Pittsburgh And Seattle

I was recently asked to name three cities that have the best chance to be the next Portland. That ship has sailed. We should be looking for the next Nashville. Moving up the urban hierarchy, where is the next Chicago (#2 US city behind New York)? That would be Washington, DC. It's a game of using the old regime to understand the new economic geography.

I'm in awe of Pittsburgh's transformation. Playing the same game, what might the city become? I've already answered the question, settling on Seattle. The more I learn about Seattle, the more apt the comparison seems. It has gone from Rust Belt dump to shiny tech town in matter of a few decades. Microsoft moved from Albuquerque to Seattle via return migration. Now add to that the power of melancholy:

Countless Americans (and innumerable French artists and writers) have done their best work under la grisaille, as Parisians call their leaden ceiling. Ireland surely has more good writers and dramatists per capita than any country in the world. And in Seattle, you can’t walk outside for a snort of espresso without bumping into a newly published novelist who finally finished the tortured tome after escaping from somewhere with too much distracting sun.

Pittsburgh has its own la grisaille. My wife, a native, loves the climate. When I met Randy Pausch, of "Last Lecture" fame, my lasting memory of him is his stated regret of wasting so much of his life in a place where one couldn't enjoy the outdoors. In that regard, he hated Pittsburgh.

Born in Erie, I've lived in some gloomy places. But I couldn't hack it in Olympia, Washington. The dreary winter was too persistent. I've never been so depressed. The short days and constant clouds were debilitating. However, I do respond well to melancholy-fueled creativity.  In Pittsburgh, I can be functionally glum. I've experienced a similar balance living in northern New England.

Embracing the environmental determinism, Pittsburgh has the same mojo blessing Seattle. Creative thinkers can and do thrive there. It's an inspiring place that attracts talent because it develops talent. People develop, not places.

San Francisco Is Dying

When I write "the Creative Class economy is dying" I mean the Innovation Economy is converging. More cities are getting in on the talent attraction game. The makes life tough on established Creative Class winners such as San Francisco:

San Francisco is using millions of dollars in federal grant money to help train and educate local residents to make them attractive hires for the booming technology industry.

As The City celebrates its emergence as a tech hub around industry heavyweights such as Salesforce.com and Twitter, city officials are emphasizing the need to make sure some of the benefits accrue for San Franciscans who don’t yet possess specialized technology skills.

“A significant portion of San Francisco’s worker population lacks the skills and educational attainment to access these opportunities,” a city grant application stated. Back in the dot-com boom of the late 1990s, San Francisco’s demand for IT workers was met through “in-migration,” the application noted.

San Francisco is getting a talent production bail out. "In-migration" doesn't cut it any more. Suck it, Portland.

In contrast, witness the rise of Silicon Beach in Los Angeles:

L.A. has extraordinary resources to sustain and build upon its tech boom. Perhaps most surprising is its strong technology talent pool. UCLA, USC and Caltech collectively graduate more engineers annually than Stanford and Berkeley, major feeders of Silicon Valley. And L.A. tech staffers tend to possess more interdisciplinary skills than their northern counterparts, having developed expertise in cinema, communications, music, design and entrepreneurialism while pursuing engineering degrees.

Concerning talent production, :Los Angeles > San Francisco. L.A. tech firms aren't dependent on "in-migration". Thanks to Brian Kelsey (Civic Analytics), I got wise to U.S. talent production geography and L.A.'s importance to the pool of software developers:

And, if after all this talk about using labor market information to identify workforce availability in your region still doesn't produce the software developers you need, sign up for career fairs in Chicago, Pittsburgh, and Los Angeles. They led the U.S. in graduates prepared for software development jobs in 2006.

Better to be Chicago, Pittsburgh, or Los Angeles than San Francisco or Portland. Even if you don't buy my argument that the Innovation Economy is converging, San Francisco did apply for the grant. The in-migration of talent was deemed insufficient. Silicon Valley is sounding the alarm about return migration to India and China:

Friel stressed the importance of supporting education and training for the local population, "natural and immigrant alike," and doing whatever possible to keep the region attractive to talent from around the world.

At the same time, he said, "I don't think it's realistic or healthy to continue to rely on such a large inflow of engineering and science talent from abroad, particularly from Asia. This inflow has been the source of much of the Valley's historic edge in innovation, but conditions for these immigrants, support for their education, financing for their business ideas, have improved in their home countries and declined here."

Even as attracting and retaining top talent remains important to the region, California's investment in higher education is declining. While the total number of science and engineering degrees has leveled off, the percentage conferred to foreign students has been sliding in both the state and nation as a whole, the report notes.

Better to have a UCLA or a CMU than to be Creative Class cool. Talent attraction alone won't save your city. The economy is diverging to the places where the best talent is produced.

Peak Labor Force Pittsburgh

From Pittsburgh TODAY:

In fact, the total labor force figure of 1,265,110 is the highest labor force figure for the region ever.

Emphasis added. Ever.

China Is Dying

Silicon Valley is past its peak. That's the bellwether region for US economic convergence. The bellwether for global economic convergence is China. That country is past its peak:

More evidence of a shift in foreign direct investment away from China to other emerging Asian economies, headed by Indonesia, Vietnam, the Philippines and India.

HSBC says in a report that south east Asia’s share of global FDI inflows, which slumped from 8 per cent to 2 per cent after the 1998 Asian financial crisis, is back to 7.6 per cent – almost equal to China’s 8.1 per cent. With their young populations, these countries and India should see further FDI increases from companies looking to capitalise on low-cost labour, while Chinese inflows will slow as its population ages and its economy matures.

Author and HSBC economist Trinh Nguyen says that as well as the economic change in China, three global trends will drive FDI increases in the rest of Asia: cheap money in the advanced world, the renminbi’s appreciation, and economic stagnation in the developed economies.

Emphasis added. Inflows are slowing. The population is getting older. The economy is maturing. The action is diffusing to other upstart countries. Convergence.

Now the fun begins. Can China adjust? Economic activity is migrating away from legacy cost-burdened eastern coast inland to cheaper labor. Convergence is happening within the country, as well. For now, there appears to be enough frontier to keep things humming along.

Talent Attraction Crisis

There's war for talent within Silicon Valley. Then there is the war for talent with Silicon Valley. Immigrants are returning to China and India. More US metros are stepping up their game to attract and retain the best. The high cost of living, the crowds, and traffic are pushing people out of California. I assert that all of this has come to a head. The Creative Class economy is dying.

Concerning talent migration, what does all of the above portend? More places are competing in a talent pool that isn't getting any larger. The cost for innovation labor will impact the economic geography. The new firm location paradigm:

As in Pittsburgh, the Cambridge site began as a small operation near a major university that soon outgrew its space, turning into a name-brand presence designed to retain bright graduates who might have set their sights on Silicon Valley.

The Google Boston site -- sometimes referred to as Google Cambridge, with its address in Boston's brainy neighbor -- relies on a proximity to MIT. The school is a powerhouse supplier of Google candidates and plays the role that many experts say Carnegie Mellon will take here as graduates jockey to get an interview with one of the country's most distinctive employers. ...

... Months after Google announced plans to expand its Boston presence to a 60,000-square-foot space along the Charles River, competitor Microsoft said it would lease 136,000 square feet in a building that shares a subway stop with the Google office.

"One comes and then the other comes," said Mr. Anderson, who as a venture capitalist backed Pittsburgh-based ForeSystems, a tech business later acquired by Marconi.

But Google welcomed the new neighbor, said Steve Vinter, engineering director at Google Boston.

"I'm not worried about losing a candidate to Microsoft," he said. "I'm worried about the three candidates who leave for Silicon Valley."

It's a similar quandary in Pittsburgh -- a 2009 survey of electrical and computer engineering graduates of CMU found that while 49 percent of graduates found work in the Mid-Atlantic region, 24 percent moved to California, Hawaii or Nevada.

Emphasis added. To get a leg up on Silicon Valley competition, both Google and Microsoft put offices near where the most desirable talent is produced. Talent production attracts business. Better yet, exporting talent attracts business. Promoting brain drain is a serious economic development strategy.

