elite knowledge workers are probably exactly the kind of talent a state would normally be particularly interested in retaining.

The best talent is less likely to stay in a state with a restrictive geographic mobility regime. You might retain greater numbers of graduates, but at a cost. You'll encourage the cream of the crop (innovators and job creators) to leave.

Over the 5+ years I've been blogging about brain drain, I've shifted my thinking from talent retention policies are ineffective to outright destructive. The underlying issue pits quantity of migration against quality of migration. Brain drain is commonly (and erroneously) phrased in quantitative terms. Shifts in population numbers do not indicate brain drain or gain. "More" doesn't necessarily mean "better".

This is the unspoken part of the shrinking cities paradigm. They aren't coming back. Graduates will continue to leave. The region can still thrive. But those aren't numbers that buy votes or justify economic development projects. And for that matter, won't sell books.