Wednesday, January 25, 2012

Talent Migration Choke Points

If talent is the new oil, where are the choke points? When I think about global flows of talent, the first place that comes to my mind is Silicon Valley. Set up shop there, letting the best and brightest come to you. But choke points cut both ways. The concentration of traffic represents opportunity and vulnerability. Ryan Avent with the latter story:

Based on the data points in these stories, then, we have a rise in tech salaries in 2011 of 5.2% versus a rise in Silicon Valley rents of north of 10%. To the extent that falling real wages are discouraging people from moving to Silicon Valley to take advantage of the boom, the country is losing out on employment opportunities, a potential increase in incomes, and new business formation. That's pretty disappointing. And one then has to ask why the area's housing market is so tight. Historically, the answer has been slow growth in housing supply, which is itself a reflection of the development priorities of the local residents. Through November of last year, the San Jose metropolitan area had approved just 2,400 new housing units for all of 2011, with an additional 5,400 approved in the San Francisco-Oakland metro area. To put that into context, Fargo, North Dakota approved over 1,400 units over that period; Detroit approved over 3,000 units; Las Vegas approved over 4,600 units, and Houston approved over 28,000 new housing units in that time.

A tight labor market discourages entrepreneurship (Avent's first point in the blog post). The higher prices for housing discourages talent migration. This negative feedback loop is hurting job creation. Talent is too spiky.

Like talent, venture capital is spiky. Richard Florida remarks that this money is not as spiky as some think:

Venture capital investment can and does flow widely across regions and is attracted to areas with the best deals and strongest ecosystems for innovation and entrepreneurship. It is largely a myth that a lack of venture capital funds in certain places holds back innovation there. 

A tight labor market would seem to be a much bigger problem for regional innovation. Where is there an ample supply of free-flowing talent? Pittsburgh:

Google Pittsburgh's Bakery Square office was recognized as one of the coolest offices in the country last year, but wait and see the new floor, modeled after the Kennywood amusement park, says Jordan Newman, Google spokesperson. ...

... "The reason we're growing in Pittsburgh is there's a great pipeline of talent coming from CMU and other schools in the region," says Newsman. "There are so many great engineers coming out of the city. We're confident we'll be able to continue to find the talent here."

The boomerang effect has also brought many back to the region, he adds; residents who left Pittsburgh and chose to come back to work at Google. The region's strong economy has contributed as well.

Thinking of the US economic landscape in geopolitical terms, Pittsburgh is fertile ground for job creation. Better to be where the talent is produced than in a place waiting for talent to show up. So Portland fights for talent with placemaking strategies and Pittsburgh fights for entrepreneurship with the development of people.

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