That last sentence wouldn't make any sense a decade ago. A few places such as Boston, Silicon Valley, and Chicago were sucking up all the best talent. Your city had to be more than cool to lure the Creative Class. It had to be one of the few winners of agglomeration in a diverging Innovation Economy.

Today, the cool cities are where the talent is produced. That's Rust Belt Chic. It is a converging Innovation Economy and a diverging Talent Economy. Waterloo and Pittsburgh are ironic winners. Put a bird on it.

Brain Drain Boondoggles: Michigan Future

The pinnacle of brain drain hysteria is concentrated in three states: Michigan, Indiana, and Ohio. Every state complains about the outmigration of native sons and daughters. It's a product of our xenophobic tendencies. Politicians and policy advocates make a lot of hay exploiting these fears. In Michigan, Indiana, and Ohio, the annual cycle of brain drain boondoggles is alarming. The appetite for silver bullet retention efforts is insatiable. The latest rhetoric from Michigan:

Internships have been described as everything from slave labor to a gateway to success. For president of Michigan Future Inc. Lou Glazer, internships are a vital piece to Michigan’s economic success. ...

... Glazer’s Ann Arbor-based think tank, as well as many others across the state, view Michigan’s “brain drain” exodus of recent college graduates as something that can be combatted with the right combination of job opportunities and a cultural shift.

“Young people want to go where there’s good quality of place and where other young talent is concentrating. That’s what Michigan is having problems with and why so many of our talent young people go to Chicago.”

Combating brain drain undermines economic development. Any initiative that would decrease geographic mobility is anti-talent. An extreme example of Glazer's wrongheadedness is China's hukou system:

China has long forbidden such workers from putting down roots under a system of household registration, known as the hukou, developed to keep the rural poor from swamping the cities. Without a city hukou, migrant workers are forbidden from tapping local social benefits and have difficulty sending their children to local schools—with the result that many leave their offspring in the care of grandparents back home.

Economists and a rising number of Chinese policy makers say the hukou system gets in the way of turning migrant workers into a more stable, productive work force that could also further China's goal of rebalancing its economy toward more consumer-driven growth. The hukou system contributes to a shortage of workers in cities as it encourages migrants to return to the village when it comes time to raise a family.

Hukou effectively clamps down on brain drain. More people remain in rural areas. Return migration is all but guaranteed. Instead of hukou, Glazer promotes internships. The desired result is the same.

The policy goal of talent retention is perverse, akin to encouraging someone to skip college. It's good for local businesses because the glut of talent suppresses wages and makes headhunting less expensive. Community interests trump individual ones. The bigger picture is a less vibrant national and global economy. We all lose so Ann Arbor might gain.

A better internship program would focus on attracting graduates from out-of-state schools. A prototype is Bulldogs in the Bluegrass, which brings Yale college students to Louisville, Kentucky. The very act of migration is economic development. Michigan would benefit more if it focused on talent attraction in lieu of retention. More people would realize that Ann Arbor is a great place to live and work, instead of the geographic stereotype of ruin porn Detroit. People develop, not places.

Chicago Is Dying

I've covered Chicago's decline, but not as exhaustively as Aaron Renn has done. Chicago remains an important global city. The core is world class. The size of the metro economy and the wealth that has agglomerated there are redoubtable. To be even more diplomatic about the problems, paraphrasing Aaron, the city is in relative decline. I want to consider the prospects of absolute decline. Economic convergence is killing Chicago:

Their children, Mexican-born, still consider Chicago their home and long to return. One wears his Chicago school sweater over the uniform issued by his Mexican school. His classmates, noting his fluency in English, call him gringo. But his parents are certain they have made the right choice, even if the boys were on a path to qualify for legal status in the U.S.

In Chicago and across the country, immigrant families are making the same calculations. Their American dreams have clashed with the reality of low-paying jobs that offer little chance for advancement or middle-class security. ...

... The people leaving Chicago all have a story of their own. Many, like the Barcenas family, sought safety and opportunity. Their children grew up in Chicago, melding into the city's schools and playgrounds as generations of Poles, Irish and Italians did before them. And, they hoped that Chicago would be where they would find happiness and a home.

Now those dreams lie elsewhere. ...

... In an increasingly global economy that is less dependent on the U.S., they told their children, success is possible anywhere.

In Mexico, "we know how to move the levers," Xochitl Barcenas said. "We know the system."

"If you want to return to the United States, you can return with an international company," her husband told their sons. "Or, if you prepare well, you can fit in anywhere."

The Mexicans fleeing Chicago and returning to their home country are indicators of a tectonic shift in the global economy. Many US cities that thrived during the Innovation Economy may find the going tough in the post-financial crisis world. Chicago is on the wrong side of this divide.

Whether you are from Mexico or Iowa City, you no longer need to move to Chicago to make your mark. If you are gung ho to leave, you'd be better off in New York, DC, or Philadelphia. Return migration is devastating Chicago.

I expect the brain drain to pick up pace over the next decade as more people figure out the opportunities available in Pittsburgh, Cleveland, and San Antonio (three places I've studied). The emerging Talent Economy favors such metros. Chicago has a long way to go towards understanding how to grow economically in the face of demographic decline. It knows how to be a talent magnet, not much else.

Yet there sits a global city on the shores of Lake Michigan in defiance of all the critics and alarmists. Mexico's rise doesn't matter. Life goes on inside the Loop, where everything seems as good as it ever was. As you were.

Cleveland Is Dying

Brain drain is the first step towards brain circulation. What good is brain circulation (i.e. return migration)? Three conclusions from empirical research:

We find that:

• When individuals with foreign experience join the board of a company, the firm’s valuation improves;

• Its total factor productivity increases; and

• In the subsequent years, the firm’s profitability increases.

We also show that these improvements in performance are accompanied by changes in corporate policies that are generally set by the board:

• Firms’ propensity to manage earnings decreases and CEO turnover following low profits increases, indicating that corporate governance improves

• Among the firms that make mergers and acquisitions, the ones with board members with foreign experience are more likely to make an international merger or acquisition.

This suggests that these firms are able to access a broader range of investment opportunities. Similarly, firms with board members with foreign experience are able to access more sources of external financing, as they are more likely to engage a foreign investor when raising capital through private placements than other firms without directors with foreign experience.

Third, firms that hire directors with foreign experience start exporting more.

Putting a return migrant instead of a local on the company board is better for the business. I conducted return migration focus groups for Global Cleveland. Many participants expressed frustration with the lack of opportunities. The networks of power were parochial. Locals only. Too much social capital was (still is) killing Cleveland.

Return migrants are social capital rich, outside of their hometown. These networks could serve as a catalyst for entrepreneurship and economic development in Cleveland if the community would do a better job of recognizing the value of this talent pool. A good place to start is stopping with the population obsession. People develop, not places.

Rethinking Pittsburgh

I have a love/hate relationship with place PR articles that show up in venues such as airline magazines. You see what civic boosters want you to see. Their job is to sell the city to business, talent, and tourists. Discerning the real from the hype is difficult. But that's not to say these puff pieces are useless. Pittsburgh in the latest issue of fDi (a Financial Times publication):

Although financial incentives since the 1980s have been attracting entrepreneurs,finding skilled workers or persuading them to move to Pittsburgh has proved to be difficult. “When I was recruiting people in the late 1980s, the standard response was ‘I do not want to move here’. Attracting talent was a challenge then,” says Mr Yablonsky, who at that time was managing Carnegie Group, a software solutions company.

To attract skilled employees to his Carnegie Group, Mr Yablonsky says that he“started a ‘boomeranger’ strategy”. The main premise of that initiative was targeting people who had links with Pittsburgh, either because it was their home town or where they went to school, and persuading them that Pittsburgh was a perfect place not only to work, but also start a family. “Eventually our company grew to total of 250 people, out of which ‘boomerangers’ constituted one-third of the total headcount,” says Mr Yablonsky.

Now Mr Yablonsky applies that strategy in his role in the city’s economic development agencies and says that a lot of businesses in Pittsburgh recruit their employees by searching for ex-Pittsburghers. Mr Yablonsky himself could be described as ‘boomeranger’. Born in Pittsburgh, he worked for many years in Cincinnati, Ohio before returning.

Emphasis added. I'm surprised that the fraction of boomerangers employed was so small. Pittsburgh has an image problem that still persists. Attracting outsiders is tough. It is what I call the "Ann Arbor Dilemma". Ann Arbor is in Michigan, near Detroit. Executives and other talent fear ruin porn. No matter that Ann Arbor is an attractive college town. It's in the Rust Belt, a hell hole.

The geographic stereotype sets up the Pittsburgh surprise, if you can convince the skeptics to do a little digging:

At the heart of the Pittsburgh revival story lies a strong research funding backing and a score of incubators helping local businesses to grow.“At the end of 1990s, I was aware there was a stream of research funding in south California and that it creates the environment for companies to grow. And I found out that Pittsburgh actually receives more biomedical research money than California. I checked it and it turned out to be true,” says Thomas Petzinger Jr, executive vice-president of Knopp Biosciences, a Pittsburgh-based pharmaceutical company that works on treatments for Parkinson’s disease and sclerosis.

Emphasis added. Pittsburgh? Yes, Pittsburgh receives more biomendical research money than California. All of California? Ask Petzinger. Definitely ironic if factual.

I sense the negative mesofacts impeding migration to Pittsburgh are quickly retreating. Newcomers will outnumber boomerangers. Inflows of venture capital will grow dramatically. The mental map of globalization will be amended. 2013 will be a great year. Suck it, Portland.

Creative Class Mesofacts

Yes, geography still matters. But that doesn't mean the world is getting spikier instead of flatter. And even if the world is getting spikier, that doesn't preclude it from getting flatter at some point in the future. Transformation takes time. Mesofacts are facts that are no longer true. Today's migrants are chasing yesterday's dream city. The Creative Class economy is dying.

2013 will be a year of reckoning for Creative Class mesofacts in dire need of updating. Richard Florida made too much of CMU graduates bolting Rust Belt Pittsburgh for cool Austin. The Steel City didn't have enough rock bands and gays to cut it. It still doesn't, but now Pittsburgh is cool. The buzz will likely attract rock bands and gays, proof that world is spiky.

Yes, the world is still spiky. Pittsburgh is proof that it is getting flatter. You needn't live in Los Angeles to work for Disney. The entertainment technology industry is diffusing (i.e. converging). A similar story is developing in Brighton, U.K.:

A modest office block around the back of Brighton train station looks an unlikely place for Disney’s European base for its hit kids’ games website, Club Penguin, but inside there is a clue. National flags for Spain, Portugal, France and Germany mark out how each area of the brightly-coloured office caters for a different language.

Many of the young staff of around 60 people, who sit at computer screens, managing the online chatter between kids who play on Club Penguin, have been recruited locally.

Brighton’s youthful cosmpolitan population — there are a string of language schools as well as two universities — was a big attraction for Disney when it expanded Club Penguin beyond North America in 2008. “We knew we’d be able to hire the key people with language skills,” explains Simon Pollard, a manager at Club Penguin.

“We could have chosen London,” he adds, but there was a cultural fit with Brighton as Club Penguin itself was founded in a small city, Kelowna, in Canada. And Disney already owned a computer games studio in Brighton, Black Rock, which it bought in 2006.

In the digital age, where anyone with a broadband connection can have global reach and talent is mobile, being based in a major city like London is no longer essential for a media company. Ricochet, the TV firm behind Supernanny, Gok Wan’s Style Secrets and Blood, Sweat, moved to the South Coast for just that reason.

“This used to be a London company with a Brighton outpost,” recalls Ricochet managing director Jo Ball, thinking back a decade, when founder Nick Powell pushed for the relocation because his home was in Sussex.  “Now it’s a Brighton company with a small toehold in London.” Significantly, US giant Warner Bros, which bought Ricochet in 2010, hasn’t wanted to change it.

Brighton’s seaside charms and its reputation as a liberal, party-loving town have always appealed to creative types. That has only increased as living costs in London have soared.

Emphasis added. Talent is geographically mobile. The technology exists that would allow this talent to live anywhere and still lead highly productive lives. Then why was this talent agglomerating in a few cities such as London? That's the Creative Class paradox.

Agglomeration can't go on forever. At some point, the rent is too damn high. London is at that point. Brighton is the beneficiary. The world is getting flatter.

Pittsburgh Over Portland Hype Continues

Around this time in 2012, Pittsburgh was "in" and Portland was "out". New year, same story:

WE FOUND THEM TO BE ABOUT HALF PRICED.GOT A DECENT HOTEL ROOM FOR ABOUT $100 A NIGHT. >> ANOTHER PLACE THAT A LOT OF PEOPLE DON'T TYPICALLY THINK TO GO ON VACATION THERE IS PITTSBURGH, PENNSYLVANIA. >> RIGHT. >>xx THIS IS REALLY MAKING A COMEBACK. >> IN THE TRAVEL INDUSTRY WE'RE LOOKING ALWAYS FOR THIS HOT NEW AMERICAN CITY.PORTLAND, OREGON, HAS HAD THAT CROWN FOR MANY YEARS.PITTSBURGH MAY STEAL THE CROWN. >> PITTSBURGH IS THE NEWPORT LAND. >> YES.IT HAS ITS OWN MINI SILICON VALLEY.IT HAS GROWING RESTAURANTS, MICROBREWERIES.AGAIN, AFFORDABLE.DEFINITELY WORTH A LOOK. >> OVERSEAS TRAVEL, MARSAILLES,

That's the unedited closed captioning from the TODAY Show clip for hot destinations in 2013. You can view the entire segment here. (Pan down to the bottom of the article for the embedded video.) For some reason, Kate Maxwell's (Jetsetter.com) slip up of "Liberty East" is omitted. That's the location of the "mini-Silicon Valley". Pittsburgh is the hot new American city, displacing Portland. Put a bird on it!

Population And Immigration

Ohio is dying. At least, that's the dominant narrative. The press and politicians recycling outdated mesofacts:

In addition, the Census data show that Ohio continued to lose residents as people move elsewhere in the nation. While the state gained more than 33,000 people from international migration during the last two years, the data show, it lost 84,528 people who moved to other states.

The total migration loss of more than 51,000 people was counteracted by the state having about 60,000 more births than deaths from April 1, 2010 to July 1, 2011.

“Without question,” Nichols said, “until Ohio has a sustained period of economic growth and job creation, this will remain a concern.”

Ohio’s population growth is so weak that it is likely inevitable that the state will soon see population loss for the first time in its history, said Mark Salling, research associate with the Maxine Goodman Levin College of Urban Affairs at Cleveland State University.

“If the economy were to pick up, especially in Ohio, we might avert this eventual loss of population,” Salling said. “But without being able to foresee any major changes in the economy, the loss has got to happen soon. But then again, five years ago I was saying it would happen any year, and it still hasn’t happened.”

Population growth, not economic growth, is the policy goal. If we looked at domestic migration (ignoring immigration and natural increase), then we see a surprising group of losers. The only thing that seems to matter is net migration. People vote with their feet. The winners are where the population is increasing, regardless of the reason behind the boom. Population up, good. Population down, bad.

I use Reading, PA to point out the absurdity of this perspective. Much of the eastern part of the state is growing thanks to an influx of Hispanics. This supposed change of fortune has given rise to the idea that immigrants can save the Rust Belt. I investigated the hype for Global Cleveland, an organization dedicated to bolstering Northeast Ohio's population. What I found was not immigration, but domestic migration. Hispanics are fleeing the high rents and low quality of life in New York for the opportunity landscape of Rust Belt cities. The Creative Class economy is dying, not Ohio. Domestic migration and natural increase are boosting the numbers, not immigration.

I'll return later in this post to the Reading case. I've emphasized "natural increase" in view of demographic convergence evidence:

Latinos suffered larger percentage declines in household wealth than white, black or Asian households from 2005 to 2009, and, according to the Pew report, their rates of poverty and unemployment also grew more sharply after the recession began.

Prolonged recessions do produce dips in the birthrate, but a drop as large as Latinos have experienced is atypical, said William H. Frey, a sociologist and demographer at the Brookings Institution. “It is surprising,” Mr. Frey said. “When you hear about a decrease in the birthrate, you don’t expect Latinos to be at the forefront of the trend.”

D’Vera Cohn, a senior writer at the Pew Research Center and an author of the report, said that in past recessions, when overall fertility dipped, “it bounced back over time when the economy got better.”

“If history repeats itself, that will happen again,” she said.

But to Mr. Frey, the decrease has signaled much about the aspirations of young Latinos to become full and permanent members of the upwardly mobile middle class, despite the challenges posed by the struggling economy.

Regions attracting Hispanics can no longer bank on a demographic dividend. The birth rates for Hispanics are more in line with the rest of the US population. Going forward, the number boost will be much more muted. Frey's analysis dovetails well with my own research. Hispanics are migrating for upward mobility opportunities, which is what I recommended Global Cleveland extend to potential migrants in areas such as the Lehigh Valley. It's a residual flow that is short on population growth but long on economic development.

Circling back to Reading, Hispanic migrants are being pushed there. Lacking is an economic pull. Poverty rates have skyrocketed in Reading along with the population growth. Opportunities are limited. Economic activity in population moribund Pittsburgh beckons. More people is not, in and of itself, a good thing. People develop, not places.

2013: Year Of The Return Migrant

The Creative Class economy is dying. The talent that agglomerated in a few winning metros is now returning home, to places with more opportunity. Big fish, small pond Miami:

Even after being back in Miami for four years now and seeing my peers leave in a heartbeat, I still get asked why I haven’t left. My simple answer: “You can create in Miami. You can’t in D.C., Atlanta, New York, etc.”

While I love those cities and credit Atlanta for my entrepreneurial and professional development, those cities are oversaturated and everything you’re thinking about doing is already being done and dominated by someone else. So while it is true that you can easily experience a different level of living in those cities, you will just fit with the pack.

If you want to be a change agent; if you want to be part of something new and big, especially as an emerging leader, then you need to be in a city where you can create, and that’s right here in Miami.

The opening salvo in this piece is classic Rust Belt Chic migration, "Miami raised, Tallahassee educated, Atlanta sharpened, and now back in Miami using my social, business, and political capital to do good for something bigger than myself."

She went away to university and moved on to Big City before coming back to help redevelop her hometown. Brain drain isn't a problem to be solved with cool urban amenities and other boondoggles. It is the first stage in the enrichment of an individual who maintains strong ties to a community.

I think of New York and Atlanta as cities that excel in the economic development of people. Other cities, such as Pittsburgh and Boston, do a world class job of producing talent that can migrate to Atlanta to be sharpened. The best talent will spend at least part of its career in an alpha global city. That migration is brain gain, not brain drain.

But why move back home? Because "if you want to be part of something new and big, especially as an emerging leader, then you need to be in a city where you can create". That city might be San Antonio, Cleveland, Philadelphia, or (in this case) Miami. Rust Belt Chic.

Trouble In Portland

Portland is a talent magnet. It is also part of a western states boom indicative of how the Innovation Economy is converging. The end of agglomeration:

Software defines what is possible on your smartphone or tablet. It is unlikely that any sector of the economy will be more important in the foreseeable future, yet the United States is training far fewer software engineers than are needed. It is unlikely that this trend will change soon, and thus the competition for talent is here to stay. Regions that win this battle will have a significant and sustainable economic advantage over regions that lose.

The good news for Oregon, and western states in general, is that right now we are winning that war for engineering talent. And not just winning, but dominating: Seattle, Portland, the San Francisco Bay Area, Los Angeles and Denver are just a few of the cities that have an established track record of building and maintaining powerful technology franchises.

Salesforce.com was said to be considering Salt Lake City or Portland for its big expansion; despite their iconic status, cities like New York, Chicago and Boston weren't on the list. This is not an anomaly but an acknowledgment of the reality that to attract the technical creative class, firms need to locate in the western United States.

Emphasis added. Salt Lake City and Portland are the new kids on the block. They are cheaper and more attractive alternatives to the old guard still sitting at the top of the urban hierarchy. The world is flat.

Portland has a problem, a big problem. As the Innovation Economy continues to converge, more cities will be competing for talent such as software engineers. Salesforce.com won't be able to bank on Portland winning the war as new hot spots pop up around the country. Young, college-educated adults are geographic whores. Instead of relocating to hip Portland, firms will move to where the talent they want is produced.

Rust Belt Chic: Economic Convergence Killing NYC

I've written a fair amount about the struggles of New York City. Talent is expensive. The rent is too damn high. The pressure to get out is tremendous. Many of these real estate refugees are popping up in Philadelphia. It's a return migration, one of the hallmarks of the Talent Economy. This vanguard is gaining confidence, getting downright snarky:

Here’s something to celebrate: The fact that the Brain Drain is not what used to be. Even a few years back, when people told you they were leaving Philly to go to NYC/LA/Whatever, it was a real reaction that you’d smile at them sadly, wish them well and then know that you’d never see them again. Nowadays, anytime people tell us they’re leaving, you can hear the wooden balls in our heads clacking together from how hard we’re rolling our eyes. So sure, go the leaving party/big show for comedians Shannon Brown and Brendan Kennedy, Sideshow Presents: Know When To Leave, send ‘em off right, but know in your heart of hearts that they’ll be back in 18 months. Why? Because NYC is a load of horseshit; East Coast bodies can’t understand LA; Portland is insufferable; and now is the best time to be HERE than perhaps there ever has been. We’ll leave the light on for ya.

This attitude adjustment is recent, very recent. Philly has seen its share of brain drain boondoggles. The issue is alive and well. Strange to read about people leaving and locals responding with a shrug of the shoulders.

The place smack is remarkable enough. The positive self-image is Rust Belt Chic, "... now is the best time to be HERE than perhaps there ever has been." The usual mantra was, "... ANYWHERE but here."

Many Rust Belt cities are entering a special era. New York is crumbling infrastructure and crushing legacy costs. Philadelphia is the urban frontier. However, some places just don't get it. Case and point Milwaukee:

The Milwaukee Water Council, the trade group that aims to coax new jobs and investment from the water technology industries of southeastern Wisconsin and change the region's rust belt image in the process, quietly has dropped the word "Milwaukee" from its formal name.

The 5-year-old Water Council is not disavowing Milwaukee, said Executive Director Dean Amhaus. If anything, no other economic development initiative rivals the Water Council in terms of rebranding the metro region and creating buzz for the city at international trade shows, third-world development forums or whenever the global economics of water are discussed.

But the work of the Water Council has become global in its nature and the organization wants to jettison anything that smacks of provincialism, Amhaus said.

Really? I would be doing everything in my power to connect the name "Milwaukee" with "world class water technology cluster". The two should be synonymous.

The article goes on to put Milwaukee on par with Paris, which is the theme of this post. Milwaukee has nothing to be ashamed of. "Rust Belt" has gone from pejorative to positive in what seems to be only a few months. Someone mail Amhaus a copy of "Rust Belt Chic: The Cleveland Anthology." We all want something that smacks of provincialism.

Germany Is Dying

Germany is starved for talent. Residents of Spain are hungry for jobs. Both countries are members of the European Union. One big, happy labor market, right? Wrong:

Class of 2012 participant Rafael Gonzalez del Castillo speaks German and could work in Germany. He picked up the language on a student exchange program in the southern town of Darmstadt and lived with German flat-mates in Madrid. But, in perhaps an alarming sign for Europe, he sees more opportunity and cultural affinity in booming Latin America — and has started to learn Portuguese so he can see work in Brazil.

It's part of a rising trend in Spaniards departing for former European colonies in Latin America, meaning that Europe is losing much of its top-level talent to emerging economies.

"I see Brazil as a country that's going to grow so much in these years," said Gonzalez del Castillo, "And I feel close to them because we are Latin people, and our language is similar."

Oh, sweet economic convergence. Better to be in Brazil than in Germany. The gist of the article concerns culture, namely language. Navigating an international border is less daunting. You go where you know.

Looming larger is opportunity. Brazil is growing and Germany is dying. Europe is dying. In the face of crisis, a talent pipeline is being built between Spain and Brazil at Germany's expense. Creative Class Berlin is over. Sao Paulo or bust.

London Is Dying

Still reeling from the shock of the financial crisis, the world continues to get flatter. Talent that used to agglomerate in Creative Class cool cities is fleeing to cheaper locales as the convergence of the Innovation Economy accelerates. London is the latest evidence of this sea of change:

London laid the foundation for my profession. The City’s legal system has boasted a global reputation for excellence ever since, and its model has become the envy of the world. But this, perversely, is the problem. London has become the victim of its own success. International centres, particularly in Asia, are seeking to attract legal and arbitration services, once rooted firmly in the City, by copying its model.

Singapore and Hong Kong are prime examples, with the latter inheriting its legal framework directly from the British more than 150 years ago. With 1,300 foreign lawyers now stationed in Hong Kong, a former British colony that owes so much to the City’s system is now positioned to supplant it.

What is the appeal of practice in the east? In a word, cost. On this London has been the author of its own decline, particularly when it comes to arbitration services. The attraction of arbitration lies in its speed and low cost relative to court-based litigation. Yet the City’s arbitration system is increasingly mimicking the practices of its more expensive legal cousin. Fees in the UK are on the rise, and, as more businesses look to arbitration services, cheap international alternatives to London are competing for their custom.

From the linked text in the first paragraph:

Firms are moving high-volume work to other cities such as Belfast, while new forms of legal process outsourcing, or LPO – some of which firms are investing in – are emerging.

The economic geography that Richard Florida made famous is dying. The iconic metros of each economic epoch are victims of their own success (e.g. Detroit and the Manufacturing Economy). We are entering a new era that will have its own group of winners (and losers) as talent agglomerates someplace else for reasons that are not yet clear. Why pay London rents when your firm can be just as effective in Belfast or Wheeling, West Virginia?

I think we can bank on more regions competing for the same talent that used to only gravitate towards alpha global cities such as London, which will make the cheaper locations even more attractive. A concurrent trend is the maturing of social media technologies as our soft skills catch up with recent innovations:

For Cowen, people who can find inexpensive, tasty food are the same type of people that use information to make themselves more productive economically. In his book The Age of the Infovore (2010), he argues that the internet means information can be better absorbed, organised and deployed than ever before. “That’s where contemporary innovation is at, in lieu of the flying car, or the teleporter, or the trip to Mars.”

Cowen is walking-talking-tweeting evidence for his theory. Why, then, apart from an early surge in the 1990s, hasn’t the internet led to more measurable economic gains? “My view of the internet is that it is way overrated in what it’s done to date but considerably underrated in what it will do.” He notes that it took decades for earlier major inventions to have institutions built around them, such as roads for cars and grids for electricity. “If you’re an optimist about what has come before, you tend to be a pessimist about what’s on the way.”

Emphasis added. The Flat World hype was premature, not wrong. As for the world is spiky, that's yesterday's economy. Innovation is diffusing, not agglomerating.

If you want to see where we are headed, I highly recommend "Borderless Economics" by Robert Guest. Brain drain is dead. People develop, not places. Exporting talent is better than attracting talent.

Income Per Natural

Migration is economic development. We can't see that because of our place-centric perspective. European Union crisis:

Now, the new right to work anywhere is bumping against old prejudices about crossing national lines. There are new strains in the partnership, with some Germans fretting about the influx and Spanish and Greek policymakers worried that their best hope for recovery is vanishing one plane ticket at a time. ...

... Germany’s gain is Spain’s loss, and Bernedo said that she has no plans to return — for now. In a few weeks, her husband and 5-year-old son will move to Germany, too. The Spanish Embassy has collaborated on programs to find work for its citizens in Germany, and every emigration eases the pressure on Spain’s frayed safety net. But some who stay put in Europe’s struggling countries have expressed frustration with Germany, saying it pushes austerity on its neighbors and reaps rewards for itself.

“Our country is really upset” about workers leaving, Bernedo said. “They’re thinking, ‘We’ve paid for their education, and now they’re producing for Germany.’ ”

Of course, Spain doesn't like the zero-sum game of migration. Germany doesn't, either. Both places lose. That's the story behind income per natural, a different way of measuring economic development:

Eubulides of Miletus, a Greek logician of the 4th century BCE, formulated a paradox known as the sorites (“heaps”): One grain of wheat is not a heap of wheat, and if one grain is not a heap then two grains are not a heap, and if two are not then three are not— therefore ten million grains of wheat do not constitute a heap. Eubulides’ purpose was to point out the inherent indeterminacy of the word ‘heap’. Of course there is a point, an inescapably arbitrary one, at which a collection of grains is a heap.

By the same token, there is a certainly a degree of migration at which migration becomes economic development for the people from a particular place. If sea levels were to rise just 7½ feet (2.3m), all 300,000 current residents of the low-lying nation of the Maldives would become emigrants. Income per resident (zero) would cease to contain information about Maldivians’ welfare, or the degree to which they produce, consume, or exchange goods and services. The question is not whether migration can be economic development, but rather at what point do we consider migration an important form of economic development? Only numbers can suggest an answer to this species of question.

The initial estimates made here do point toward an answer. Over a billion people live in countries whose collective income per capita would rise more than 10% if considered as income per natural rather than income per resident. Put differently, for those billion people departure from the country is one of the largest national “industries” in terms of its contribution to average material welfare per person of naturals. It is likely that by a reasonable international standard of poverty, two of every five living Mexicans who have escaped poverty did so by leaving Mexico; for Haitians it is four out of five. And on the order of tens of thousands of infant deaths are prevented each year for the sole reason that those infants’ parents left poor countries. Although there is no clear point at which migration becomes development, we suggest that by any reasonable standard a very large part of the developing world is already past that point.

This is not at all an abstract observation. Measuring economic progress as if migration is not a form of development leads to bizarre conclusions by making a line in the sand the only consideration. If a Nicaraguan woman working in Arizona sends $200 a month to her impoverished spouse in Nicaragua, that can spur ‘development’ by common wisdom. But if her spouse goes to join her in Arizona and acquires a $2,000 per month lifestyle, that is not considered ‘development’. The woman and her spouse would likely disagree. On the sending-country side, should the Federated States of Micronesia be subsidizing education that prepares its workers for the local labor market or the global labor market? The government will arrive at very different policies depending on whether or not it sees migration as a form of development.

James Scott’s (1998) Seeing Like a State profoundly illustrates how nation-states use statistics to reduce people’s lived reality to statistics amenable to state enumeration and control. Few developing-country governments arrange their interventions in such a way as to maximize the welfare of their people rather than their place. Likewise, few rich-country governments set their policies related to immigration or development assistance in due consideration of their effect on people rather than places. As long as most people stayed put and international welfare disparities were small, acting as if patches of ground had welfare of their own made little difference to people’s lives. But that era is ending, and we need to prepare the statistics to see the real, not imagined, world.

Emphasis added. Workforce development is local and, ironically, isn't focused on the economic welfare of people. It is focused on the economic welfare of a place. That may have made sense a few decades ago. Given globalization and increasing geographic mobility (e.g. urbanization), current workforce development practices are counterproductive. The migration from Spain to Germany isn't a problem. It's a solution.

To frame outmigration as a negative outcome, as brain drain, is ridiculous. Regions are engaged in workforce development that benefit local companies at the expense of people. Discouraging geographic mobility is the same as restricting access to higher education. Retention initiatives are, fundamentally, xenophobic.

Worse is the backlash against talent attraction. Back to Germany, the "winner" of the zero-sum game:

But many ordinary Germans view their new neighbors with caution. A recent local television show about some of the Spanish engineers was called “Dr. Guest Worker,” a reference to a 1960s program that brought Turkish manual laborers to Germany without granting citizenship to them or their children. The Turkish workers never returned home, but many Germans never welcomed them, creating an underclass with fewer rights and fostering resentments that persist to this day.

Spain isn't happy about losing talent. That makes sense. Why is Germany unhappy about gaining talent? It should measure income per natural:

There is a point to this exercise: 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.

Arriving migrants reduce the average income in the destination country. We ignore the gains and highlight the negative impact on a place.On a global scale, a person is making 50% more in wages. On a national scale, two places record a drop in average income. Brain drain is bad. Places develop, not people.

Ironic Migration: Washington, DC

We recognize boom towns as an effect without cause. The "analysis" for the influx of migrants is actually a synopsis of just how good it is. The positive feedback loop machine:

"Washington, D.C., is unique because over the last five years its unemployment rate was not hit as hard by the Great Recession," said Michael Stoll, chair and professor of public policy at the University of California at Los Angeles about the study. "But I think the other thing is that the city has remade itself from the one we knew 10 to 15 years ago."

Emphasis added. The topic sentence is begging the question. Yes, the city has transformed. Why? How? From the same article:

Thirteen years ago the band The Magnetic Fields crooned that the U.S. capital city is "the greatest place to be," in the indie love song "Washington, D.C."

Recently, a growing number of Americans are singing along as they move to the District in search of jobs, economic opportunity and cultural attractions.

In a study on migration provided exclusively to Reuters that is set to be released next month, United Van Lines found the District of Columbia tops all 50 states for the number of people moving in during 2012.

The Magnetic Fields is an ironic migration indicator. I remember feeling the pull in Pittsburgh way back in 1997. Yinzer hipsters were heeding the siren call of the U Street corridor, longing to hang out at Black Cat and the 9:30 Club. This urban pioneer attraction sapped Pittsburgh's own revitalization story, which would be buried in the rubble of the Dot-Com Bust. The entire scene picked up and moved to DC.

Why DC popped and Pittsburgh did not is still a mystery to me. While DC is now in full bloom, Pittsburgh is enjoying its own recession renaissance. Pittsburgh is the greatest place to be, its gravity experienced in the neighborhoods of DC's spiraling rents. The new U Street is Penn Avenue.

The Pittsburgh talent migration is roughly a decade behind DC, a good projection of where the city is headed. Why? How? I don't know. A boom town is an effect without cause.

Brain Drain Boondoggle: LA Tech Corridor

I study ironic geography. I get a thrill when a map undermines a mesofact. The urban core of a center-less city:

Writer Dorothy Parker once haughtily dismissed Los Angeles as “72 suburbs in search of a city.” But the research of USC alumnus Samuel Krueger shows that the City of Angels actually does have a focal point.

Krueger set out to analyze how Los Angeles fares as a structurally cohesive city from a scientific point of view for his thesis in the Geographic Information Science and Technology (GIST) master’s program at the USC Dornsife College of Letters, Arts and Sciences.

“On an emotional level, I get tired of people saying that LA is not a real city, so I wanted to show that it has a center just like any other city,” Krueger said.

Emphasis added. A real city is "New York or Chicago or Paris." The perception that LA doesn't belong in that urban peer group can negatively impact migration and economic development. It can also lead to bad policy decisions:

The Los Angeles Mayor's Council on Innovation and Industry (LAMCII) has been meeting since March, to help identify the top issues facing growth companies in the region, and to propose activity to spur additional entrepreneurial activity and innovation, according to the group. The group said that it is hoping to promote the path of the current Expo line as a new technology corridor, to create new "innovation hubs" along the corridor. The idea, according to the LACMII, is to use city-owned parcels to create community spaces and working environments to enable startups and businesses in those areas, using "tech-friendly amenties" to attract startups to those locations.

The group also said it plans to launch a new program called the Edge.LA Fellowship Program to connect the city's many new graduates with local businesses and entrepreneurs, and new efforts to help entrepreneurs find resources like accelerators, commercial real estate, and more. The group said it found that since 2008, 54% of UCLA's engineering graduates have chosen to relocate from the area, which the group called a "brain drain" to the region.

Los Angeles plans to build a city center. It already has one. (Actually, both LA and Pittsburgh are polycentric.) Worse, LACMII is selling this real estate boondoggle as a brain drain plug. That should be a red flag. This group is on a snipe hunt. The baseline urban economic geography is flawed.

Geographical Imaginations And Migration

Talking about Creative Class migration influences migration. Austin is the prototype of cool, an urban ideal. The Austin school of planning and development:

Austin is widely seen as the epitome of what might be termed a hometown/boomtown ideal in North America urban policy. By this I mean that the contemporary urban policy orthodoxy in North America suggests that successful cities must effectively blend a boomtown atmosphere – a vibrant economy, usually one structured around specific economic clusters such as semiconductors and electronics, computers and peripherals, and film and media – with a high quality of life which makes the place attractive as a hometown for business owners and their most valued employees (McCann, 2004). Austin is a city with a well-developed and still expanding technology sector, a growing population, a relatively low cost of living, an attractive environment, vibrant nightlife, and a strong arts sector, anchored by the music and movie industries.

Oh, to be the "Next Austin". For the most part, Austin as a destination is reinforced. The Madisons of the world are still waiting for the Creative Class dividend. The same could said about the "Next Silicon Valley" aspiration. The Bay Area couldn't ask for a better branding campaign and other cities are footing the bill.

We're now in the midst of a backlash against Creative Class geographical imaginations. The buzz about abandoning too expensive New York City for more authentic and affordable Cleveland influences migration. A new set of mesofacts are percolating among college students:

Young artists are leaving New York and looking elsewhere

The dream of moving to the big city may be changing.

In recent years, post-industrial cities along the Rust Belt and in the South have experienced a substantial surge in the number of young people moving in. According to The Cleveland Sun, the city, despite having lost 17 percent of its overall population in the last decade, has doubled its downtown population, with a majority of these new residents between the ages of 21 and 35. The U.S. Census Bureau reports that for the first time in decades, more young people have moved in — rather than moved out — St. Louis. And according to Pittsburghlive.com, about 70 percent of Pittsburg’s new residents in 2011 were under the age of 35.

This may be because people are getting priced out of cities that have traditionally been popular among young people. According to the Council for Community and Economic Research, out of the top five most expensive cities to live in the U.S., three were in the New York City metropolitan area. In 2011, Chicago, San Francisco, Boston, Portland, NYC and Savannah all experienced a minimum rent hike of six percent. According to the Living Wage Project, living in NYC costs $11.86 an hour.

As young people face sky-high living costs on top of even tougher unemployment rates, the big city may not have the same pull. According to a Brookings Institute study, the “Biggest Losers” in net migration of peoples between the ages of 25 and 34 was the Los Angeles Metro area, which lost 78,265 of these residents between 2005 and 2010. The second “Biggest Loser” was the New York Metro area, which lost 69,352 of its young residents.

The hemorrhage of young people from big cities may be the gain of smaller cities such as Philadelphia, Baltimore, Cleveland, Flint and about a dozen others once considered gritty industrial wastelands. Two cities in particular — Detroit and New Orleans — have risen above recent hardships to become havens for the young and the hip.

By now, the data narrative is familiar. In and of itself, that should be remarkable. However, the feting of Detroit and New Orleans is cliché. Many quibble with the analysis and express skepticism. In terms of migration, none of that matters. The young and geographically mobile have a new place fetish, a different itch to scratch.

The last recession has put an exclamation point on the reshuffled landscape. Creative Class thinking is mainstream urban planning. Cities are chasing yesterday's hot trends. The global economy has swung in favor of Pittsburgh over Portland and Hamilton over Toronto. Today's story in a college newspaper is tomorrow's migration.

Promoting Brain Drain

Aiming to plug the brain drain is a silly policy goal. Regions, states, and countries should be trying to promote outmigration, not stifle it. Scotland learning this lesson from Lithuania:

We therefore need to get the balance right between exporting the expertise and skills abroad as an economic opportunity and retaining those which are in demand by our indigenous companies. This is the delicate juggling act which another small nation, also on the periphery of Europe, is currently facing. Lithuania is currently managing the difficult balance of encouraging talent to venture out of the country but also attracting in the skills they need for growth. Bearing in mind this small nation of only 3.2 million is barely two decades on from being a communist state, its growth levels are solid and easily outstrip the UK. In May the Bank of Lithuania revised upwards its economic projections, forecasting growth of three per cent in 2012 and 3.5 per cent in 2013.

The work we are doing within our Lithuania operation sums up the flow of people, contributing to the nation’s economic success. Not only are we helping to export some of their indigenous talent across the world, we are also working on attracting talent into the country. We are seeing a strong push now to bring Lithuanian-grown talent home, to utilise the skills they have learned from their International experiences and to play their part in helping to grow the economy of their homeland.

This is a model which Scotland could do well to follow. The double-pronged approach of exporting our skills where they are in demand and also luring back the much-needed Scottish talent that is currently in London or abroad will only benefit Scotland’s economy in the longer term.

The first step towards economic development is talent production for a global labor market. Addressing local business needs is best done through attraction (i.e. importing talent). A good example is Poland:

Foreign companies flock to invest. Its balance sheet is the envy of Europe. Top university programs crank out graduates whom everyone wants to hire.

Such is the current reputation of Poland, which has continued to grow during the global financial crisis as neighboring countries decline, lining itself up for a strong run to become the continent’s next economic powerhouse.

General Electric officials say they haven’t for a moment regretted basing one of their global design centers here, where Polish engineers helped create the new GEnx engine for Boeing’s 787 Dreamliner. 

Poland started producing the talent needed long before the likes of GE set up shop. College graduates ran off to Ireland and worked for companies such as Dell. A 2009 New York Times article I referenced:

In a symbolic shift, Dell moved operations to Lodz from Limerick in Ireland. Ireland has protested the 52.7 million euros in subsidies that Dell got from the Polish government, but Dell cited the skilled work force in Lodz and proximity to growing markets as the reasons for its move.

The Irish boom, now possibly the worst bust in Europe, attracted many Poles, who worked with Dell there and are now finding their way home.

“We even have some workers in Lodz who have come from our Limerick, Ireland, factory and who are very happy to have come back to help set up this one,” Mr. Dell said at the opening in January.

Tomasz Rybinski, 30, was among those Poles who left the country after it joined the European Union in 2004. He found work in then-booming Britain, where he spent three years mixing salads, moving boxes in a warehouse and then, finally, working in a factory that made industrial refrigerators.

Rumors this year that layoffs were in the works were enough to convince Mr. Rybinski that the new possibilities in his native Lodz trumped what had by then become a shattered British economy.

Emphasis added. Dell followed return migrants back to Poland. In terms of firm relocation decisions, talent production trumps talent attraction. Pittsburgh is much better off than Portland.

None of the above is possible without brain drain. Workforce development is parochial. Geographic mobility declines. The talent pool undergoes eutrophication. The economy becomes moribund.

Right-To-Work Boondoggle

At the heart of the debate about right-to-work legislation in Michigan is migration, brain drain. Both camps point to Michigration as a justification for their position. Arguing for right-to-work:

Of the nine states that saw the greatest population growth in that decade, six have a right-to-work law and a seventh — Colorado — enjoyed a quasi-RTW status thanks to its "labor peace act," which makes it difficult for unions to extract fee payments from non-members in a workplace. (Right-to-work laws do not affect collective bargaining, other than to prohibit labor contracts that make union dues or fees a condition of employment.)

To be sure, many factors go into individual migration decisions (high growth states also have more days of sunshine than Michigan, for example), but scholarly studies of the issue using sophisticated statistical techniques to isolate the different factors nevertheless suggest that having right-to-work protections for employees has a positive impact on a state’s in-bound migration.

For example, a 2010 study by Mackinac Center for Public Policy adjunct scholar Richard Vedder examined other possible explanations including climate, taxes, population and the “occupational composition of the workforce,” and still concluded, “Without exception, in all the estimations, a statistically significant positive relationship … was observed between the presence of right-to-work laws and net migration.” Mackinac Center analyses of Michigan migration also discovered a “revealed preference” for right-to-work states.

There you have it. Right-to-work laws are positively correlated with net migration. I'll let that stand on its own for now. The case against right-to-work:

Of the top ten states in private-sector personal incomes (that aren’t oil and gas rich like Wyoming), none are right to work states. But they are the best educated, including: Massachusetts (39.5% of adults have a bachelor’s degree or higher), Colorado (36.4%), New York (32.5%), Minnesota (31.8%) and Illinois (30.7%). Compare that to Michigan’s 24.6% bachelor’s attainment rate.

Are our kids fleeing Michigan for Indiana because it is now “right-to-work”? No, they are going to Chicago, New York, Minneapolis, and Denver because they have a better chance to take their talents (and too often their Michigan education) and either create, or take a job for themselves.

While we are signaling in Michigan that we don’t value our workers and our teachers, and competing with right-to-work states like Alabama and Mississippi to be the “low-cost” producer, other states are eating our lunch by building a knowledge economy, and employing Michigan’s talent to do so.

There you have it. Right-to-work laws are negatively correlated with higher personal incomes and educational attainment rates. Michigan is in a race to the bottom, fueling more brain drain. Soon, the entire state will be residing in Chicago.

Concerning migration, I doubt right-to-work laws have any impact. Both sides are using brain drain hysteria to garner support. The Mackinac Center's analysis is bogus. John Austin fails to demonstrate how right-to-work will undermine the state's Talent Economy. Feathers are ruffled. That's about the extent of the damage.

The battle over right-to-work is ideological. If Michigan wanted to positively impact talent migration, then politicians and policy wonks should take a look at noncompete agreements. Following California's lead, Michigan would stand out from the Rust Belt pack. Right-to-migrate is a powerful economic stimulus. Or, take a closer look at right-to-work Indiana. That state is still fretting about brain drain. Much ado about nothing.

Modelling Return Migration

Why do expatriates return home? Migrations back to Cleveland and India share many characteristics. Family is the primary consideration. Also important is opportunity. While established metros are struggling, the places left behind are booming. The lure of Bangalore:

"I had been thinking of moving back for a fairly long time. At some point of time every Indian living abroad does think of moving back. But most of them do not take action and I surely did not want to be one of them," he said.

So, what drew him back to India? "Firstly, India is going through a kind of transformation. Another important reason was that my parents were ageing and I wanted to be close to them."

Family is the biggest reason for people wanting to move back to India. Brij Singh, founder of Apptility.com is no different. "In 2008 we decided to spend time with our family and moved back. The desire to stay close to the family was the biggest reason. Later on business decisions influenced my mind," said Singh.

He added, "India is at a very interesting point right now. Booming economy, attractive demographics and a rising middle class provides a very conducive environment for career adventures. That is largely the reason you see a lot of folks coming back and 'doing something' here."

Emphasis added. Figuring out why someone migrated is easy. The mystery is how people transition from mulling over relocation prospects to making the move. From Britain to France:

She said: "If you ask people why they have moved to France they will often point around them and say it's because it is so beautiful or because it is like Britain used to be in the past – safer, friendlier and so on.

"However, these responses hide very personalised biographies and a much more complex set of variables. People's decisions are often based on previous travel or holiday experiences, while factors such as globalisation, economic and political changes and people's class also play an important role.

"A large portion of the British population share the idea of a rural idyll and could afford to make it a reality, but only a small percentage of people actually act on their dream and move to France."

Dr Benson conducted 12 months of ethnographic fieldwork with British residents in the Lot to gain detailed insights into the migration decision and post-migration lives of the generally affluent British migrants.

With many of those interviewed, she found there was a watershed moment at the core of the migration; redundancy, retirement and children leaving home were all presented as factors explaining the timing of migration.

However, it also became clear that for all the migrants, lives led before such watershed moments were building up to that point. For many migrants, the knowledge and skills of how to live abroad had been gained through other overseas experiences – working abroad, as part of the military or through tourism.

The "watershed moment" is the catalyst for migration. For those hoping to induce a move, that's not much help. Actionable is the pregnancy of possibility. You go where you know, if you know how to go. Uncertainty leads to risk aversion. You might long for rural France. How does one pull it off? What will life be like once you have settled into your new home? Such questions are barriers to migration.

How well do you know where you go? India is a large country. The repatriation story glosses over a finer grained geography. Focusing on Bangalore narrows the analysis considerably. The scale of relocation is even smaller than that:

But why Koramangala? "We picked Koramangala because it is a hub within a hub in many ways. If Bangalore is a centre of the Indian IT revolution then Koramangala is a centre within Bangalore," said Singh.

Anshuman Bapna, an MBA from Stanford used to live in New York. He relocated to Koramangala after his stint with Google and Microsoft. "I loved that familiar feeling in Koramangala after I came back. I returned to start my company, Mygola.com. What we were building required an operational scale and technical prowess, both of which could be found here in India," said Bapna 

Emphasis added. Bapna's statement is vague. I think he is talking about seeing threads of his New York experience in Koramangala. Repats like to be around other repats. Koramangala is a return migration ghetto.  A familiar place attracts migrants.

I noticed the same pattern in Cleveland. Repats are clustering on the West Side in Ohio City and Tremont. Those neighborhoods are familiar to boomerangers coming from New York or Chicago. They grew up in the Cleveland suburbs but now have a taste for urban living. There is a link between neighborhoods that are hundreds of miles apart. That connection is the path of least resistance. Cities could and should do a lot more to leverage that flow.

Creative Class Chic Is Dying

Out: Portland. In: Pittsburgh. Over the next few weeks, we will read dozens of articles describing what we will leave behind in 2012 and what 2013 portends. Portland, Oregon is the past. Pittsburgh is the future. But that was 2011/2012. For 2012/2013, I head to Canada:

“I’ve never lived anywhere else because no other city inspires me like Hamilton does,” he adds. “I guess others are starting to find out what’s been going on here. That’s OK by me . . . the more the merrier.”

Hamilton is already home to more than its fair share of the nation’s best known musicians, writers, visual artists and filmmakers: including songwriter and novelist Ian Thomas and his actor/producer brother, Dave; comedian and TV producer Steve Smith; musician and music producer Daniel Lanois; actor Graham Greene; comic actor Eugene Levy; movie producer Ivan Reitman; comic actor Martin Short; and, since 2003, playwright Sky Gilbert, who’s typically unequivocal about his reasons for moving there.

“I was fed up trying to find a home in Toronto’s vanishing neighbourhoods or among the walls of condos,” Gilbert says.

“It’s a city for rich people on one end and ghettoized, frightened suburbanites on the other.

“I love living here. Hamilton has enriched my work. I’ve found a lively, responsive audience: working-class, middle-class, honest and curious. It’s like Toronto used to be, a long time ago. Something’s going on here.”

Emphasis added. What Toronto used to be is Rust Belt Chic. Now, home to Richard Florida, Canada's largest city is Creative Class cool. Talent is fleeing the oppressive expense, cookie cutter urbanity, and the parochial fortresses of wealth. Toronto is dying.

Hamilton is ascendant. It is Rust Belt Chic, today. It is the anti-Toronto:

Martinus Geleynse, a filmmaker, publisher and politician-in-the-making, has been a professional activist in and observer of Hamilton’s burgeoning political and cultural life for five years.

“Hamilton prides itself on not being Toronto . . . or any other city,” he says. “It has a tough past, but no regrets. You take Hamilton on its own terms.”

Geleynse, who has run for city council, publishes Urbanicity, a monthly broadsheet and website that tracks Hamilton’s progress on municipal policy, urban development and economics, contentious public issues and culture.

He’s also director of Hamilton24, an annual series of six festivals that invite emerging filmmakers to produce a complete short film in 24 hours.

“There are so many creative people moving here from Toronto, Calgary, Montreal, London, it’s almost like the Wild West rush,” Geleynse says.

Emphasis added. Hamilton doesn't need Richard Florida to tell it what it should be. Legacy cities have suffered through enough brain drain boondoggles. Hamilton's greatest asset, warts and all, is its unique sense of place. Hamilton has a soul.

Creative Class Chic didn't save any cities. We've cycled through the urban fad and settled on the backwaters of globalization. The Innovation Economy has tipped from divergence to convergence. The world is flat, not spiky. Time for Creative Class theory to retire and enjoy South Beach.

Whatever The Question, The Answer Is Shale

From Business Insider:

Talent Retention Causes Brain Drain

Brain drain is good for economic development. Get used to that idea. Talent retention is bad for economic development. Get used to that idea, too. The Michigan Paradox, or how talent retention causes brain drain:

What has happened to places that stayed siloed is tragic. In 1985, for instance, the Michigan legislature passed an antitrust bill that also mistakenly repealed an 80-year-old open-competition statute (a law that had helped to spark the US automobile revolution in the early 1900s by letting engineers at big motor companies trade employees). Since the repeal, employees who have learned field-specific skills or built strong customer relationships that might help elsewhere have had to either take unpaid time off or leave the state. Job changes in Michigan have decreased by 8 percent among inventors across all industries—not just automotive—and by 16 percent among technically specialized workers. And that’s bad for innovation. Managers don’t need to pounce on great ideas; it’s not like they can be taken elsewhere.

The other result in Michigan is brain drain. Inventors who hold patents have been 256 percent more likely to move out of the state than their cohort in other places, MIT’s Marx says. He found that inventors who change jobs flee to states that permit them to take new positions in the same field or launch startups. Not surprisingly, places like California have become more attractive to talented workers than, say, Michigan.

Emphasis added. "Places that stayed siloed" are states that allow noncompete agreements. Companies can use the force of law to retain talent. This stifles innovation and encourages outmigration. Michigan's brain drain "problem" is Michigan. Being business friendly is driving away business.

Noncompetes are a metaphor for the zero-sum game between regions vying for talent. The crying about brain drain is ubiquitous. If your prodigal daughters and sons leave, the community is doomed. The community is doomed thanks to all the crying about brain drain. Millions of dollars are wasted on retention. Real estate boondoggles promising a cooler downtown abound. You'll do anything to keep your children from leaving.

Plugging the brain drain stifles creativity. Too much talent churn erodes social capital. Positive or negative net migration poses a unique set of challenges. Resist the urge to make normative judgments and remember that people develop, not places.

People develop, not companies. As with cities, we tend to forget that businesses are made up of people. Talent is the new oil. The freedom to move spurs tremendous growth. Silicon Valley towers over Boston's Route 128 because its workers are more geographically mobile. The Google Diaspora is just as valuable as the Burgh Diaspora.

Innovation Economy Converging

The world is getting less spiky. If there is a war for talent, then "why are IT wages flat?" Even in the Innovation Economy, labor costs matter:

"IT salaries have not really kept pace with inflation," said Victor Janulaitis, the CEO of Janco Associates, which reports on IT wage compensation.

In 2000, the average hourly wage was $37.27 in computer and math occupations for workers with at least a bachelor's degree. In 2011, it was $39.24, adjusted for inflation, according to a new report by the Economic Policy Institute.

That translates to an average wage increase of less than a half percent a year. In real terms, IT wages overall have gone up by $1.97 an hour in just over 10 years, according to the EPI. It gathered data from the Current Population Survey, a monthly survey of households conducted by the Census Bureau for the Bureau of Labor Statistics.

Fair to say that the jury is still out on whether or not the Innovation Economy is still diverging. The journalist of the above article balances the story with expert claims that business as usual isn't too far off into the future. That's healthy skepticism. The shape and scope of the recovery is still a mystery.

With the "fiscal cliff" looming, BRICs struggling, and the European Union looking more like Japan's lost decades; uncertainty is acute. Why is Microsoft so sure there is a talent shortage? Apply another dose of healthy skepticism. More supply can help keep costs down. Current measures for austere times may not go away. Demand might not come back. On top of all those unknowns, add our ignorance about return migration:

“We hope this research helps reveal the bonds between the United States and other countries – specifically India – given the contributions of foreign-born academics to the scientific innovation of this country,” said Sabharwal, who studies workforce policy as it relates to job satisfaction, productivity, and diversity. “National borders are becoming thinner, and we want to expand research on human capital.”

Sabharwal said that little is known about the way skilled migrants formulate their re-migration decisions. Existing data have shed light light on why these workers have been highly productive but dissatisfied enough to leave. Cultural and social experiences may indicate whether they choose to stay in the United States, she said.

Such patterns could lead to gaps in the workforce, an issue that academic leaders and policymakers may want to consider as they try to maintain a stable workforce.

At best, Microsoft is fumbling around in the dark. More likely, the company is proposing a brain drain boondoggle. For a few years running, the alarm bells have been ringing. Foreign born talent is leaving the United States. While I'm sympathetic to liberalizing policies and allowing immigrants to stay in the United States, the flow reversal is good for all countries involved: The more geographic mobility, the better the global economy.

Microsoft is leveraging the anxiety about brain drain, seeking a more captive labor pool. The company is watching its bottom line in terms of talent costs. That doesn't look like economic divergence. The zenith of the Innovation Economy is behind us.